Anthem
Annual Report 2019

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2019ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number: 001-16751ANTHEM, INC.(Exact name of registrant as specified in its charter)Indiana 35-2145715(State or other jurisdiction ofincorporation or organization) (I.R.S. Employer Identification Number) 220 Virginia AvenueIndianapolis, Indiana 46204(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (800) 331-1476Securities registered pursuant to Section 12(b) of the Act:Title of each class Trading symbol(s) Name of each exchange on which registeredCommon Stock, Par Value $0.01 ANTM New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NONEIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.:Large accelerated filer☒ Accelerated filerNon-accelerated filer Smaller reporting companyEmerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No xThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (assuming solely for the purposes of thiscalculation that all Directors and executive officers of the registrant are “affiliates”) as of June 28, 2019 was approximately $72,160,040,688.As of February 6, 2020, 252,329,919 shares of the Registrant’s Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCEPart III of this Annual Report on Form 10-K incorporates by reference information from the registrant’s Definitive Proxy Statement for the Annual Meeting ofShareholders to be held May 21, 2020.Anthem, Inc. Annual Report on Form 10-KFor the Year Ended December 31, 2019 Table of Contents PART I ITEM 1.BUSINESS3ITEM 1A.RISK FACTORS22ITEM 1B.UNRESOLVED SEC STAFF COMMENTS39ITEM 2.PROPERTIES39ITEM 3.LEGAL PROCEEDINGS40ITEM 4.MINE SAFETY DISCLOSURES40 PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES41ITEM 6.SELECTED FINANCIAL DATA43ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS44ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK68ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA70ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE142ITEM 9A.CONTROLS AND PROCEDURES142ITEM 9B.OTHER INFORMATION145 PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE145ITEM 11.EXECUTIVE COMPENSATION145ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS145ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE146ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES146 PART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES147ITEM 16.FORM 10-K SUMMARY151 SIGNATURES158-1-References in this Annual Report on Form 10-K to the terms “we,” “our,” “us,” “Anthem” or the “Company” refer to Anthem, Inc., an Indiana corporation,and, unless the context otherwise requires, its direct and indirect subsidiaries. References to the term “states” include the District of Columbia, unless the contextotherwise requires.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K, including Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” containsforward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our views about futureevents and financial performance and are generally not historical facts. Words such as “expect,” “feel,” “believe,” “will,” “may,” “should,” “anticipate,” “intend,”“estimate,” “project,” “forecast,” “plan” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limitedto: financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations,products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult topredict and generally beyond our control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. You are also urged tocarefully review and consider the various risks and other disclosures discussed in our reports filed with the U.S. Securities and Exchange Commission from time totime, which attempt to advise interested parties of the factors that affect our business. Except to the extent otherwise required by federal securities laws, we do notundertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof. These risks and uncertaintiesinclude, but are not limited to: trends in healthcare costs and utilization rates; our ability to secure sufficient premium rates, including regulatory approval for andimplementation of such rates; the impact of federal and state regulation, including ongoing changes in the Patient Protection and Affordable Care Act and theHealth Care and Education Reconciliation Act of 2010, as amended, or collectively, the ACA, and the ultimate outcome of legal challenges to the ACA; our abilityto contract with providers on cost-effective and competitive terms; competitive pressures and our ability to adapt to changes in the industry and develop andimplement strategic growth opportunities; reduced enrollment; unauthorized disclosure of member or employee sensitive or confidential information, including theimpact and outcome of any investigations, inquiries, claims and litigation related thereto; risks and uncertainties regarding Medicare and Medicaid programs,including those related to non-compliance with the complex regulations imposed thereon; our ability to maintain and achieve improvement in Centers for Medicareand Medicaid Services, or CMS, Star ratings and other quality scores and funding risks with respect to revenue received from participation therein; a negativechange in our healthcare product mix; costs and other liabilities associated with litigation, government investigations, audits or reviews; the ultimate outcome oflitigation between Cigna Corporation, or Cigna, and us related to the merger agreement between the parties and the potential for such litigation to cause us to incursubstantial additional costs, including potential settlement and judgment costs; risks and uncertainties related to our pharmacy benefit management, or PBM,business, including non-compliance by any party with the PBM services agreements between us and each of Express Scripts, Inc., or Express Scripts, andCaremarkPCS Health, L.L.C., or CVS Health, as well as agreements governing the transition of pharmacy benefit management services provided to us fromExpress Scripts to CVS Health Corporation; medical malpractice or professional liability claims or other risks related to healthcare services and PBM servicesprovided by our subsidiaries; general risks associated with mergers, acquisitions, joint ventures and strategic alliances; possible impairment of the value of ourintangible assets if future results do not adequately support goodwill and other intangible assets; possible restrictions in the payment of dividends from oursubsidiaries and increases in required minimum levels of capital; our ability to repurchase shares of our common stock and pay dividends on our common stockdue to the adequacy of our cash flow and earnings and other considerations; the potential negative effect from our substantial amount of outstanding indebtedness;a downgrade in our financial strength ratings; the effects of any negative publicity related to the health benefits industry in general or us in particular; failure toeffectively maintain and modernize our information systems; events that may negatively affect our licenses with the Blue Cross and Blue Shield Association; largescale medical emergencies, such as future public health epidemics and catastrophes; changes in economic and market conditions, as well as regulations that maynegatively affect our liquidity and investment portfolios; the impact of international laws and regulations; changes in U.S. tax laws; intense competition to attractand retain employees; and various laws and provisions in our governing documents that may prevent or discourage takeovers and business combinations.-2-PART IITEM 1. BUSINESS.GeneralWe are one of the largest health benefits companies in the United States in terms of medical membership, serving approximately 41 million medical membersthrough our affiliated health plans as of December 31, 2019. We are an independent licensee of the Blue Cross and Blue Shield Association, or BCBSA, anassociation of independent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield, or BCBS,licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, NewYork (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) andWisconsin. In a majority of these service areas, we do business as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, and Empire Blue Cross Blue Shield orEmpire Blue Cross. We also conduct business through arrangements with other BCBS licensees as well as other strategic partners. Through our subsidiaries, wealso serve customers in numerous states across the country as Aim Specialty Health, Amerigroup, Aspire Health, CareMore, Freedom Health, HealthLink,HealthSun, Optimum HealthCare, Simply Healthcare, and/or UniCare. Also, in the second quarter of 2019, we began providing pharmacy benefits management, orPBM, services through our IngenioRx subsidiary. We are licensed to conduct insurance operations in all 50 states and the District of Columbia through oursubsidiaries.In the second quarter of 2019, we began using our new pharmacy benefits manager called IngenioRx to market and sell a PBM product to fully-insured andself-funded Anthem health plan customers throughout the country, as well as to customers outside of the health plans we own. This comprehensive productportfolio includes features such as drug formularies, a pharmacy network, prescription drug database, member services and mail order capabilities. In July 2019,we announced our first contract win with a third-party health insurer, Blue Cross of Idaho, and we began providing PBM services under that contract beginning onJanuary 1, 2020. Also beginning in the second quarter of 2019, we began delegating certain PBM administrative functions, such as claims processing andprescription fulfillment, to CaremarkPCS Health, L.L.C., or CVS Health, which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement withCVS Health, or the CVS PBM Agreement. We intend to retain the responsibilities for IngenioRx’s clinical and formulary strategy and development, member andemployer experiences, operations, sales, marketing, account management and retail network strategy. From December 2009 through December 2019, wedelegated certain PBM functions and administrative services to Express Scripts, Inc., or Express Scripts, pursuant our PBM agreement with Express Scripts, or theESI PBM Agreement. In January 2019, we exercised our contractual right to terminate the ESI PBM Agreement earlier than the original expiration date ofDecember 31, 2019, due to the acquisition of Express Scripts by Cigna Corporation, or Cigna. We began transitioning existing members from Express Scripts toIngenioRx in the second quarter of 2019, and completed the transition of all of our members on January 1, 2020. Prior to the termination of the ESI PBMAgreement, Express Scripts managed the network of pharmacy providers, operated mail order pharmacies and processed prescription drug claims on our behalf,while we sold and supported the product for our members, made formulary decisions, sold drug benefit design strategy and provided front line member support.We expect IngenioRx to provide our members with more cost-effective solutions and improve our ability to integrate pharmacy benefits within our medical andspecialty platform. Notwithstanding our termination of the ESI PBM Agreement, the litigation between us and Express Scripts regarding the ESI PBM Agreementcontinues. In March 2016, we filed a lawsuit against Express Scripts seeking to recover damages for pharmacy pricing that is higher than competitive benchmarkpricing and damages related to operational breaches. Express Scripts filed an answer to the lawsuit disputing our contractual claims and alleging various defensesand counterclaims. For additional information regarding this lawsuit, see Note 13, “Commitments and Contingencies - Litigation and Regulatory Proceedings -Express Scripts, Inc. Pharmacy Benefit Management Litigation,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this AnnualReport on Form 10-K.On June 6, 2019, we announced our entrance into an agreement to acquire Beacon Health Options, Inc., or Beacon, the largest independently held behavioralhealth organization in the country. Beacon serves approximately 40 million individuals across all 50 states. This acquisition aligns with our strategy to diversifyinto health services and deliver both integrated solutions and care delivery models that personalize care for people with complex and chronic conditions. Theacquisition is expected to close in the first quarter of 2020 and is subject to standard closing conditions and customary approvals.-3-In May 2017, we announced that we were terminating the Agreement and Plan of Merger, or Cigna Merger Agreement, between us and Cigna. Both we andCigna have commenced litigation against the other seeking various actions and damages, including Cigna’s damage claim for a $1.850 billion termination feepursuant to the terms of the Cigna Merger Agreement. For additional information about the ongoing litigation related to the Cigna Merger Agreement, see Note 13,“Commitments and Contingencies - Litigation and Regulatory Proceedings - Cigna Corporation Merger Litigation,” of the Notes to Consolidated FinancialStatements included in Part II, Item 8 of this Annual Report on Form 10-K.At Anthem, we believe in working together to achieve our mission of improving lives and communities, simplifying healthcare and expecting more. As weseek to accomplish these goals through a collaborative focus on execution and delivering for those we serve, our vision is to be the most innovative, valuable andinclusive health partner. We focus on ensuring quality products and services that give members access to the care they need. With an unyielding commitment tomeeting the needs of our diverse customers, we are guided by the following values:•Leadership – Redefine what is possible•Community – Committed, connected, invested•Integrity – Do the right thing, with a spirit of excellence•Agility – Delivery today, transform tomorrow•Diversity – Open your hearts and mindsBy striving to live our values each day and in every interaction, we are committed to simplifying as well as radically reinventing the healthcare experience forall Americans.We offer a broad spectrum of network-based managed care plans to Large Group, Small Group, Individual, Medicaid and Medicare markets. Our managedcare plans include: Preferred Provider Organizations, or PPOs; Health Maintenance Organizations, or HMOs; Point-of-Service, or POS, plans; traditionalindemnity plans and other hybrid plans, including Consumer-Driven Health Plans, or CDHPs; and hospital only and limited benefit products. In addition, weprovide a broad array of managed care services to self-funded customers, including claims processing, stop loss insurance, actuarial services, provider networkaccess, medical cost management, disease management, wellness programs and other administrative services. We provide an array of specialty and other insuranceproducts and services such as PBM services, dental, vision, life and disability insurance benefits, radiology benefit management and analytics-driven personalhealthcare. We also provide services to the federal government in connection with our Federal Health Products & Services business, or FHPS, which administersthe Federal Employees Health Benefits, or FEHB, Program.An ongoing focus on healthcare costs by employers, the government and consumers has continued to drive the growth of alternatives to traditional indemnityhealth insurance. HMO, PPO and hybrid plans are among the various forms of managed care products that have been developed. Through these types of products,insurers attempt to contain the cost of healthcare by negotiating contracts with hospitals, physicians and other providers to deliver high-quality healthcare tomembers at favorable rates. These products usually feature medical management and other quality and cost optimization measures such as pre-admission reviewand approval for certain non-emergency services, pre-authorization of outpatient surgical procedures, network credentialing to determine that network physiciansand hospitals have the required certifications and expertise, and various levels of care management programs to help members better understand and navigate thehealthcare system. In addition, providers may have incentives to achieve certain quality measures, may share medical cost risk or may have other incentives todeliver quality medical services in a cost-effective manner. Also, certain plans offer members incentives for healthy behaviors, such as smoking cessation andweight management. Members are charged periodic, prepaid premiums and generally pay co-payments, coinsurance and/or deductibles when they receive services.While the distinctions between the various types of plans have lessened over recent years, PPO, POS and CDHP products generally provide reduced benefits forout-of-network services, while traditional HMO products generally provide little to no reimbursement for non-emergency out-of-network utilization, but oftenoffer more generous benefit coverage. An HMO plan may also require members to select one of the network primary care physicians, or PCPs, to coordinate theircare and approve any specialist or other services.Economic factors, greater consumer and employer sophistication and accountability have resulted in an increased demand for choice in both product/benefitdesigns and provider network configurations. As a result, we continue to offer our broad access PPO networks with multiple benefit designs, but are also focusedon leveraging our provider collaboration-4-initiatives with our Accountable Care Organization, or ACO, partnerships to develop both narrow and tiered network offerings. This array of network and productconfigurations allows both the employer and the employee to design and select the combination of benefit designs (e.g., traditional PPOs, high deductibles, healthreimbursement accounts, health savings accounts, PCP based products, tiered copays) and networks (e.g., broad, narrow, tiered, closed or exclusive provider, andopen) that optimize choice, quality and price at the consumer, employer and market level. We believe we are well-positioned in each of our states to respond tothese market preferences.For our fully-insured products, we charge a premium and assume the risk for the cost of covered healthcare services. Under self-funded products, we charge afee for services and the employer or plan sponsor funds or reimburses us for the healthcare costs. In addition, we charge a premium to underwrite stop lossinsurance for Local Group and National Account employers that maintain self-funded health plans.Our medical membership includes seven different customer types: Local Group, Individual, National Accounts, BlueCard®, Medicare, Medicaid and FEHB.BCBS-branded business generally refers to members in our service areas licensed by the BCBSA. Non-BCBS-branded business refers to members in our non-BCBS-branded Amerigroup, Freedom Health, HealthSun, Optimum HealthCare and Simply Healthcare plans, as well as HealthLink and UniCare members. Inaddition to the above medical membership, we also serve customers who purchase one or more of our other products or services that are often ancillary to ourhealth business.Our products are generally developed and marketed with an emphasis on the differing needs of our customers. In particular, our product development andmarketing efforts take into account the differing characteristics between the various customers served by us, as well as the unique needs of educational and publicentities, labor groups, federal employee health and benefit programs, national employers and state-run programs servicing low-income, high-risk and underservedmarkets. Overall, we seek to establish pricing and product designs to provide value for our customers while achieving an appropriate level of profitability for eachof our customer categories balanced with the competitive objective to grow market share. We believe that one of the keys to our success has been our focus onthese distinct customer types, which better enables us to develop benefit plans and services that meet our customers’ unique needs. Further, IngenioRx was built tosimplify pharmacy care and focus on the whole person, and we expect it will make it easier for our customers to achieve the best possible health outcomes at thelowest possible total cost of care.We market our Individual, Medicare and certain Local Group products through direct marketing activities and an extensive network of independent agents,brokers and retail partnerships. Products for National Accounts and Local Group customers with a larger employee base are generally sold through independentbrokers or consultants retained by the customer who work with industry specialists from our in-house sales force. In the Individual and Small Group markets, weoffer on-exchange products through state- or federally-facilitated marketplaces, referred to as public exchanges, and off-exchange products. Federal subsidies areavailable for certain members, subject to income and family size, who purchase public exchange products. Being a licensee of the BCBS association of companies, of which there were 36 independent primary licensees including us as of December 31, 2019, providessignificant market value, especially when competing for very large multi-state employer groups. For example, each BCBS member company is able to utilize otherBCBS licensees’ substantial provider networks and discounts when any BCBS member works or travels outside of the state in which their policy is written. Thisprogram is referred to as BlueCard® and is a source of revenue when we provide member services in the states where we are the BCBS licensee to individuals whoare customers of BCBS plans not affiliated with us. This program also provides a national provider network for our members when they travel to other states.For additional information describing each of our customer types, detailed marketing efforts and changes in medical membership over the last three years, see“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Annual Report on Form 10-K.Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting withproviders of care to our members, product pricing, medical management and health and wellness programs, including service coordination and case managementfor addressing complex and specialized health care needs, innovative product design and our ability to maintain or achieve improvement in our CMS Star ratings.CMS Star ratings affect Medicare Advantage plan reimbursements as well as our eligibility to earn quality-based bonus payments for those plans. See“Regulation” herein for additional information on our CMS Star ratings.-5-Advances in medical technology, increases in specialty drug costs, increases in hospital expenditures and other provider costs, the aging of the population andother demographic characteristics continue to contribute to rising healthcare costs. Our managed care plans and products are designed to encourage providers andmembers to participate in quality, cost-effective health benefit programs by using the full range of our innovative medical management services, quality initiativesand financial incentives. Our market share and high business retention rates enable us to realize the long-term benefits of investing in preventive and earlydetection programs. Our ability to provide cost-effective health benefits products and services is enhanced through a disciplined approach to internal costcontainment, prudent management of our risk exposure and successful integration of acquired businesses. In addition, our ability to manage selling, general andadministrative costs continues to be a driver of our overall profitability.The future results of our operations will also be impacted by certain external forces and resulting changes in our business model and strategy. The continuinggrowth in our government-sponsored business exposes us to increased regulatory oversight. The Patient Protection and Affordable Care Act and the Health Careand Education Reconciliation Act of 2010, as amended, or collectively, the ACA, has changed and may continue to make broad-based changes to the U.S.healthcare system. The ACA presented us with new growth opportunities, but also introduced new risks, regulatory challenges and uncertainties, and requiredchanges in the way products are designed, underwritten, priced, distributed and administered. Changes to our business environment are likely to continue aselected officials at the national and state levels continue to enact, and both elected officials and candidates for election continue to propose, significantmodifications to existing laws and regulations, including changes to taxes and fees. In addition, the legal challenges regarding the ACA, including a federal districtcourt decision invalidating the ACA, or the “2018 ACA Decision”, which judgment has been stayed pending appeal, continue to contribute to this uncertainty. Wewill continue to evaluate the impact of the ACA as additional guidance is made available and any further developments or judicial rulings occur. For additionaldiscussion, see “Regulation” herein and Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K.In addition to the external forces discussed in the preceding paragraph, our results of operations are impacted by levels and mix of membership which canchange as a result of the quality and pricing of our health benefits products and services, aging population, economic conditions, changes in unemployment,acquisitions, entry into new markets and expansions in or exits from existing markets. These membership trends could be negatively impacted by various factorsthat could have a material adverse effect on our future results of operations such as general economic downturns that result in business failures, failure to obtainnew customers or retain existing customers, premium increases, benefit changes or our exit from a specific market. See Part I, Item 1A “Risk Factors” and Part II,Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K.During 2019, we modestly expanded our participation in the Individual ACA-compliant market. Our strategy has been, and will continue to be, to onlyparticipate in rating regions where we have an appropriate level of confidence that these markets are on a path toward sustainability, including, but not limited to,factors such as expected financial performance, regulatory environment, and underlying market characteristics. We currently offer Individual ACA-compliantproducts in 91 of the 143 rating regions in which we operate.We believe healthcare is local and that we have the strong local presence required to understand and meet local customer needs with regard to any productthey are enrolled in with us. Further, we believe we are well-positioned to deliver what customers want: innovative, choice-based and affordable products;distinctive service; simplified transactions; and better access to information for quality care. Our local presence, combined with our national expertise, has createdopportunities for collaborative programs that reward physicians and hospitals for clinical quality and excellence. We feel that our commitment to healthimprovement and care management provides added value to customers and healthcare professionals. Ultimately, we believe that practical and sustainableimprovements in healthcare must focus on improving healthcare quality while managing costs for total affordability. We have implemented initiatives drivingpayment innovation and partnering with providers to lower cost and improve the quality of healthcare for our members, and we continue to develop new andinnovative ways to effectively manage risk and engage our members. Further, we are expanding our financial arrangements with providers to include paymentmodels that encourage value-based care. We believe focusing on quality of care rather than volume of care is the foundation for improving patient outcomes. Ourvalue-based payment model supports patient-centered care by improving collaboration between providers and health partners and delivering to our patients theright care, at the right time, in the right place. In addition, we are focused on achieving efficiencies from our national scale while optimizing service performancefor our customers. Finally, we expect to continue to rationalize our portfolio of businesses and products-6-and align our investments to capitalize on new opportunities to drive growth in our existing markets and expand into new markets in the future.We continue to enhance interactions with customers, providers, brokers, agents, employees and other stakeholders through web-enabled technology andimproving internal operations. Our approach includes not only the sales and distribution of health benefits products on the Internet, but also implementingadvanced capabilities that improve services benefiting customers, agents, brokers, and providers while optimizing administrative costs. These enhancements canalso help improve the quality, coordination and safety of healthcare through increased communications between patients and their physicians.In pursuing our vision of being the most innovative, valuable and inclusive partner, we intend to transform healthcare by providing trusted and caringsolutions and delivering quality products and services that give customers access to the care they need. At the same time, we will focus on earnings, organicmembership growth, improvements in our operating cost structure, strategic acquisitions and the efficient use of capital.Significant TransactionsThe significant transactions that have occurred over the last five years that have impacted or will impact our capital structure or that have influenced or willinfluence how we conduct our business operations include:•Launch of IngenioRx(2019);•Acquisition of America’s 1st Choice(2018);•Acquisition of HealthSun Health Plans, Inc., or HealthSun(2017);•Acquisition of Simply Healthcare Holdings, Inc., or Simply Healthcare (2015);and•Use of Capital—Board of Directors declarations of dividends on our common stock; repurchases of our common stock; and debt repurchases and newdebt issuances (2019 and prior).For additional information regarding certain of these transactions, see Note 3, “Business Acquisitions,” Note 12, “Debt,” and Note 14, “Capital Stock,” toour audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.CompetitionThe managed care industry is highly competitive, both nationally and in our local markets. Competition continues to be intense due to aggressive marketing,pricing, government-sponsored programs bid activity, business consolidations, new strategic alliances, new competitors in the market, a proliferation of newproducts, technological advancements, the impact of legislative reform, and increased quality awareness and price sensitivity among customers.We believe that participants in the managed care industry compete for customers based on quality of service, price, access to provider networks, access to caremanagement and wellness programs (including health information), innovation, breadth and flexibility of products and benefits, expertise and reputation (includingNational Committee on Quality Assurance, or NCQA, accreditation status), brand recognition and financial stability. Our ability to attract and retain customers issubstantially tied to our ability to distinguish ourselves from our competitors in these areas.Also, a health plan’s ability to interact with employers, customers and other third parties (including healthcare professionals) through electronic data transferhas become a more important competitive factor, and we have made significant investments in technology to enhance our electronic interaction with providers,employers, customers and third parties.We believe our exclusive right to market products under the most recognized brand in the industry, BCBS, in our most significant markets provides us withgreater brand recognition over competitive product offerings. Our provider networks in our markets enable us to achieve efficiencies and distinctive service levelsby allowing us to offer a broad range of health benefits to our customers on a more cost-effective basis than many of our competitors. We strive to distinguish ourproducts through provider access, service, care management, product value and brand recognition.Product pricing remains competitive and we strive to price our healthcare benefit products and design our Medicare and Medicaid bids consistent withanticipated underlying medical trends. We believe our pricing and bid strategy, based on-7-predictive modeling, proprietary research and data-driven processes, has positioned us to benefit from the potential growth opportunities available through entryinto new markets, expansions in existing markets and as a result of any future changes to the current regulatory scheme. We believe that our pricing and bidstrategy, brand name and network quality will provide a strong foundation for membership growth opportunities in the future.To build our provider networks, we compete with other health benefits plans for the best contracts with hospitals, physicians and other providers. We believethat physicians and other providers primarily consider customer volume, reimbursement rates, timeliness of reimbursement and administrative service capabilitiesalong with the reduction of non-value added administrative tasks when deciding whether to contract with a health benefits plan.At the sales and distribution level, we compete for qualified agents and brokers to recommend and distribute our products. Strong competition exists amonginsurance companies and health benefits plans for agents and brokers with demonstrated ability to secure new business and maintain existing accounts. We believethat the quality and price of our products, support services, reputation and prior relationships, along with a reasonable commission structure, are the factors agentsand brokers consider in choosing whether to market our products. We believe that we have good relationships with our agents and brokers, and that our products,support services and commission structure compare favorably to those of our competitors in all of our markets. Typically, we are the largest competitor in each ofour BCBS branded markets and, thus, are a closely-watched target by other insurance competitors.In addition, the PBM industry is highly competitive, and IngenioRx is subject to competition from national, regional and local PBMs, insurers, health plans,large retail pharmacy chains, large retail stores, supermarkets, other mail order pharmacies, web pharmacies and specialty pharmacies.Reportable SegmentsWe manage our operations through three reportable segments: Commercial & Specialty Business, Government Business and Other. We regularly evaluate theappropriateness of our reportable segments, particularly in light of organizational changes, merger and acquisition activity and changing laws and regulations. Priorto the second quarter of 2019, our Other segment included certain eliminations and corporate expenses not allocated to either of our other reportable segments.Beginning with the second quarter of 2019, our Other segment also includes IngenioRx, our pharmacy benefits manager, which began operations during the secondquarter of 2019. In addition, during the second quarter of 2019, we reclassified our integrated health services business, our Diversified Business Group, or DBG,from our Government Business segment to the Other segment to reflect changes in how our segments are being managed. Amounts for prior years have beenreclassified to conform to the current year presentation for comparability. Based on the Financial Accounting Standards Board, or FASB, guidance, as of December31, 2019, IngenioRx and DBG did not collectively meet the quantitative thresholds for a reportable segment. Current reportable segments may change in thefuture.Our Commercial & Specialty Business and Government Business segments both offer a diversified mix of managed care products, including PPOs, HMOs,traditional indemnity benefits and POS plans, as well as a variety of hybrid benefit plans including CDHPs, hospital only and limited benefit products.Our Commercial & Specialty Business segment includes our Local Group, National Accounts, Individual and Specialty businesses. Business units in theCommercial & Specialty Business segment offer fully-insured health products; provide a broad array of managed care services to self-funded customers includingclaims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellnessprograms and other administrative services; and provide an array of specialty and other insurance products and services such as dental, vision, life and disabilityinsurance benefits.Our Government Business segment includes our Medicare and Medicaid businesses, National Government Services, or NGS, and services provided to thefederal government in connection with our FHPS business. Medicaid makes federal matching funds available to all states for the delivery of healthcare benefits toeligible individuals, principally those with incomes below specified levels who meet other state-specified requirements. Medicaid is structured to allow each stateto establish its own eligibility standards, benefits package, payment rates and program administration under broad federal guidelines. Our Medicare customers areMedicare-eligible individual members age 65 and over who have enrolled in Medicare Advantage, a managed care alternative for the Medicare program, or whohave purchased Medicare Supplement benefit coverage, some disabled members under age 65, or members of all ages with end stage renal disease. Medicare-8-Supplement policies are sold to Medicare recipients as supplements to the benefits they receive from the Medicare program. Medicare Supplement policy rates arefiled with, and in some cases approved by, state insurance departments. Most of the premium for Medicare Advantage is based on bids submitted to CMS and paiddirectly by the federal government on behalf of the participant who may also be charged a small premium. Additionally, through our alliance partnershipengagements with larger provider groups and BCBS plans, we offer a variety of Medicaid services that include joint ventures, administrative service offerings, andfull-risk arrangements. NGS acts as a Medicare contractor for the federal government in several regions across the nation.Our Other segment includes our PBM business (IngenioRx), our integrated health services business (DBG) and corporate expenses not allocated to either ofour other reportable segments.Through our participation in various federal government programs, we generated approximately 20.7%, 19.8% and 17.8% of our total consolidated revenuesfrom agencies of the U.S. government for the years ended December 31, 2019, 2018 and 2017, respectively. These revenues are contained in the GovernmentBusiness segment. An immaterial amount of our total consolidated revenues is derived from activities outside of the U.S. Products and ServicesA general description of our products and services is provided below:Preferred Provider Organization: PPO products offer the member an option to select any healthcare provider, with benefits reimbursed by us at a higherlevel when care is received from a participating network provider. Increasingly, customers are choosing our PPO products offered with an exclusive providerorganization, which eliminates coverage out of network. Coverage is subject to co-payments or deductibles and coinsurance, with member cost sharing usuallylimited by out-of-pocket maximums.Consumer-Driven Health Plans: CDHPs provide consumers with increased financial responsibility, choice and control regarding how their healthcaredollars are spent. Generally, CDHPs combine a high-deductible PPO plan with an employer-funded and/or employee-funded personal care account, which mayresult in tax benefits to the employee. Some or all of the dollars remaining in the personal care account at year-end can be rolled over to the next year for futurehealthcare needs.Traditional Indemnity: Indemnity products offer the member an option to select any healthcare provider for covered services. Coverage is subject todeductibles and coinsurance, with member cost sharing usually limited by out-of-pocket maximums.Health Maintenance Organization: HMO products include comprehensive managed care benefits, generally through a participating network of physicians,hospitals and other providers. A member in one of our HMOs must typically select a PCP from our network. PCPs generally are family practitioners, internists orpediatricians who provide necessary preventive and primary medical care, and are generally responsible for coordinating other necessary healthcare services. Weoffer HMO plans with varying levels of co-payments, which result in different levels of premium rates. Point-of-Service: POS products blend the characteristics of HMO, PPO and indemnity plans. Members can have comprehensive HMO-style benefitsthrough participating network providers with minimum out-of-pocket expenses (co-payments) and also can go directly, without a referral, to any provider theychoose, subject to, among other things, certain deductibles and coinsurance. Member cost sharing is limited by out-of-pocket maximums.Public Exchange and Off-Exchange Products: Individual and Small Group products cover essential health benefits as defined in the ACA along with manyother requirements and cost sharing features. Individual and Small Group products offered on and off the public exchanges meet the definition of the “metal”product requirements (bronze, silver, gold and platinum) and each metal product must satisfy a specific actuarial value. Health insurers participating on the publicexchanges must offer at least one silver and one gold product.Administrative Services: In addition to fully-insured products, we provide administrative services to Large Group, Small Group and National Accountemployers that maintain self-funded health plans. These administrative services include underwriting, actuarial services, medical cost management, diseasemanagement, wellness programs, claims processing and other administrative services for self-funded employers. Self-funded health plans are also able to use ourprovider networks and to realize savings through our negotiated provider arrangements, while allowing employers the ability to design certain-9-health benefit plans in accordance with their own requirements and objectives. We also underwrite stop loss insurance for self-funded plans. BlueCard®: BlueCard® is a national program that links participating healthcare providers and independent BCBS plans. BlueCard® host members aregenerally members who reside in or travel to a state in which an Anthem subsidiary is the Blue Cross and/or Blue Shield licensee and who are covered under anemployer-sponsored health plan serviced by a non-Anthem controlled BCBS licensee, which is the “home” plan. We perform certain administrative functions forBlueCard® host members, for which we receive administrative fees from the BlueCard® members’ home plans. Other administrative functions, includingmaintenance of enrollment information and customer service, are performed by the home plan. Medicare Plans: We offer a wide variety of plans, products and options to individuals age 65 and older such as Medicare Supplement plans; MedicareAdvantage, including Special Needs Plans or SNPs, also known as Medicare Advantage SNPs; Medicare Part D Prescription Drug Plans, or Medicare Part D; anddual-eligible programs through Medicare-Medicaid Plans, or MMPs. Medicare Supplement plans typically pay the difference between healthcare costs incurred bya beneficiary and amounts paid by Medicare. Medicare Advantage plans provide Medicare beneficiaries with a managed care alternative to traditional Medicareand often include a Medicare Part D benefit. In addition, our Medicare Advantage SNPs provide tailored benefits to special needs individuals who areinstitutionalized or have severe or disabling chronic conditions and to dual-eligible customers, who are low-income seniors and persons under age 65 withdisabilities. Medicare Advantage SNPs are coordinated care plans specifically designed to provide targeted care, covering all the health care services consideredmedically necessary for members and often providing professional care coordination services, with personal guidance and programs that help members maintaintheir health. Medicare Part D offers a prescription drug plan to Medicare and MMP beneficiaries. MMP is a demonstration program focused on serving memberswho are dually eligible for Medicaid and Medicare, which was established as a result of the passage of the ACA. We offer these plans to customers through ourhealth benefit subsidiaries throughout the country, including America’s 1st Choice, Amerigroup, CareMore, HealthSun and Simply Healthcare. Individual Plans: We offer a full range of health insurance plans with a variety of options and deductibles for individuals who are not covered by employer-sponsored coverage and are not eligible for government sponsored plans, such as Medicare and/or Medicaid. Individual policies are generally sold throughindependent agents and brokers, retail partnerships, our in-house sales force or via the exchanges. Individual business is sold on a fully-insured basis. We offer on-exchange products through public exchanges and off-exchange products. Federal premium subsidies are available only for certain public exchange Individualproducts. Unsubsidized Individual customers are generally more sensitive to product pricing and, to a lesser extent, the configuration of the network and theefficiency of administration. Instability in the Individual market has resulted in a targeted approach where we offer products in select geographies. Medicaid Plans and Other State-Sponsored Programs: We have state contracts to serve members enrolled in publicly funded healthcare programs,including Medicaid; ACA-related Medicaid expansion programs; Temporary Assistance for Needy Families, or TANF; programs for seniors and people withdisabilities, or SPD; Children’s Health Insurance Programs, or CHIP; and specialty programs such as those focused on long-term services and support, or LTSS,HIV/AIDS, children living in foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities and/or developmental disabilities, orID/DD programs. The Medicaid program makes federal matching funds available to all states for the delivery of healthcare benefits for low income and/or highmedical risk individuals. These programs are managed by the individual states based on broad federal guidelines. TANF is a state and federally funded programdesigned for the population consisting primarily of low-income children and their guardians. SPD is a federal income supplement program designed forSupplemental Security Income recipients; however, states can broaden eligibility criteria. This population consists of low-income seniors and people withdisabilities. CHIP is a state and federally funded program that provides healthcare coverage to children not otherwise covered by Medicaid or other insuranceprograms. LTSS is a state and federally funded program that offers states a broad and flexible set of program design options and refers to the delivery of long-termservices and support for our members who receive home and community- or institution-based services for long-term care. Our HIV/AIDS program is a state andfederally sponsored program that provides services to those living with HIV/AIDS. Our foster care program is a state and federally sponsored program servingchildren with complex needs within the foster care system. Our behavioral health program is a state and federally sponsored program providing services to thosewith mental health and/or substance abuse disorders. ID/DD is a state and federally sponsored program serving those living with limitations in intellectualfunctioning and adaptive behavior learning disabilities. Our Medicaid plans also cover certain dual-eligible customers, as previously described above, who alsoreceive Medicare benefits. We provide Medicaid and other state-10-sponsored services, such as administrative services, in Arkansas, California, Colorado, Florida, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland,Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin andWashington D.C. Pharmacy Products: In the second quarter of 2019, we began using IngenioRx to market and sell a PBM product to fully-insured and self-funded Anthemhealth plan customers throughout the country, as well as to customers outside of the health plans we own. This comprehensive product portfolio includes featuressuch as drug formularies, a pharmacy network, prescription drug database, member services, and mail order capabilities. In July 2019, we announced our firstcontract win with a third-party health insurer, Blue Cross of Idaho, and we began providing PBM services under that contract beginning on January 1, 2020. Alsobeginning in the second quarter of 2019, we began delegating certain PBM administrative functions, such as claims processing and prescription fulfillment, to CVSHealth pursuant to the CVS PBM Agreement. We intend to retain the responsibilities for IngenioRx’s clinical and formulary strategy and development, memberand employer experiences, operations, sales, marketing, account management and retail network strategy. From December 2009 through December 2019, wedelegated certain PBM functions and administrative services to Express Scripts pursuant to the ESI PBM Agreement, excluding certain health plans and self-insured members who have exclusive agreements with different PBM service providers. We began transitioning existing members from Express Scripts toIngenioRx in the second quarter of 2019 and completed the transition of all of our members on January 1, 2020. Express Scripts managed the network of pharmacyproviders, operated mail order pharmacies and processed prescription drug claims on our behalf, while we sold and supported the product for our members, madeformulary decisions, sold drug benefit design strategy and provided front line member support. Life Insurance: We offer an array of competitive individual and group life insurance benefit products to both Large Group and Small Group customers inconjunction with our health plans. The life products include term life and accidental death and dismemberment. Disability: We offer short-term and long-term disability products, usually in conjunction with our health plans. Radiology Benefit Management: We offer outpatient diagnostic imaging management services to health plans, which promote the most appropriate use ofclinical services to improve the quality of care delivered to members. These services include utilization management for advanced diagnostic imaging procedures,network development and optimization, patient safety, claims adjudication and provider payment. Personal Health Care Guidance: We offer evidence-based and analytics-driven personal healthcare guidance. These services help improve the quality,coordination and safety of healthcare, enhance communications between patients and their physicians, and reduce medical costs. Dental: Our dental plans include networks in certain states in which we operate. Many of the dental benefits are provided to customers enrolled in ourhealth plans and are offered on both a fully-insured and self-funded basis. Our members also have access to additional dental providers through our participation inthe National Dental GRID, a national dental network developed by and for BCBS plans. The National Dental GRID includes dentists in all 50 states and theDistrict of Columbia and provides multi-state customers with a national solution that offers in-network discounts across the country. Additionally, we offermanaged dental services to other healthcare plans to assist those plans in providing dental benefits to their customers. Vision Services and Products: Our vision plans include networks within the states in which we operate. Many of the vision benefits are provided tocustomers enrolled in our health plans and are offered on both a fully-insured and self-funded basis. Medicare Administrative Operations: Through our subsidiary, NGS, we serve as a fiscal intermediary, carrier and Medicare administrative contractor forthe federal government by providing administrative services for the Medicare program, Parts A and B, which generally provides coverage for persons who are 65or older and for persons who are under 65 and disabled or with end-stage renal disease. Part A of the Medicare program provides coverage for services provided byhospitals, skilled nursing facilities and other healthcare facilities. Part B of the Medicare program provides coverage for services provided by physicians, physicaland occupational therapists and other professional providers, as well as certain durable medical equipment and medical supplies.-11- Networks and Provider RelationsOur relationships with physicians, hospitals and professionals that render healthcare services to our members are guided by local, regional and nationalstandards for network development, reimbursement and contract methodologies. While following industry standards, we are simultaneously seeking to leadtransformation efforts within our healthcare system, moving from a fragmented model premised on episodic intervention to one based on proactive, coordinatedcare built around the needs of the patient. A key element of this transformation involves a transition from traditional fee-for-service payment models to modelswhere providers are paid based on the value, both in quality and affordability, of the care they deliver. We establish “market-based” hospital reimbursement payments that we believe are fair, but aggressive, and among the most competitive in the market. Wealso seek to ensure that physicians in our network are paid in a timely manner at appropriate rates. In many instances, we deploy multi-year contracting strategies,including case rates or fixed rates, to limit our exposure to medical cost inflation and to increase cost predictability. We maintain both broad and narrow providernetworks to ensure member choice, based on both price and access needs, while implementing programs designed to improve the quality of care our membersreceive. Increasingly, we are supplementing our broad-based networks with smaller or more cost-effective networks that are designed to be attractive to a moreprice-sensitive customer segment, such as public exchange customers. Our reimbursement strategies vary across markets and depend on the degree of consolidation and integration of physician groups and hospitals. Under a fee-for-service reimbursement methodology for physicians, fee schedules are developed at the state level based on an assessment of several factors and conditions,including the CMS resource-based relative value system, or RBRVS, medical practice cost inflation and physician supply. We utilize CMS RBRVS fee schedulesas a reference point for fee schedule development and analysis. The RBRVS structure was developed, maintained, and updated by CMS and is used by theMedicare program and other major payers. In addition, we have implemented and continue to expand physician incentive contracting, or “pay-for-performance,”which ties physician payment levels to performance on clinical measures. While we generally do not delegate full financial responsibility to our physician providers in the form of capitation-based reimbursement, we maintaincapitation-based arrangements in certain markets where we determine that market dynamics result in it being a useful method to lower costs and reduceunderwriting risk. Our hospital contracts provide for a variety of reimbursement arrangements depending on local market dynamics and current hospital utilization efficiency.Most hospitals are reimbursed a fixed amount per day or reimbursed a per-case amount, per admission, for inpatient covered services. A small percentage ofhospitals, primarily rural, sole community hospitals, are reimbursed on a discount from approved charge basis for covered services. Our “per-case” reimbursementmethods utilize many of the same attributes contained in Medicare’s Diagnosis Related Groups methodology. Hospital outpatient services are reimbursed by fixedcase rates, fee schedules or percent of approved charges. Our hospital contracts recognize unique hospital attributes, such as academic medical centers orcommunity hospitals, and the volume of care performed for our members. To improve predictability of expected costs, we frequently use a multi-year contractingapproach with providers. In addition, the majority of our hospital contracts include a pay-for-performance component where reimbursement levels are linked toimproved clinical performance, patient safety and medical error reduction. Our provider engagement and contracting strategies are moving away from “unit price” or volume-based payment models to payment models that aligncompensation with the value delivered as measured by healthcare outcomes, quality and cost. Our Enhanced Personal Health Care program augments traditionalfee-for-service with shared savings opportunities for providers when actual healthcare costs are below projected costs and providers meet specific quality measures.The quality measures are based on nationally accepted, credible standards (e.g., NCQA, the American Diabetes Association and the American Academy ofPediatrics) and span preventive, acute and chronic care. We understand, however, that payment incentives alone are insufficient to create the large-scale, system-wide transformation required to achieve meaningful impacts on cost, quality and member experience. Accordingly, we are investing in care delivery transformationand population health management support structures to help providers succeed under value-based payment models. This support includes our web-basedpopulation health management technology and teams of dedicated practice consultants who work alongside providers, sharing best practices, and helping themleverage our data to the benefit of their patients. In some of these arrangements, participating physician practices receive a per-member, per-month clinicalcoordination fee to compensate them for important care management activities that occur outside of the patient visit (e.g., purchasing an electronic health record orhiring care-12-management nurses), all of which have been shown to reduce healthcare costs and improve care outcomes. Since the launch of our Enhanced Personal Health Careprogram, we now have arrangements with provider organizations covering 52% of our PCPs and have rolled this program out in each of the 14 states where weoperate as a licensee of the BCBSA.Medical Management ProgramsOur medical management programs include a broad array of activities that facilitate improvements in the quality of care provided to our members andpromote cost-effective medical care. These medical management activities and programs are administered and directed by physicians and nurses. The goals of ourmedical management strategies are to ensure that the care delivered to our members is supported by appropriate medical and scientific evidence, is received on atimely basis and occurs in the most appropriate setting. The following is a general description of our medical management programs, which are available to ourmembers depending on the particular plan or product in which they participate:Precertification: A traditional medical management program involves assessment of the appropriateness of certain hospitalizations and other medicalservices prior to the services being rendered. For example, precertification is used to determine whether a set of hospital and medical services is beingappropriately applied to the member’s clinical condition, in accordance with criteria for medical necessity as that term is defined in the member’s benefits contract.All of our health plans have implemented precertification programs for selected medical services including surgeries, major diagnostic procedures, devices, drugsand other services to help members maximize benefits and avoid unnecessary charges or penalties. Through our American Imaging Management, Inc. subsidiary,doing business as AIM Specialty Health, or AIM, we promote appropriate, safe and affordable member care in the areas of imaging, sleep disorders, cardiactesting, oncology drugs and musculoskeletal procedures. These expanded specialty benefit management solutions leverage clinical expertise and technology toengage our provider communities and members in more effective and efficient use of outpatient services.Care coordination: Another traditional medical management strategy we use is care coordination, which is based on nationally recognized criteriadeveloped by third-party medical specialists. With inpatient care coordination, the requirements and intensity of services during a patient’s hospital stay arereviewed, at times by an onsite, skilled nurse professional in collaboration with the hospital’s medical and nursing staff, in order to coordinate care and determinethe most effective transition of care from the hospital setting. In addition, continued stay cases are reviewed with physician medical directors to ensure appropriateutilization of medical services. We also coordinate care for outpatient services to help ensure that patients with chronic conditions who receive care from multiplephysicians are able to manage the exchange of information between physicians and coordinate office visits to their physicians.Case management: We have implemented a medical management strategy focused on identifying the small percentage of the membership that will require ahigh level of intervention and assistance to manage their healthcare needs. Case Management identifies members who are likely to be re-admitted to the hospitalthrough claims analysis using predictive modeling techniques, the use of health risk assessment data, utilization management reports and referrals from a physicianor one of our other programs, such as the 24/7 NurseLine. Registered nurses, medical directors, behavioral health experts, pharmacists and other clinicians focus onthese members and help them coordinate their care through pharmacy compliance, post-hospital care, follow-up visits to see their physician and support in theirhome. Increasingly, we collaborate with our providers and key health partners within the member’s provider care team by providing actionable patient datainsights, practice-coaching capabilities, technology and programs and products that help our providers and health partners to successfully deliver the right care, atthe right time, in the right place.Formulary management: We have developed formularies, which are selections of drugs based on clinical quality and effectiveness. A pharmacy andtherapeutics committee of physicians uses scientific and clinical evidence to ensure that our members have access to the appropriate drug therapies and receivethese therapies through proper settings. Medical policy: A medical policy committee determines our national policies and guidelines for the application of medical technologies, procedures andservices. This committee is comprised of internal and external physician leaders from various specialties and areas of the country. We also work in cooperationwith academic medical centers, practicing community physicians and medical specialty organizations. All guidelines and policies are reviewed at least once a yearor as new published clinical evidence becomes available.Quality programs: We are actively engaged with our hospital and physician networks to enable them to improve medical and surgical care and achievebetter outcomes for our members. We endorse, encourage and incentivize hospitals and-13-physicians to support national initiatives to improve the quality of clinical care and patient outcomes and to reduce medication errors and hospital infections.External review procedures: We work with outside experts through a process of external review to provide our members scientifically and clinically,evidence-based medical care. When we receive member concerns, we have formal appeals procedures that ultimately allow coverage disputes related to medicalnecessity decisions under the benefits contract to be settled by independent expert physicians.Provider cost comparison tools: Through Estimate Your Cost, Care & Cost Finder, and other web-based tools, our members can compare cost estimates,quality accreditation data and patient reviews for common services at contracted providers, with cost estimates for facility, professional and ancillary services.These cost estimates bundle related services typically performed at the time of the procedure, not just for the procedure itself. Users can review cost data for over400 common, shop-able medical procedures in all states. Members can also estimate out-of-pocket costs based on a member’s own benefit coverage, deductible,and out-of-pocket maximum. We also offer information on overall facility ratings and patient experience using trusted third-party data. We continue to work onenhancing and evolving our tools to assist members in making informed and value-based healthcare decisions. In addition, we collaborate with an externalindependent vendor to support employers wanting to purchase a consumer engagement solution with certain additional functionality.Anthem Health Guide: Anthem Health Guide integrates the customer service experience with clinical and wellness coaching to provide easier navigation ofhealthcare services for our members. Anthem Health Guide provides members with education on benefit options and digital opportunities that fit memberreferences, and makes recommendations for eligible clinical programs to ensure members are connected to the most appropriate care and clinical resources. Byallowing members to connect with us using voice, click-to-chat, secure email and mobile technology, we enhance our ability to engage with our members.Anthem Whole Health Connection: Anthem Whole Health Connection is a differentiated approach to whole person health that uniquely connects medical,pharmacy, dental, vision, disability and supplemental health clinical and claims data to proactively identify health issues earlier and engage our members with theirhealth providers in new ways to support health, lower costs and deliver better healthcare experience. Anthem Whole Health Connection is included when Anthemhealth benefits are combined with one or more of the Anthem pharmacy, dental, vision, life, disability or supplemental health coverage plans.Care Management ProgramsWe continue to expand our 360º Health suite of integrated care management programs and tools. 360º Health offers the following programs, among others,which are available to our members depending on the particular plan or product in which they participate, and have been proven to increase quality and reducemedical costs for our members:ConditionCare and FutureMoms are care management and maternity management programs that serve as adjuncts to physician care. Skilled nurseprofessionals, with added support from our team of dietitians, social workers, pharmacists, health educators and other health professionals, help participantsunderstand their condition, their doctor’s orders and how to become a better self-manager of their condition. We also offer members infertility consultationthrough our SpecialOffers@Anthem program, a comprehensive and integrated assembly of discounted health and wellness products and services from a variety ofthe nation’s leading retailers.24/7 NurseLine offers access to qualified, registered nurses anytime. This allows our members to make informed decisions about the appropriate level of careand avoid unnecessary worry. This program also includes a referral process to the nearest urgent care facility, a robust audio library, accessible by phone, withmore than 600 health and wellness topics, as well as on-line health education topics designed to educate members about symptoms and treatment of many commonhealth concerns.MyHealth Advantage utilizes integrated information systems and sophisticated data analytics to help our members improve their compliance with evidence-based care guidelines, providing personal care notes that alert members to potential gaps in care, enable more prudent healthcare choices, and assist in therealization of member out-of-pocket cost savings. Key opportunities are also shared with physicians through Availity® at the time of membership eligibilityverification. Availity® is-14-an electronic data interchange system that allows for the exchange of health information among providers over a secure network.MyHealth Coach provides our members with a professional guide who helps them navigate the healthcare system and make better decisions about their well-being. MyHealth Coach proactively reaches out to people who are at risk for potentially serious health issues or have complex healthcare needs. Our healthcoaches help participants understand and manage chronic conditions, handle any health and wellness related services they need and make smart lifestyle choices.HealthyLifestyles helps employees transform unhealthy habits into positive ones by focusing on behaviors that can have a positive effect on their health andtheir employer’s financial well-being. HealthyLifestyles programs include smoking cessation, weight management, stress management, physical activity, and dietand nutrition.Behavioral Health Case Management is a comprehensive program supporting a wide range of members who are impacted by their behavioral healthcondition, including specialty areas such as eating disorders, anxiety, depression and substance abuse. The program assists members and their families withobtaining appropriate behavioral health treatment, offering community resources, providing education and telephonic support, and promoting providercollaboration.Autism Spectrum Disorder Program is a specialized case management program staffed by a dedicated team of clinicians who have been trained on the uniquechallenges and needs of families with a member who has a diagnosis of autism spectrum disorder. These clinicians provide education, information on communityresources to help with care and support, guidance on the appropriate usage of benefits, and assistance in exploring effective treatments, such as medical services,that may help the member and their families.Employee Assistance Programs provide 24/7 telephonic support for personal and crisis events. Members also gain access to many resources that allow supportwithin work and personal life by providing quick and easy access to confidential resources to help meet the challenges of daily life. Examples of services availableinclude counseling, referral assistance with child care, health and wellness, financial issues, legal issues, adoption and daily living.Healthcare Quality InitiativesIncreasingly, the healthcare industry is able to define quality healthcare based on preventive health measurements, outcomes of care and optimal caremanagement for chronic disease. A key to our success has been our ability to work with our network physicians and hospitals to improve the quality and outcomesof the healthcare services provided to our members. Our ability to promote quality medical care has been recognized by NCQA, the largest and most respectednational accreditation program for managed care health plans.Several quality healthcare measures, including the Healthcare Effectiveness Data and Information Set, or HEDIS®, have been incorporated into NCQA’saccreditation processes. HEDIS® measures range from preventive services, such as screening mammography and pediatric immunization, to elements of care,including decreasing the complications of diabetes and improving treatment for patients with heart disease. For health plans, NCQA’s highest accreditation statusof Excellent is granted only to those plans that demonstrate levels of service and clinical quality that meet or exceed NCQA’s rigorous requirements for consumerprotection and quality improvement. Plans earning this accreditation level must also achieve HEDIS® results that are in the highest range of national or regionalperformance. Details for each of our plans’ accreditation levels can be found at www.ncqa.org.Our wholly-owned health outcomes research subsidiary, HealthCore, Inc., or HealthCore, generates consistent and actionable evidence to support decisionmaking while helping to guide fresh initiatives for a range of stakeholders in the healthcare industry. By leveraging a rich array of medical and pharmacy utilizationdata queried from administrative claims, patient surveys, medical charts and laboratory diagnostics, among other health records, HealthCore’s multi-disciplinaryresearch teams uncover a broad spectrum of safety, effectiveness, pharmacoepidemiology, and health economics evidence. HealthCore’s real world evidence andcomparative effectiveness research, among other data, has played roles in the product planning and development campaigns of biotechnology and pharmaceuticalcompanies and today it lists most of the leading biologics and drug manufacturers as clients or alliance partners. Its health plan research has led to better insightsinto evidence-based treatment approaches, the development of value-based initiatives to drive access and adherence to treatment, and the crafting of incentives tomodify patient and provider behavior. One of HealthCore’s predominant initiatives is its governmental and academic collaborations that include cooperation withsome of the country’s top institutions and federal-15-agencies, including the Food and Drug Administration, or FDA, Patient-Centered Outcomes Research Institute and the National Institutes of Health. HealthCore isalso an active contributor to the FDA’s medical product safety surveillance Sentinel program. HealthCore serves as the coordinating center for the National Heart,Lung, and Blood Institute’s Pediatric Heart Network, a collaboration among 40 of the nation’s top pediatric hospitals. Additionally, HealthCore has taken athought-leadership position in the development of pragmatic clinical trials. As a notable contributor to the health outcomes evidence base, HealthCore’s researchfindings are broadly disseminated during presentations at national and international medical meetings and are published in a variety of respected peer-reviewedmedical and health services journals.Our AIM subsidiary supports quality by implementing clinical appropriateness and patient safety solutions for advanced imaging procedures, cardiology, sleepmedicine, medical oncology, radiation therapy, rehabilitative, certain outpatient surgical and musculoskeletal services. These programs, based on widely acceptedand evidence-based clinical guidelines, promote the most appropriate use of clinical services to improve the quality of overall healthcare delivered to our membersand members of other health plans that are covered under AIM’s programs. To provide additional impact to its clinical appropriateness program, AIM has alsoimplemented a provider assessment program, OptiNet®, which promotes more informed selection of diagnostic imaging and testing facilities by providing cost andfacility information to physician offices at the point that a procedure is ordered. We have also leveraged AIM’s provider network assessment information toproactively engage and educate our members about imaging providers and sleep testing choices based on site capabilities and cost differences. This program isanother example of how we facilitate improvements in the quality of care provided to our members and promote cost-effective medical care.Pricing and Underwriting of Our ProductsWe price our products based on our assessment of current healthcare claim costs and emerging healthcare cost trends, combined with charges foradministrative expenses, risk and profit, including charges for the ACA taxes and fees, where applicable. We continually review our product designs and pricingguidelines on a national and regional basis so that our products remain competitive and consistent with our profitability goals and strategies.Our revenue on Medicare policies is based on annual bids submitted to CMS. We base the commercial and Medicaid premiums we charge and our Medicarebids on our estimates of future medical costs over the fixed contract period. In applying our pricing to each employer group and customer, we aim to maintainconsistent, competitive, disciplined underwriting standards. We employ our proprietary accumulated actuarial and financial data to determine underwriting andpricing parameters for both our fully-insured and self-funded businesses.In most circumstances, our pricing and underwriting decisions follow a prospective rating process in which a fixed premium is determined at the beginning ofthe contract period. For our fully-insured business, any deviation, favorable or unfavorable, from the medical costs assumed in determining the premium is ourresponsibility. Some of our larger groups employ retrospective rating reviews, where positive experience is partially refunded to the group, and negativeexperience is charged against a rate stabilization fund established from the group’s favorable experience or charged against future favorable experience.BCBSA LicensesWe are a party to license agreements with the BCBSA that entitle us to the exclusive, and in certain areas, non-exclusive use of the Blue Cross and BlueShield names and marks in assigned geographic territories. BCBSA is a national trade association of Blue Cross and Blue Shield licensees, the primary function ofwhich is to promote and preserve the integrity of the BCBS names and marks, as well as provide certain coordination among the member companies. Each BCBSAlicensee is an independent legal organization and is not responsible for obligations of other BCBSA member organizations. We have no right to market productsand services using the BCBS names and marks outside of the states in which we are licensed to sell BCBS products. We are required to pay an annual license fee tothe BCBSA based on enrollment and also to comply with various operational, governance and financial standards set forth in the licenses.We believe that we and our licensed affiliates are currently in compliance with these standards. The standards under the license agreements may be modifiedin certain instances by the BCBSA. See Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K for additional details of our licensing requirements andthe impact if we were not to comply with these license agreements.-16-Regulation GeneralOur operations are subject to comprehensive and detailed state, federal and international regulation throughout the jurisdictions in which we do business. Theselaws and regulations, which can vary significantly from jurisdiction to jurisdiction, restrict how we conduct our businesses and result in additional burdens andcosts to us. Further, federal and state laws and regulations are subject to amendments and changing interpretations in each jurisdiction. The application of thesecomplex legal and regulatory requirements to the detailed operation of our businesses creates areas of uncertainty. In addition, there are numerous proposedhealthcare laws and regulations at the federal and state levels, including single payer, Medicare for All and public option proposals, some of which could materiallyadversely affect our businesses if they were to be enacted.Supervisory agencies, including federal and state regulators and departments of health, insurance and corporation, have broad authority to:•grant, suspend and revoke licenses to transactbusiness;•regulate our products and services in greatdetail;•regulate, limit, or suspend our ability to market products, including the exclusion of our plans from participating on publicexchanges;•retroactively adjust premium rates;•monitor our solvency and reserveadequacy;•scrutinize our investment activities on the basis of quality, diversification and other quantitative criteria;and•impose monetary and criminal sanctions for non-compliance with regulatoryrequirements.To carry out these tasks, these government entities periodically examine our operations and accounts.The health benefits business also may be adversely impacted by court and regulatory decisions that expand or invalidate the interpretations of existing statutesand regulations. It is uncertain whether we can recoup, through higher premiums or other measures, the increased costs of mandated benefits or other increasedcosts caused by potential legislation, regulation or court rulings. See Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K.State Regulation of Insurance Companies and HMOsOur insurance and HMO subsidiaries must obtain a certificate of authority and maintain that license in the jurisdictions in which they conduct business. TheNational Association of Insurance Commissioners, or NAIC, has adopted model regulations that, where adopted by states, require expanded governance practices,risk and solvency assessment reporting and the filing of periodic financial and operating reports. Most states have adopted these or similar measures to expand thescope of regulations relating to corporate governance and internal control activities of HMOs and insurance companies. Health insurers and HMOs are subject tostate examination and periodic license renewal.In addition, we are regulated as an insurance holding company and are subject to the insurance holding company acts of the states in which our insurancecompany and HMO subsidiaries are domiciled. These acts contain certain reporting requirements, as well as restrictions on transactions between an insurer orHMO and its affiliates, and may restrict the ability of our regulated subsidiaries to pay dividends to our holding companies. These holding company laws andregulations generally require registration with applicable state departments of insurance and the filing of reports describing capital structure, ownership, financialcondition, certain intercompany transactions, enterprise risks, corporate governance and general business operations. In addition, state insurance holding companylaws and regulations require notice or prior regulatory approval of transactions including acquisitions, material intercompany transfers of assets, guarantees andother transactions between the regulated companies and their affiliates, including parent holding companies. Applicable state insurance holding company acts alsorestrict the ability of any person to obtain control of an insurance company or HMO without prior regulatory approval. “Control” is generally defined as the director indirect power to direct or cause the direction of the management and policies of a person and is presumed to exist if a person directly or indirectly owns or-17-controls 10% or more of the voting securities of another person. Dispositions of control generally are also regulated under the state insurance holding companyacts.The states of domicile of our regulated subsidiaries have statutory risk-based capital, or RBC, requirements for health and other insurance companies andHMOs based on the Risk-Based Capital (RBC) For Health Organizations Model Act. These RBC requirements are intended to assess the capital adequacy of lifeand health insurers and HMOs, taking into account the risk characteristics of a company’s investments and products. In general, under these laws, an insurancecompany or HMO must submit a report of its RBC level to the insurance department or insurance commissioner of its state of domicile for each calendar year. Thelaw requires increasing degrees of regulatory oversight and intervention as a company’s RBC declines. As of December 31, 2019, the RBC levels of our insuranceand HMO subsidiaries exceeded all applicable mandatory RBC requirements. For more information on RBC capital and additional liquidity and capitalrequirements for a licensee of the BCBSA, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and CapitalResources–Risk-Based Capital,” included in Part II, Item 7 of this Annual Report on Form 10-K.Ongoing Requirements and Changes Stemming from the ACAThe ACA significantly changed the United States healthcare system. While we anticipate continued efforts to invalidate, modify, repeal or replace the ACA,either through Congress or court challenges, we expect the major portions of the ACA to remain in place and continue to significantly impact our businessoperations and results of operations, including pricing, minimum medical loss ratios, or MLRs, and the geographies in which our products are available.The ACA prohibits lifetime limits, certain annual limits, member cost-sharing on specified preventive benefits and pre-existing condition exclusions. Further,the ACA implemented certain requirements for insurers, including changes to Medicare Advantage payments and the minimum MLR provision that requiresinsurers to pay rebates to customers when insurers do not meet or exceed the specified MLR thresholds. In addition, the ACA also required a number of otherchanges with significant effects on both federal and state health insurance markets, including strict rules on how health insurance is rated, what benefits must beoffered, the assessment of new taxes and fees (including annual fees on health insurance companies), the creation of public exchanges for Individuals and SmallGroups, the availability of premium subsidies for qualified individuals, and expansions in eligibility for Medicaid. Changes to our business environment are likelyto continue as elected officials at the national and state levels continue to enact, and both elected officials and candidates for election continue to propose,significant modifications to existing laws and regulations, including changes to taxes and fees. Also, the legal challenges regarding the ACA, including the 2018ACA Decision, which judgment has been stayed pending appeal, could have a material adverse effect on our business, cash flows, financial condition and resultsof operations.In general, the Individual market risk pool that includes public exchange markets has become less healthy since its inception in 2014 and continues to exhibitrisk volatility. Based on our experience in public exchange markets to date, we have made adjustments to our premium rates and participation footprint, and we willcontinue to evaluate the performance of our public exchange plans going forward. In addition, insurers have faced uncertainties related to federal governmentfunding for various ACA programs. These factors may have a material adverse effect on our results of operations if premiums are not adequate or do notappropriately reflect the acuity of these individuals. Any variation from our expectations regarding acuity, enrollment levels, adverse selection, or otherassumptions utilized in setting premium rates could have a material adverse effect on our results of operations, financial position, and cash flows.Further, implementation of the ACA brings with it significant oversight responsibilities by health insurers that may result in increased governmental audits,increased assertions of False Claims Act violations, and an increased risk of other litigation.-18-Federal regulatory agencies continue to modify regulations and guidance related to the ACA and markets more broadly. Some of the more significant ACArules are described below:•The minimum MLR thresholds by line of business for the Commercial market, as defined by HHS, are asfollows:Line of Business %Large Group 85Small Group 80Individual 80New York state regulations require us to meet a more restrictive MLR threshold of 82% for both Small Group and Individual lines of business. Theminimum MLR thresholds disclosed above are based on definitions of an MLR calculation provided by HHS, or specific states, as applicable, and differfrom our calculation of “benefit expense ratio” based on premium revenue and benefit expense as reported in accordance with U.S. generally acceptedaccounting principles, or GAAP. Furthermore, the definitions of the lines of business differ under the various federal and state regulations and may notcorrespond to our lines of business. Definitions under the MLR regulation also impact insurers differently depending upon their organizational structureor tax status, which could result in a competitive advantage to some insurance providers that may not be available to us, resulting in an uneven playingfield in the industry.The ACA also imposed a separate minimum MLR threshold of 85% for Medicare Advantage and Medicare Part D prescription drug plans, or MedicarePart D plans. Medicare Advantage or Medicare Part D plans that do not meet this threshold will have to pay a minimum MLR rebate. If a plan’s MLR isbelow 85% for three consecutive years beginning with 2014, enrollment will be restricted. A Medicare Advantage or Medicare Part D plan contract willbe terminated if the plan’s MLR is below 85% for five consecutive years.In addition, state Medicaid programs are required to set managed care capitation rates such that a minimum 85% MLR is projected to be achieved;however, states are not required to collect remittances if the minimum MLR is not achieved.Approximately 58.9% and 20.8% of our premium revenue and medical membership, respectively, were subject to the minimum MLR regulations as ofand for the year ended December 31, 2019. Approximately 58.7% and 22.0% of our premium revenue and medical membership, respectively, weresubject to the minimum MLR regulations as of and for the year ended December 31, 2018.•The ACA created an incentive payment program for Medicare Advantage plans. CMS developed the Medicare Advantage Star ratings system, whichawards between 1.0 and 5.0 stars to Medicare Advantage plans based on performance in several categories, including quality of care and customerservice. The Star ratings are used by CMS to award quality-based bonus payments to plans that receive a rating of 4.0 or higher. The methodology andmeasures included in the Star ratings system can be modified by CMS annually. As of December 31, 2019, all of our Medicare Advantage plans havereceived a rating of 3.0 or higher.•Regulations require premium rate increases to be reviewed for Small Group and Individual products above specified thresholds, 15% for 2019 and 2020,and may be adjusted from time to time. The regulations provide for state insurance regulators to conduct the reviews, except for cases where a state doesnot have an “effective” rate review program or in federal enforcement states, in which cases HHS will conduct the reviews for any rate increase.•Prior to the implementation of the ACA, health insurers were permitted to use differential pricing, commonly referred to as “rating bands,” based onfactors such as health status, gender and age. The ACA precludes health insurers from using health status and gender in the determination of the insurancepremium. In addition, rating bands for age cannot vary by more than 3 to 1, and rating bands for tobacco use cannot vary by more than 1.5 to 1. Theongoing use of the 3 to 1 rating bands may have a significant impact on the majority of Individual and Small Group customers and could lead to adverseselection in the market as well as increased variability in projecting future premiums for those customer markets.-19-•The ACA imposed an annual Health Insurance Provider Fee, or HIP Fee, on health insurers that write certain types of health insurance on U.S. risks,which has been permanently repealed effective January 1, 2021. The annual HIP Fee is allocated to health insurers based on the ratio of the amount of aninsurer’s net premium revenues written during the preceding calendar year to the amount of health insurance premium for all U.S. health risk for thosecertain lines of business written during the preceding calendar year. We record our estimated liability for the HIP Fee in full at the beginning of the yearwith a corresponding deferred asset that is amortized on a straight-line basis to selling, general and administrative expense. The final calculation andpayment of the annual HIP Fee is due by September 30th of each fee year. The HIP Fee is non-deductible for federal income tax purposes. Our affectedproducts are priced to cover the increased selling, general and administrative and income tax expenses associated with the HIP Fee. The total amount duefrom allocations to health insurers was $14.3 billion for 2018 and was suspended for 2019. The HIP Fee has resumed and increased to $15.5 billion for2020 and has been permanently eliminated beginning in 2021.•Medicare Advantage reimbursement rates will not increase as much as they would otherwise due to the payment formula promulgated by the ACA thatcontinues to impact reimbursements. We also expect further and ongoing regulatory guidance on a number of issues related to Medicare, includingevolving methodology for ratings and quality bonus payments. CMS is also proposing changes to its program that audits data submitted under the riskadjustment programs in a way that would increase financial recoveries from plans.Drug Benefit and Pharmacy Benefit Manager RegulationPharmacy benefit managers are regulated at both the federal and state levels and must comply with federal and state statutes and regulations governinglabeling, packaging, advertising and adulteration of prescription drugs, dispensing of controlled substances, and licensing. In recent years the federal governmenthas banned certain business practices, including “gag clauses,” which prohibited pharmacists from informing patients when a lower cost drug was available as asubstitute, and “clawbacks,” which occurred when pharmacy benefit managers sought to recoup the difference between the reimbursed cost of the drug and thepatient’s copay and the drug itself was less expensive than the copay paid by the patient. Regulation in the states varies dramatically and ranges from licensure ofPBMs as third-party administrators, licensure specifically as a pharmacy benefit manager, and licensure accompanied by additional disclosures and limitations ofbusiness practices to varying degrees. The NAIC is working on a PBM model law that, if adopted widely, could result in a more standardized approach to PBMregulation in the states in the future.A number of proposals are being considered at the federal and state levels that would increase regulation of drug benefits and pharmacy benefit managers.Such proposals under consideration include (1) regulation of rebates from drug manufacturers that would require rebate dollars to be applied at the point-of-sale,(2) federal policy changes to set the prices for a subset of drugs covered under the Medicare program, (3) reforms to the Medicare drug benefit, such as beneficiarycost-sharing changes that aim to lower consumer costs, and (4) attempts at both the federal and state levels to ban the use of spread pricing contracts in both theCommercial and Medicaid markets. These reforms have the potential to have broad impacts on our PBM business and could materially adversely affect ourbusiness if they are enacted.Privacy, Confidentiality and Data Standards RegulationThe federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the administrative simplification provisions of HIPAA impose anumber of requirements on covered entities (including insurers, HMOs, group health plans, providers and clearinghouses) and their business associates relating tothe use, disclosure and safeguarding of protected health information. These requirements include uniform standards of common electronic healthcare transactions;privacy and security regulations; and unique identifier rules for employers, health plans and providers.Also, the Health Information Technology for Economic and Clinical Health, or HITECH, Act provisions of the American Recovery and Reinvestment Act of2009 and corresponding implementing regulations have imposed additional requirements on the use and disclosure of protected health information such asadditional breach notification and reporting requirements, contracting requirements for HIPAA business associate agreements, strengthened enforcementmechanisms and increased penalties for HIPAA violations. Federal consumer protection laws may also apply in some instances to privacy and security practicesrelated to personally identifiable information.-20-The federal Gramm-Leach-Bliley Act generally places restrictions on the disclosure of non-public information to non-affiliated third parties, and requiresfinancial institutions, including insurers, to provide customers with notice regarding how their non-public personal information is used, including an opportunity to“opt out” of certain disclosures. State departments of insurance and certain federal agencies adopted implementing regulations as required by federal law.The Cybersecurity Information Sharing Act of 2015 encourages organizations to share cyber threat indicators with the federal government and, among otherthings, directed HHS to develop a set of voluntary cybersecurity best practices for organizations in the health care industry.In addition, public exchanges are required to adhere to privacy and security standards with respect to personally identifiable information and to impose privacyand security standards that are at least as protective as those the public exchange has implemented for itself on insurers offering plans through the public exchangesand their designated downstream entities, including pharmacy benefit mangers and other business associates. These standards may differ from, and be morestringent than, HIPAA.Furthermore, states have begun enacting more comprehensive privacy laws and regulations addressing consumer rights to data protection or transparency thatmay affect our privacy and security practices, such as state laws like the California Consumer Privacy Act that govern the use, disclosure and protection ofmember data and impose additional breach notification requirements. State consumer protection laws may also apply to privacy and security practices related topersonally identifiable information, including information related to consumers and care providers. Complying with conflicting cybersecurity regulations andvarying enforcement philosophies, which may differ from state to state, requires significant resources and may materially and adversely affect our ability tostandardize our products and services across state lines.Federal regulation has also been proposed in the following areas that could materially impact our operations if finalized:•Federal regulations on data interoperability that would require claims data to be made available to third parties unaffiliated with Anthem;and•Federal regulations requiring hospitals and health insurers to publish negotiated prices forservices.Employee Retirement Income Security Act of 1974The provision of services to certain employee welfare benefit plans is subject to the Employee Retirement Income Security Act of 1974, as amended, orERISA, a complex set of laws and regulations subject to interpretation and enforcement by the Internal Revenue Service and the Department of Labor. ERISAregulates certain aspects of the relationships between us, the employers that maintain employee welfare benefit plans subject to ERISA and participants in suchplans. Some of our administrative services and other activities may also be subject to regulation under ERISA. In addition, certain states require licensure orregistration of companies providing third-party claims administration services for benefit plans. We provide a variety of products and services to employee welfarebenefit plans that are covered by ERISA. Plans subject to ERISA can also be subject to state laws, and the question of whether and to what extent ERISA preemptsa state law has been, and will continue to be, interpreted by many courts.Guaranty Fund AssessmentsUnder insolvency or guaranty association laws in most states, insurance companies and HMOs can be assessed for amounts paid by guaranty funds forpolicyholder losses incurred when an insurance company or HMO becomes insolvent. Most state insolvency or guaranty association laws currently provide forassessments based upon the amount of premiums received on insurance underwritten within such state (with a minimum amount payable even if no premium isreceived). Under many of these guaranty association laws, assessments are made retrospectively. Some states permit insurers or HMOs to recover assessments paidthrough full or partial premium tax offsets or through future policyholder surcharges. The amount and timing of any future assessments cannot be predicted withcertainty; however, future assessments are likely to occur.EmployeesAt December 31, 2019, we had approximately 70,600 employees. Our employees are an important asset, and we seek to develop them to their full potential.We believe that our relationship with our employees is good.-21-Available InformationWe are a large accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act) and are required, pursuantto Item 101 of Regulation S-K, to provide certain information regarding our website and the availability of certain documents filed with or furnished to the U.S.Securities and Exchange Commission, or SEC. Our website is www.antheminc.com. We have included our website address throughout this Annual Report onForm 10-K as a textual reference only. The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K. We make available, free of charge, by mail or through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports onForm 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after weelectronically file such material with or furnish it to the SEC. We also include on our website our Corporate Governance Guidelines, our Code of Conduct and thecharter of each standing committee of our Board of Directors. In addition, we intend to disclose on our website any amendments to, or waivers from, our Code ofConduct that are required to be publicly disclosed pursuant to rules of the SEC and the New York Stock Exchange, or NYSE. Anthem, Inc. is an Indianacorporation incorporated on July 17, 2001.ITEM 1A. RISK FACTORS.The following is a description of significant factors that could cause our actual results to differ materially from those contained in forward-looking statementsmade in this Annual Report on Form 10-K and presented elsewhere by management from time to time. Such factors may have a material adverse effect on ourbusiness, financial condition, and results of operations, and you should carefully consider them and not place undue reliance on any forward-looking statements. Itis not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete statement of all our potential risks oruncertainties. Because of these and other factors, past performance should not be considered an indication of future performance.If we fail to appropriately predict, price for and manage healthcare costs, the profitability of our products could decline, which could materially adverselyaffect our business, cash flows, financial condition and results of operations.Our profitability depends in large part on accurately predicting and pricing healthcare costs and on our ability to manage future healthcare costs throughmedical management, product design, negotiation of favorable provider contracts and underwriting criteria. Total healthcare costs are affected by the number ofindividual services rendered, the cost of each service and the type of service rendered. Numerous factors affecting the cost of healthcare may adversely affect ourability to predict and manage healthcare costs, as well as our business, cash flows, financial condition and results of operations. These factors include, amongothers, changes in healthcare practices, demographic characteristics including the aging population, medical cost inflation, the introduction of new technologies,drugs and treatments, increased cost of individual services, increases in the cost and number of prescription drugs, clusters of high cost cases, increased use ofservices, including due to natural catastrophes or other large-scale medical emergencies or epidemics, and new treatment guidelines, new mandated benefits (suchas the expansion of essential benefits coverage) or changes to other regulations impacting our business. Relatively small differences between predicted and actualmedical costs or utilization rates as a percentage of revenues can result in significant changes in our financial results.Generally, our premiums on Commercial policies and Medicaid contracts are fixed for a 12-month period and are determined several months prior to thecommencement of the premium period. Our revenue on Medicare policies is based on bids submitted to CMS six months prior to the start of the contract year.Accordingly, the costs we incur in excess of our benefit cost projections generally are not recovered in the contract year through higher premiums. ExistingMedicaid contract rates are often established by the applicable state, and our actual costs may exceed those rates. Although we base our Commercial premiums andour Medicare and Medicaid bids, and our acceptance of state-established Medicaid rates on our estimates of future medical costs over the fixed contract period,many factors, including those discussed above, may cause actual costs to exceed those estimated and reflected in premiums and bids.Relatively small differences between predicted and actual healthcare costs as a percentage of premium revenues can result in significant changes in our resultsof operations. Although federal and state premium and risk adjustment mechanisms could help offset healthcare benefit costs in excess of our projections if ourassumptions (including assumptions for-22-government premium and risk adjustment payments) utilized in setting our premium rates are significantly different than actual results, our income statement andfinancial condition could still be adversely affected.In addition to the challenge of managing healthcare costs, we face pressure to contain premium rates. Our customers may renegotiate their contracts to seek tocontain their costs or may move to a competitor to obtain more favorable premiums. Further, federal and state regulatory agencies may restrict or prevent entirelyour ability to implement changes in premium rates. For example, we must submit data on all proposed rate increases to HHS for monitoring purposes on many ofour products. In addition, the ACA includes an annual rate review requirement to prohibit unreasonable rate increases, and our plans may be excluded fromparticipating in the public exchanges if they are deemed to have a history of “unreasonable” rate increases. A limitation on our ability to increase or maintain ourpremium or reimbursement levels or a significant loss of membership resulting from our need to increase or maintain premium or reimbursement levels couldadversely affect our business, cash flows, financial condition and results of operations.In addition, the reserves that we establish for health insurance policy benefits and other contractual rights and benefits are based upon assumptions concerninga number of factors, including trends in healthcare costs, expenses, general economic conditions and other factors. To the extent the actual claims experience isunfavorable as compared to our underlying assumptions, our incurred losses would increase and future earnings could be adversely affected.We are subject to significant government regulation, and changes or proposed changes in the regulation of our business by federal and state regulatorsmay adversely affect our business, cash flows, financial condition, results of operations and the market price of our securities.We are subject to significant state and federal regulation associated with many aspects of our business, including, but not limited to, licensing, premiums,marketing activities, provider contracting, access and payment standards, and corporate governance and financial reporting matters. In addition, IngenioRx is alsosubject to an increasing number of licensure, registration and other laws and accreditation standards that impact the business practices of a pharmacy benefitmanager. We must identify, assess and respond to new laws and regulations, as well as comply with the various existing laws and regulations applicable to ourbusiness. Further, the integration into our business of entities that we acquire, or the expansion of our business into new areas, may affect the way in which existinglaws and rules apply to us, including by subjecting us to laws and rules that did not previously apply to us.Changes in existing laws, rules and regulatory interpretation or future laws, rules, regulatory interpretations or judgments could force us to change how weconduct our business, affect the products we offer (and where we offer them), restrict revenue and enrollment growth, increase our costs, including operating,healthcare technology and administrative costs, restrict our ability to obtain new product approvals and implement changes in premium rates and requireenhancements to our compliance infrastructure and internal controls environment, which could adversely impact our business and results of operations. In addition,legislative and/or regulatory policies or proposals that seek to manage the healthcare industry or otherwise impact our business may cause the market price of oursecurities to decrease, even if such policies or proposals never become effective.Our insurance, managed healthcare and HMO subsidiaries are subject to extensive regulation and supervision by regulatory authorities and agencies in eachstate in which they are licensed or authorized to do business, in addition to regulation by federal agencies. We are required to obtain and maintain insurance andother regulatory approvals to market certain of our products, to increase prices for certain regulated products and to consummate some of our acquisitions anddispositions. Delays in obtaining or failure to obtain or maintain these approvals, as well as future regulatory action by state or federal authorities could have amaterial adverse effect on the profitability or marketability of our health benefits or managed care products or on our business, financial condition and results ofoperations.In addition, because of our participation in government-sponsored programs such as Medicare and Medicaid, many of our subsidiaries are also subject toregulation by CMS and state Medicaid agencies, and to changes in government regulations or policy with respect to, among other things, reimbursement levels,eligibility requirements, benefit coverage requirements and additional governmental participation, which could also adversely affect our business, cash flows,financial condition and results of operations.In addition, under insolvency or guaranty association laws in most states, insurance companies can be assessed for certain obligations to policyholders andclaimants of impaired or insolvent insurance companies. Some states have similar-23-laws relating to HMOs and other payers such as consumer operated and oriented plans (co-ops) established under the ACA. The NAIC has amended the Life andHealth Insurance Guaranty Association Model Act, or NAIC Model Act, to expand the assessment base for long-term care products and to add HMOs as members.We have experienced assessments in the past, and may experience assessments in the future as a result of other companies that fail to establish premiums sufficientto cover their costs. If the amended NAIC Model Act is adopted by the states, these changes could impact our assessments. Any such assessment could expose usto the risk of paying a portion of an impaired or insolvent insurance company’s claims through state guaranty associations. We are not currently able to estimateour potential financial obligations, losses, or the availability of potential offsets associated with potential guaranty association assessments; however, anysignificant increase in guaranty association assessments could have a material adverse effect on our business, cash flows, financial condition and results ofoperations.We expect state legislatures will continue to focus on healthcare delivery and financing issues. State ballot initiatives can also be put to voters that wouldsubstantially impair our operating environment. Most states are very focused on how to manage and reduce their budgets and are exploring ways to mitigate costincreases. As such, some states have acted to reduce or limit increases to premium payments. Others have enacted, or are contemplating, significant reform of theirhealth insurance markets to include provisions affecting both public programs and privately-financed health insurance arrangements. If enacted into law, these stateproposals could have a material adverse impact on our business, cash flows, operations or financial condition.A number of states in which we offer Medicaid products have not opted for Medicaid expansion under the ACA, at least for the present time, and statesfrequently review public program eligibility. Where states make changes to reduce eligibility, we could experience reduced Medicaid enrollment and reducedgrowth opportunities. If future modifications to laws and regulations at the federal or state level result in reduced public enrollment, this could negatively impactour Medicaid business.Additionally, from time to time, Congress has considered, and may consider in the future, various forms of managed care reform legislation which, if adopted,could fundamentally alter the treatment of coverage decisions under ERISA. There have been legislative attempts to limit ERISA’s preemptive effect on state lawsand litigants’ ability to seek damages beyond the benefits offered under their plans. If adopted, such limitations could increase our liability exposure, could permitgreater state regulation of our operations, and could expand the scope of damages, including punitive damages, litigants could be awarded. While we cannotpredict if any of these initiatives will ultimately become effective or, if enacted, what their terms will be, their enactment could increase our costs, expose us toexpanded liability or require us to revise the ways in which we conduct business.The ongoing changes to the ACA and related laws and regulations could adversely affect our business, cash flows, financial condition and results ofoperations.The ongoing changes in federal and state laws and regulations stemming from the ACA, including the steps that have been taken to amend, repeal and limitthe scope and application of the ACA, continue to represent significant challenges to the U.S. healthcare system. We are unable to predict how these events willultimately be resolved and what the potential impact may be on our business, including, but not limited to, our products, services, processes and technology, andon our relationships with current and future customers and healthcare providers. The legal challenges regarding the ACA, including a federal district court decisioninvalidating the ACA in its entirety, which judgment has been stayed pending appeal, continue to contribute to this uncertainty, which could significantly impactthe market for our products, the regulations applicable to us and the fees and taxes payable by us. In addition, the ACA imposes significant fees, assessments andtaxes on us and other health insurers, health plans and other industry participants, including the annual non-tax deductible HIP Fee; however, the HIP Fee has beenpermanently repealed beginning January 1, 2021. Further regulations and modifications to the ACA at the federal or state level, including any judicial invalidationof the ACA, could have significant effects on our business and future operations, some of which may adversely affect our results of operations and financialcondition.In general, the risk pool for the Individual market, which includes public exchange markets, has become less healthy since its inception in 2014. In addition,insurers have faced uncertainties related to federal government funding for various ACA programs. Based on our experience in public exchange markets to date,we have made adjustments to our premium rates and geographic participation, and will continue to evaluate the performance of our public exchange plans, thefuture viability of the public exchanges and availability of federal subsidies, and may make further adjustments to our rates and-24-participation going forward. These factors may have a material adverse effect on our results of operations if premiums are not adequate or do not appropriatelyreflect the acuity of these individuals. Any variation from our expectations regarding acuity, enrollment levels, adverse selection, or other assumptions utilized insetting premium rates could have a material adverse effect on our results of operations, financial position, and cash flows.For additional information related to the ACA, see Part I, Item 1 “Business” and Part II, Item 7 “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” of this Annual Report on Form 10-K.If we fail to develop and maintain satisfactory relationships with hospitals, physicians, pharmacy benefit service providers and other healthcareproviders, our business, cash flows, financial condition and results of operations may be adversely affected.Our profitability is also dependent in part upon our ability to contract on favorable terms with hospitals, physicians, PBM service providers and otherhealthcare providers. Physicians, hospitals and other healthcare providers may elect not to contract with us, and the failure to secure or maintain cost-effectivehealthcare provider contracts on competitive terms may result in a loss of membership or higher medical costs, which could adversely affect our business. Inaddition, consolidation among healthcare providers, ACO practice management companies, which aggregate physician practices for administrative efficiency andmarketing leverage, and other organizational structures that physicians, hospitals and other care providers choose, as well as the ability of larger employers tocontract directly with providers, may change the way that these providers interact with us and may change the competitive landscape. Such organizations or groupsof physicians may compete directly with us, which may impact our relationship with these providers or affect the way that we price our products and estimate ourcosts and may require us to incur costs to change our operations, which could adversely affect our business, cash flows, financial condition and results ofoperations.Our inability to contract with providers, or if providers attempt to use their market position to negotiate more favorable contracts or place us at a competitivedisadvantage, or the inability of providers to provide adequate care, could adversely affect our business. In addition, we do not have contracts with all providersthat render services to our members and, as a result, may not have a pre-established agreement about the amount of compensation those out-of-network providerswill accept for the services they render, which can result in significant litigation or arbitration proceedings, or provider attempts to obtain payment from ourmembers for the difference between the amount we have paid and the amount they have charged.We face competition in many of our markets, and if we fail to adequately adapt to changes in our industry and develop and implement strategic growthopportunities, our ability to compete and grow may be adversely affected.As a health benefits company, we operate in a highly competitive environment and in an industry that is subject to significant changes from legislative reform,business consolidations, new strategic alliances, new market entrants, aggressive marketing practices by other health benefits organizations and technologicaladvancements. These factors have produced and will likely continue to produce, significant pressures on our profitability. Furthermore, decisions to buy ourproducts and services are increasingly made or influenced by consumers, through means such as direct purchasing (for example, Medicare Advantage plans) andinsurance exchanges that allow individual choice, or by large employers that may increasingly have the ability to contract directly with providers. This createsunique market pressures, and in order to compete effectively in the consumer-driven marketplace, we will be required to develop and deliver innovative andpotentially disruptive products and services to satisfy evolving market demands.In addition, the PBM industry is highly competitive, and IngenioRx is subject to competition from national, regional and local PBMs, insurers, health plans,large retail pharmacy chains, large retail stores, supermarkets, other mail order pharmacies, web pharmacies and specialty pharmacies. Strong competition withinthe pharmacy benefit business has generated greater demand for lower product and service pricing, increased revenue sharing and enhanced product and serviceofferings. Our inability to maintain positive trends, contract on favorable terms with pharmaceutical manufacturers for, among other things, rebates, discounts andadministrative fees or a failure to identify and implement new ways to mitigate pricing pressures, could negatively impact our ability to attract or retain customers,negatively impact our margins and have a material adverse effect on our business and results of operations.Furthermore, as a result of changes to traditional health insurance over the past several years, the health insurance industry has experienced a significant shiftin membership to products with lower margins. In order to profitably grow our-25-business in the future, we need to not only grow our profitable medical membership, but also continue to diversify our sources of revenue and earnings, includingthrough the increased sale of our specialty products, such as dental, vision and other supplemental products, expansion of our non-insurance assets andestablishment of new cost of care solutions, including innovations in PBM services. If we are unable to acquire or develop and successfully manage newopportunities that further our strategic objectives and differentiate our products from our competitors, our ability to profitably grow our business could beadversely affected.We also will have to respond to pricing and other actions taken by existing competitors and potentially disruptive new entrants. Also, due to the pricetransparency provided by public exchanges and new market entrants, we face competitive pressures from new and existing competitors in the market for Individualhealth insurance. These risks may be enhanced if employers shift to defined contribution healthcare benefits plans and make greater utilization of private insuranceexchanges or encourage their employees to purchase health insurance on the public exchanges. We can provide no assurance that we will be able to competesuccessfully on these exchanges or that we will be able to benefit from any opportunities presented by such exchanges. If we are not competitive on theseexchanges or are unsuccessful in reducing our cost structure, our future growth and profitability may be adversely impacted.We are currently dependent on the non-exclusive services of independent agents and brokers in the marketing of our healthcare products, particularly withrespect to individuals, seniors and small employer group customers. We face intense competition for the services and allegiance of these independent agents andbrokers, who may also market the products of our competitors. Our relationship with our brokers and independent agents could be adversely impacted by changesin our business practices to address legislative changes, including potential reductions in commissions and consulting fees paid to agents and brokers. We cannotensure that we will be able to compete successfully against current and future competitors for these services or that competitive pressures faced by us will notmaterially and adversely affect our business, cash flows, financial condition and results of operations.A significant reduction in the enrollment in our health benefits or PBM products or services, particularly in states where we have large regionalconcentrations, could have an adverse effect on our business, cash flows, financial condition and results of operations.A significant reduction in the number of enrollees in our health benefits or PBM products or services could adversely affect our business, cash flows, financialcondition and results of operations. Factors that could contribute to a reduction in enrollment include: reductions in workforce by existing customers; a generaleconomic upturn that results in fewer individuals being eligible for Medicaid programs; a general economic downturn that results in business failures and highunemployment rates; employers no longer offering certain healthcare coverage as an employee benefit or electing to offer coverage on a voluntary, employee-funded basis; participation on public exchanges; federal and state regulatory changes, including the elimination of the individual mandate penalty in the ACA;failure to obtain new customers or retain existing customers; premium increases and benefit changes; our exit from a specific market; negative publicity and newscoverage; and failure to attain or maintain nationally recognized accreditations.The states in which we operate that have the largest concentrations of revenues include California, Florida, Georgia, Indiana, New York, Ohio, Texas andVirginia. Due to this concentration of business in these states, we are exposed to potential losses resulting from the risk of state-specific or regional economicdownturns impacting these states. If any such negative economic conditions do not improve, we may experience a reduction in existing and new business, whichcould have a material adverse effect on our business, cash flows, financial condition and results of operations.A cyber attack or other privacy or data security incident could result in an unauthorized disclosure of sensitive or confidential information, cause a lossof data, disrupt a large amount of our operations, give rise to remediation or other expenses, expose us to liability under federal and state laws, andsubject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition and results of operations.As part of our normal operations, we collect, process and retain certain sensitive and confidential information. We are subject to various federal, state andinternational laws and rules regarding the use and disclosure of certain sensitive or confidential information, including HIPAA, the HITECH Act, the Gramm-Leach-Bliley Act and numerous state laws governing personal information, including the California Consumer Privacy Act. Our facilities and systems, and thoseof our-26-third-party service providers, are regularly the target of, and may be vulnerable to, cyber attacks, security breaches, acts of vandalism, computer viruses, misplacedor lost data, programming and/or human errors or other threats.We were the target of an external cyber attack in 2015 and have been, and will likely continue to be, the target of other attempted cyber attacks and securitythreats. In the event of such a cyber attack in the future, we may be subject to litigation and governmental investigations which could divert the attention ofmanagement from the operation of our business, result in reputational damage and have a material adverse impact on our business, cash flows, financial conditionand results of operations. While we have contingency plans and insurance coverage for potential liabilities of this nature, they may not be sufficient to cover allclaims and liabilities.We cannot ensure that we will be able to identify, prevent or contain the effects of cyber attacks or other cybersecurity risks that bypass our security measuresor disrupt our information technology systems or business. We have security technologies, processes and procedures in place to protect against cybersecurity risksand security breaches. However, hardware, software or applications we develop or procure from third parties may contain defects in design, manufacturer defectsor other problems that could unexpectedly compromise information security. In addition, because the techniques used to obtain unauthorized access, disable ordegrade service or sabotage systems change frequently, are becoming increasingly sophisticated, and may not immediately produce signs of intrusion, we may beunable to anticipate these techniques, timely discover or counter them or implement adequate preventative measures. Viruses, worms or other malicious softwareprograms may be used to attack our systems or otherwise exploit any security vulnerabilities, and such security attacks may cause system disruptions or shutdowns,or may cause personal information or proprietary or confidential information to be misappropriated or compromised. As a result, cybersecurity and the continueddevelopment and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack,damage and unauthorized access remain a priority for us.In addition, we use third-party technology, systems and services for a variety of reasons, including, without limitation, encryption and authenticationtechnology, employee email, content delivery to customers, back-office support, and other functions that in some cases involve processing, storing and transmittinglarge amounts of data for our business. Although we have developed systems and processes that are designed to reduce the impact of a security breach at a third-party vendor, such measures cannot provide absolute security, and these third-party providers may also experience security breaches or interruptions to theirinformation technology hardware and software infrastructure and communications systems that could adversely impact us.Noncompliance with any privacy or security laws and regulations, or any security breach, cyber attack or cybersecurity breach, and any incident involving themisappropriation, loss or other unauthorized disclosure or use of, or access to, sensitive or confidential member information, whether by us or by one of our third-party service providers, could require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage. Inaddition, this could negatively affect our operations, cause system disruptions, damage our reputation, cause membership losses and contract breaches, and couldalso result in regulatory enforcement actions, material fines and penalties, litigation or other actions that could have a material adverse effect on our business, cashflows, financial condition and results of operations.There are various risks associated with participating in Medicaid and Medicare programs, including dependence upon government funding and thetiming of payments, compliance with government contracts and increased regulatory oversight.We contract with various federal and state agencies, including CMS, to provide managed healthcare services, such as Medicare Advantage, Medicare Part D,Medicare Supplement, Medicaid, TANF, SPD, LTSS, CHIP, ACA-related Medicaid expansion programs and various specialty programs. We also provide variousadministrative services for several other entities offering medical and/or prescription drug plans to their Medicaid or Medicare eligible members through ouraffiliated companies, and we offer employer group waiver plans which provide medical and/or prescription drug coverage to retirees. We are also participating inprograms in several states for the care of dual-eligible members. These programs have been the subject of ongoing regulatory reform initiatives, and it is difficult topredict the impact of these and potential future regulatory reforms on our Government Business segment. Regulatory reform initiatives or additional changes inexisting laws or regulations, or their interpretations, could have a material adverse effect on our business, cash flows, financial condition and results of operations.-27-Revenues from the Medicare and Medicaid programs are dependent, in whole or in part, upon annual funding from the federal government and/or applicablestate governments. The base premium rate paid by each state or federal agency differs depending upon a combination of various factors such as defined upperpayment limits, a member’s health status, age, gender, county or region, benefit mix, member eligibility category and risk scores. Future Medicare and Medicaidrates may be affected by continued government efforts to contain costs as well as federal and state budgetary constraints. Additionally, ongoing CMS systemchanges related to the data it uses to calculate risk scores in the Medicare Advantage program may impact our federal funding. If the federal government or anystate in which we operate were to decrease rates paid to us, pay us less than the amount necessary to keep pace with our cost trends or seek an adjustment topreviously negotiated rates, it could have a material adverse effect on our business, cash flows, financial condition and results of operations. Further, certain statecontracts are subject to cancellation in the event of the unavailability of state funds. In addition, various states’ MMPs are still subject to uncertainty surroundingpayment rates and other requirements, which could affect where we seek to participate in these programs. An unexpected reduction in payments, inadequategovernment funding or significantly delayed payments for these programs may adversely affect our business, cash flows, financial condition and results ofoperations.Other potential risks associated with Medicare Advantage and Medicare Part D plans include increased medical or pharmaceutical costs, data correctionsidentified as a result of ongoing auditing and monitoring activities, potential uncollectability of receivables resulting from processing and/or verifying enrollment,inadequacy of underwriting assumptions, inability to receive and process correct information (including inability due to systems issues by the federal government,the applicable state government or us), uncollectability of premiums from members, and limited enrollment periods. While we believe we have adequatelyreviewed our assumptions and estimates regarding these complex and wide-ranging programs under Medicare Advantage and Medicare Part D, including thoserelated to collectability of receivables and establishment of liabilities, actual results may be materially different than our assumptions and estimates and could havea material adverse effect on our business, financial condition and results of operations. Finally, there is the possibility that the Medicare Advantage program couldbe significantly impacted by any future modification, repeal or replacement of the ACA.Our contracts with CMS and state governmental agencies contain certain provisions regarding data submission, risk adjustment, provider networkmaintenance, quality measures, claims payment, encounter data, continuity of care, call center performance and other requirements specific to federal and stateprogram regulations. We have been subject in the past, and may again be in the future, to administrative actions, fines, penalties, liquidated damages orretrospective adjustments in payments made to our health plans as a result of a failure to comply with those requirements, which has impacted and in the futurecould impact our profitability. In addition, we could be required to file a corrective plan of action with additional penalties for noncompliance, including a negativeimpact on future membership enrollment levels. Further, the majority of our CMS and state Medicaid contracts are subject to a competitive procurement process.Our existing contracts have not always been renewed, we have not always been awarded new contracts as a result of the competitive procurement process, and insome cases, we have lost members under existing contracts as a result of a post-award challenge, each of which could take place again in the future and have amaterial adverse effect on our business, cash flows, financial condition and results of operations.Further, the Medicare Advantage Star rating system utilized by CMS to evaluate Medicare Advantage Plans may have a significant effect on our revenue, ashigher-rated plans tend to experience increased enrollment and plans with a Star rating of 4.0 or higher are eligible for quality-based bonus payments and canmarket to and enroll members year-round. Our Star ratings may be negatively impacted if we fail to meet the quality, performance and regulatory compliancecriteria established by CMS. Furthermore, the Star rating system is subject to change annually by CMS, which may make it more difficult to achieve four stars orgreater. If we do not maintain or continue to improve our Star ratings, fail to meet or exceed our competitors’ ratings, or if quality-based bonus payments arereduced or eliminated, we may experience a negative impact on our revenues and the benefits that our plans can offer, which could materially and adversely affectthe marketability of our plans, our membership levels, results of operations, financial condition and cash flows. Similarly, a number of state Medicaid programs inwhich we participate have implemented performance standards, and if we fail to meet or exceed those standards, we may not receive performance-based bonuspayments or may incur performance-based penalties.In addition to the contractual requirements affecting our participation in Medicaid and Medicare programs, we are also subject to various federal and statehealthcare laws and regulations, including those directed at preventing fraud, abuse and discrimination in government-funded programs. Failure to comply withthese laws and regulations could result in investigations, litigation, fines, restrictions on, or exclusions from, program participation, or the imposition of corporate-28-integrity agreements or other agreements with a federal or state governmental agency, any of which could adversely impact our business, cash flows, financialcondition and results of operations.We are periodically subject to government audits, including CMS Risk Adjustment Data Validation, or RADV audits, of our Medicare Advantage Plans tovalidate diagnostic data, patient claims and financial reporting, as well as audits by the Medicare Part D Recovery Audit Contractor, or RAC. CMS has recentlyproposed changing its audits in a way that could increase financial recoveries from health plans. These audits could result in significant adjustments in paymentsmade to our health plans. In addition to these federal programs, the states in which we operate Medicaid plans conduct audits, and a number of states haveimplemented Medicaid RAC programs which were authorized by the ACA. State RAC programs could increase the number of audits and any subsequentrecoupment by the federal and state governments, which could adversely affect our financial condition and results of operations. If we fail to report and correcterrors discovered through our own auditing procedures or during a CMS, state or RAC audit, or otherwise fail to comply with applicable laws and regulations, wecould be subject to fines, civil penalties or other sanctions which could have a material adverse effect on our ability to participate in these programs, and on ourfinancial condition, cash flows and results of operations.On November 1, 2018, CMS released a proposed rule that would revise its RADV methodology by, among other things, excluding an adjustment forunderlying fee-for-service data errors and extrapolating RADV results at the contract level. If adopted in its current form, the rule could have a detrimental impacton all Medicare Advantage insurers. While it is uncertain whether CMS will issue the rule as proposed, if adopted, it could have a material adverse impact on ourMedicare business and future results of operations. In addition to the proposed rule, there has been increased government scrutiny and civil litigation under theFalse Claims Act related to risk adjustment practices under the Medicare Advantage program. Government investigations, any enforcement actions and civillitigation could result in monetary damages, penalties and business practice changes that could have a material adverse effect on our financial condition, cash flowsand results of operations.Our Medicare and Medicaid contracts are also subject to various MLR rules, including minimum MLR thresholds, rebate requirements and audits, whichcould adversely affect our membership and revenues if any of our state Medicare or Medicaid plans do not meet an applicable minimum MLR thresholds. If aMedicare Advantage, MMP or Medicare Part D contract pays minimum MLR rebates for three consecutive years, it will become ineligible to participate in openenrollment. If a Medicare Advantage or Medicare Part D contract pays such rebates for five consecutive years, it will be terminated by CMS.A change in our healthcare product mix may impact our profitability.Our healthcare products that involve greater potential risk generally tend to be more profitable than administrative services products and those healthcareproducts where the employer groups assume the underwriting risks. Individuals and small employer groups are more likely to purchase our higher-risk healthcareproducts because such purchasers are generally unable or unwilling to bear greater liability for healthcare expenditures. Typically, government-sponsoredprograms also involve our higher-risk healthcare products. A shift of enrollees from more profitable products to less profitable products could have a materialadverse effect on our cash flows, financial condition and results of operations.We face risks related to litigation.We are, or may in the future be, a party to a variety of legal actions that may affect our business, such as employment and employment discrimination-relatedsuits, administrative charges before government agencies, employee benefit claims, breach of contract actions, tort claims and intellectual property-relatedlitigation. In addition, because of the nature of our business, we are subject to a variety of legal actions relating to our business operations, including the design,administration and offering of our products and services. These could include claims relating to the denial or limitation of healthcare benefits; federal and statefalse claims act laws; dispensing of drugs associated with our PBM business; professional liability claims arising out of the delivery of healthcare and relatedservices to the public; development or application of medical policies and coverage and clinical guidelines; medical malpractice actions; product liability claims;allegations of anti-competitive and unfair business activities; provider disputes over reimbursement and contracts; provider tiering programs; narrow networks;termination of provider contracts; the recovery of overpayments from providers; self-funded business; disputes over co-payment calculations; reimbursement ofout-of-network claims; the failure to disclose certain business practices; the failure to comply with various state or federal laws, including but not limited to,ERISA and the Mental Health-29-Parity Act; and customer audits and contract performance, including government contracts. These actions or proceedings could have a material adverse effect onour business, cash flows, financial condition and results of operations.We are also involved in, or may in the future be party to, pending or threatened litigation of the character incidental to the business we transact or arising outof our operations, including, but not limited to, breaches of security and violations of privacy requirements, shareholder actions, compliance with federal and statelaws and regulations (including qui tam or “whistleblower” actions), or sales and acquisitions of businesses or assets (including as a result of the terminated CignaMerger Agreement, or as more fully described under Note 13, “Commitments and Contingencies - Litigation and Regulatory Proceedings - Cigna CorporationMerger Litigation,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K). From time to time, we areinvolved as a party in various governmental investigations, audits, reviews and administrative proceedings, including challenges relating to the award ofgovernment contracts. These investigations, audits and reviews include routine and special investigations by various state insurance departments, various federalregulators including CMS and the Department of Health and Human Services Office of Inspector General (HHS-OIG), state attorneys general, the Department ofJustice (DOJ), and various offices of the U.S. Attorney General. Following an investigation, we may be subject to civil or criminal fines, penalties and othersanctions if we are determined to be in violation of applicable laws or regulations. Liabilities that may result from these actions could have a material adverseeffect on our cash flows, results of operations and financial condition.Recent court decisions and legislative activity may increase our exposure for any of these types of claims. In some cases, substantial non-economic (includinginjunctive relief), treble or punitive damages may be sought. Although we maintain insurance coverage for some of these potential liabilities, some liabilities anddamages may not be covered by insurance, insurers may dispute coverage or the amount of insurance may not be enough to cover the damages awarded. Inaddition, insurance coverage for all or certain forms of liability may become unavailable or prohibitively expensive in the future. Any adverse judgment against usresulting in such damage awards could result in negative publicity and have an adverse effect on our cash flows, results of operations and financial condition.Further, litigation brought against the federal and some state governments over the ACA, including the 2018 ACA Decision, could have a material adverseeffect on our business, cash flows, financial condition and results of operations as changes to, or the invalidation of, the ACA resulting from such litigation may beunfavorable to our business or may create uncertainty over the applicability and enforceability of portions of the law and related regulations, which impacts ourstrategy and could negatively impact our future growth opportunities.Cigna’s pursuit of litigation in connection with the Cigna Merger Agreement, together with our own litigation against Cigna, could cause us to incursubstantial costs, may present material distractions and, if decided adverse to Anthem, could negatively impact our financial condition.As described in Note 13, “Commitments and Contingencies - Litigation and Regulatory Proceedings - Cigna Corporation Merger Litigation,” of the Notes toConsolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, in February 2017, Cigna commenced litigation against us in theDelaware Court of Chancery, or the Delaware Court, for a declaratory judgment that its purported termination of the Cigna Merger Agreement was lawful andseeking damages against us. We promptly filed our own litigation against Cigna seeking to compel Cigna’s specific performance of the Cigna Merger Agreementand damages against Cigna. In May 2017, after the Delaware Court denied our motion to enjoin Cigna from terminating the Cigna Merger Agreement, wedelivered to Cigna a notice terminating the Cigna Merger Agreement. In the Delaware Court litigation, trial commenced in late February 2019 and concluded inMarch 2019, and closing arguments were held in November 2019. We have incurred, and likely will continue to incur, substantial litigation costs related to theselawsuits, and may incur substantial additional cost, including potential settlement and judgment costs. Our defense against Cigna’s claims, the pursuit of our claimsor the settlement, or failure to reach a settlement, for any claims may result in negative media attention, and may adversely affect our business, reputation, financialcondition, results of operations and cash flows.Our PBM business and related operations are subject to a number of risks and uncertainties that are in addition to those we face in our core healthcarebusiness.We provide PBM services through our IngenioRx business, and we are responsible to regulators and our customers for the delivery of those PBM services thatwe contract to provide. Our PBM business is subject to the risks inherent in the-30-dispensing, packaging, fulfillment and distribution of pharmaceuticals and other healthcare products, including claims related to dispensing and other operationalerrors. Any failure by us or one of our PBM services suppliers to adhere to the laws and regulations applicable to the dispensing of pharmaceuticals could subjectour PBM business to civil and criminal penalties.Our PBM business is subject to federal and state laws and regulations that govern its relationships with pharmaceutical manufacturers, physicians, pharmaciesand customers, including without limitation, federal and state anti-kickback laws, beneficiary inducement laws, consumer protection laws, ERISA, HIPAA andlaws related to the operation of internet and mail-service pharmacies, as well as an increasing number of licensure, registration and other laws and accreditationstandards that impact the business practices of a PBM business. In addition, the practice of pharmacy is subject to federal and state laws and regulation, includingthose of state boards of pharmacy, individual state-controlled substance authorities, the U.S. Drug Enforcement Agency and the FDA. Also, we and our third-partyvendors are subject to registration requirements and state and federal laws concerning labeling, packaging, advertising, handling and adulteration of prescriptiondrugs and dispensing of controlled substances. Federal and state legislatures also regularly consider new regulations for the industry that could materially affectcurrent industry practices, including potential new legislation and regulations regarding the receipt or disclosure of rebates, discounts and other fees frompharmaceutical companies, the development and use of formularies and other utilization management tools, the use of average wholesale prices or other pricingbenchmarks, pricing for specialty pharmaceuticals, limited access to networks and pharmacy network reimbursement methodologies. Noncompliance withapplicable laws and regulations by us or our third-party vendors could have a material adverse effect on our business, results of operations, financial condition,liquidity and reputation and could expose us to civil and criminal penalties.Our PBM business would be adversely affected if we are unable to contract on favorable terms with pharmaceutical manufacturers for, among other things,rebates, discounts and administrative fees.We are dependent on the success of our relationships with third parties for various services and functions, including PBM services.We contract with various third parties to perform certain functions and services and provide us with certain information technology systems. Certain of thesethird parties provide us with significant portions of our business infrastructure and operating requirements, and we could become overly dependent on key vendors,which could cause us to lose core competencies. A termination of our agreements with, or disruption in the performance of, one or more of these service providerscould result in service disruptions or unavailability, reduced service quality and effectiveness, increased or duplicative costs or an inability to meet our obligationsto our customers. In addition, we may also have to seek alternative service providers, which may be unavailable or only available on less favorable contract terms.Any of these outcomes could adversely affect our business, reputation, cash flows, financial condition and operating results.In particular, beginning in the second quarter of 2019, we began delegating certain PBM administrative functions, such as claims processing and prescriptionfulfillment, to CVS Health pursuant to the CVS PBM Agreement. In addition, although we completed the transition of our members from Express Scripts toIngenioRx on January 1, 2020, Express Scripts continues to provide certain audit and various run-out transition services related to our PBM business pursuant tothe ESI PBM Agreement. CVS Health began providing certain PBM administrative functions to IngenioRx pursuant to the CVS PBM Agreement beginning in thesecond quarter of 2019. In connection with the transition of PBM administrative functions to CVS Health, if CVS Health fails to provide PBM services ascontractually required, we may not be able to meet the full demands of our customers, which could have a material adverse effect on our business, reputation andresults of operations. For additional information on the agreement with CVS Health, see “Business - General,” in Part I, Item 1 of this Annual Report on Form 10-K. In addition, the litigation between us and Express Scripts regarding the ESI PBM Agreement continues, as more fully described under Note 13, “Commitmentsand Contingencies - Litigation and Regulatory Proceedings - Express Scripts, Inc. Pharmacy Benefit Management Litigation,” of the Notes to ConsolidatedFinancial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.There are various risks associated with providing healthcare services.The direct provision of healthcare services by certain of our subsidiaries involves risks of additional litigation arising from medical malpractice actions basedon our treatment decisions or brought against us or our associates for alleged malpractice or professional liability claims arising out of the delivery of healthcareand related services. In addition, liability may arise from maintaining healthcare premises that serve the public. The defense of any actions may result in significant-31-expenses, and if we fail to maintain adequate insurance coverage for these liabilities, or if such insurance is not available, the resulting costs could adversely affectour business, cash flows, financial condition and results of operations.Additionally, many states in which certain of our subsidiaries operate limit the practice of medicine to licensed individuals or professional organizationscomprised of licensed individuals. Business corporations generally may not exercise control over the medical decisions of physicians, and we are not licensed topractice medicine. Rules and regulations relating to the practice of medicine, fee-splitting between physicians and referral sources, and similar issues vary fromstate to state. Further, certain federal and state laws, including those covering our Medicare and Medicaid plans, prohibit the offer, payment, solicitation, or receiptof any form of remuneration to induce, or in return for, the referral of patient care opportunities, including, but not limited to, Medicare patients, and also generallyprohibit physicians from making referrals to any entity providing certain designated health services if the referring physician or related person has an ownership orfinancial interest in the entity. Any enforcement actions by governmental officials alleging non-compliance with these rules and regulations could adversely affectour business, cash flows, financial condition and results of operations.Mergers, acquisitions, joint ventures, strategic partnerships and other business combinations involve risks that could have a material adverse effect onour business, cash flows, financial condition and results of operation.The following are some of the risks associated with mergers, acquisitions, joint ventures and strategic alliances, referred to collectively as businesscombinations, that could have a material adverse effect on our business, cash flows, financial condition and results of operations:•some of the business combinations may not achieve anticipated revenues, earnings or cash flow, business opportunities, synergies, growth prospects andother anticipated benefits;•the goodwill or other intangible assets established as a result of our business combinations may be incorrectly valued or become non-recoverable;•we may assume liabilities that were not disclosed to us or which wereunderestimated;•we may experience difficulties in integrating business combinations, be unable to integrate business combinations successfully or as quickly as expected,and be unable to realize anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays orother operational, technical or financial problems;•business combinations, and proposed business combinations that are not completed, could disrupt our ongoing business, lead to the incurrence ofsignificant fees, distract management, result in the loss of key employees, divert resources, result in tax costs or inefficiencies and make it difficult tomaintain our current business standards, controls, information technology systems, policies and procedures;•we may finance future business combinations by issuing common stock for some or all of the purchase price, which could dilute the ownership interests ofour shareholders;•we may also incur additional debt related to future businesscombinations;•we would be competing with other firms, some of which may have greater financial and other resources, to acquire attractivecompanies;•we may experience disputes with our partners in our strategic alliances and joint ventures, which could result in litigation or a loss of business;and•future business combinations may make it difficult to comply with the requirements of the BCBSA and lead to an increased risk that our BCBSA licenseagreements may be terminated.The value of our intangible assets may become impaired.Due largely to our past mergers and acquisitions, goodwill and other intangible assets represent a substantial portion of our assets. If we make additionalacquisitions, it is likely that we will record additional intangible assets on our consolidated balance sheets. The value we place on intangible assets may beadversely impacted if business combinations fail to perform in a manner consistent with our assumptions.-32-In accordance with applicable accounting standards, we periodically evaluate our goodwill and other intangible assets to determine whether all or a portion oftheir carrying values may no longer be recoverable, in which case a charge to income may be necessary. This impairment testing requires us to make assumptionsand judgments regarding the estimated fair value of our reporting units, including goodwill and other intangible assets. In addition, certain other intangible assetswith indefinite lives, such as trademarks, are also tested separately. Estimated fair values developed based on our assumptions and judgments might besignificantly different if other reasonable assumptions and estimates were to be used. If estimated fair values are less than the carrying values of goodwill and otherintangible assets with indefinite lives in future impairment tests, or if significant impairment indicators are noted relative to other intangible assets subject toamortization, we may be required to record impairment losses against future income.Any future evaluations requiring an impairment of our goodwill and other intangible assets could materially affect our results of operations and shareholders’equity in the period in which the impairment occurs. A material decrease in shareholders’ equity could, in turn, negatively impact our debt ratings or potentiallyimpact our compliance with existing debt covenants.In addition, the estimated fair value of our reporting units may be impacted as a result of business decisions we make associated with any future changes tolaws and regulations. Such decisions, which could unfavorably affect our ability to support the carrying value of certain goodwill and other intangible assets, couldresult in impairment charges in future periods.As a holding company, we are dependent on dividends from our subsidiaries. These dividends are necessary to pay our outstanding indebtedness. Ourregulated subsidiaries are subject to state regulations, including restrictions on the payment of dividends, maintenance of minimum levels of capital andrestrictions on investment portfolios.We are a holding company whose assets include the outstanding shares of common stock (or other ownership interest) of our subsidiaries including ourintermediate holding companies and regulated insurance and HMO subsidiaries. Our subsidiaries are separate legal entities. As a holding company, we depend ondividends and administrative expense reimbursements from our subsidiaries. Furthermore, our subsidiaries are not obligated to make funds available to us, andcreditors of our subsidiaries will have a superior claim to certain of our subsidiaries’ assets. Among other restrictions, state insurance and HMO laws may restrictthe ability of our regulated subsidiaries to pay dividends. In some states, we have made special undertakings that may limit the ability of our regulated subsidiariesto pay dividends. In addition, our subsidiaries’ ability to make any payments to us will also depend on their earnings, the terms of their indebtedness, business andtax considerations and other legal restrictions. Our ability to repurchase shares or pay dividends in the future to our shareholders and meet our obligations,including paying operating expenses and debt service on our outstanding and future indebtedness, will depend upon the receipt of dividends from our subsidiaries.An inability of our subsidiaries to pay dividends in the future in an amount sufficient for us to meet our financial obligations may materially adversely affect ourbusiness, cash flows, financial condition and results of operations.Most of our regulated subsidiaries are subject to RBC standards or other forms of minimum capital requirements imposed by their states of domicile, whichrequire our regulated subsidiaries to report their results of risk-based capital calculations to the departments of insurance and the NAIC. Failure to maintain theminimum RBC standards could subject our regulated subsidiaries to corrective action, including state supervision or liquidation. Changes to the existing RBCstandards or the adoption of an RBC requirement at the holding company level, which is currently being considered and developed by the NAIC and variousstates, could further restrict our or our regulated subsidiaries’ ability to pay dividends and adversely affect our business. In addition, as discussed in more detailbelow, we are a party to license agreements with the BCBSA which contain certain requirements and restrictions regarding our operations, including minimumcapital and liquidity requirements, which could restrict the ability of our regulated subsidiaries to pay dividends.Our regulated subsidiaries are subject to state laws and regulations that require diversification of their investment portfolios and limit the amount ofinvestments in certain riskier investment categories, such as below-investment-grade fixed maturity securities, mortgage loans, real estate and equity investments,which could generate higher returns on their investments. Failure to comply with these laws and regulations might cause investments exceeding regulatorylimitations to be treated as non-admitted assets for purposes of measuring statutory surplus and risk-based capital, and, in some instances, require the sale of thoseinvestments.-33-We have substantial indebtedness outstanding and may incur additional indebtedness in the future in connection with acquisitions or otherwise. Suchindebtedness could adversely affect our ability to pursue desirable business opportunities and to react to changes in the economy or our industry, andexposes us to interest rate risk to the extent of our variable rate indebtedness.Our debt service obligations require us to use a portion of our cash flow to pay interest and principal on debt instead of for other corporate purposes, includingfunding future expansion. If our cash flow and capital resources are insufficient to service our debt obligations, we may be forced to seek extraordinary dividendsfrom our subsidiaries, sell assets, seek additional equity or debt capital or restructure our debt. However, these measures might be unsuccessful or inadequate tomeet scheduled debt service obligations, or may not be available on commercially reasonable terms.We may also incur future debt obligations, in connection with acquisitions or otherwise, that might subject us to restrictive covenants that could affect ourfinancial and operational flexibility. Our breach or failure to comply with any of these covenants could result in a default under our credit facilities or otherindebtedness. If we default under our credit agreement, the lenders could cease to make further extensions of credit or cause all of our outstanding debt obligationsunder our credit agreement to become immediately due and payable, together with accrued and unpaid interest. If the indebtedness under our notes or our creditagreement or our other indebtedness is accelerated, we may be unable to repay or finance the amounts due, on commercially reasonable terms, or at all.Changes in the method of determining the London Interbank Offered Rate, or LIBOR, or the replacement of LIBOR with an alternative reference rate,may adversely affect the market for or value of our outstanding debt and the interest rate, return, value and liquidity of certain of our investments.A portion of our indebtedness bears interest at fluctuating interest rates, primarily based on LIBOR, and our investment portfolio also includes some LIBOR-based, floating rate debt investments. In July 2017, the Financial Conduct Authority, a regulator of financial services firms in the United Kingdom, announced thatit intends to stop persuading or compelling banks to submit LIBOR rates after 2021. In response to concerns regarding the future of LIBOR, the Board ofGovernors of the Federal Reserve System and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee (“ARRC”) to identifyalternatives to LIBOR. The ARRC has recommended a benchmark replacement waterfall to assist issuers in continued capital market entry while safeguardingagainst LIBOR’s discontinuation. The initial steps in the ARRC’s recommended provision reference variations of the Secured Overnight Financing Rate(“SOFR”). At this time, it is not possible to predict whether SOFR will attain market traction as a LIBOR replacement.We are unable to predict whether LIBOR will cease to exist after calendar year 2021, the effect of any changes, any establishment of alternative referencerates or any other reforms to LIBOR or any replacement of LIBOR that may be enacted in the United Kingdom or elsewhere. Such changes, reforms orreplacements relating to LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives or other financialobligations or extensions of credit entered into by us, as well as the interest rate, return, value, and liquidity of any LIBOR-based securities held in our investmentportfolios, and could adversely impact our cost of capital, overall financial condition or results of operations.A downgrade in our credit ratings could have an adverse effect on our business, cash flows, financial condition and results of operations.Claims-paying ability as well as financial strength ratings and debt ratings by nationally recognized statistical rating organizations are an important factor inestablishing the competitive position of insurance companies and health benefits companies. We believe our strong credit ratings are an important factor inmarketing our products to customers, since credit ratings information is broadly disseminated and generally used by customers and creditors. In addition, if ourcredit ratings are downgraded or placed under review, our business, cash flows, financial condition and results of operations could be adversely impacted bylimitations on future borrowings and a potential increase in our borrowing costs. Our ratings reflect each rating agency’s opinion of our financial strength,operating performance and ability to meet our obligations to policyholders and creditors, and are not evaluations directed toward the protection of investors in ourcommon stock. Each of the ratings organizations reviews our ratings periodically, and there can be no assurance that our current ratings will be maintained in thefuture.-34-The health benefits industry is subject to negative publicity, which could adversely affect our business, cash flows, financial condition and results ofoperations.The health benefits industry is subject to negative publicity, which can arise from, among other things, increases in premium rates, industry consolidation, costof care initiatives and the ongoing debate over laws and regulations impacting the U.S. healthcare system. Negative publicity may result in increased regulation andlegislative review of industry practices, which may further increase our costs of doing business and adversely affect our profitability by limiting our ability tomarket or provide our products and services, requiring us to change our products and services, or increasing the regulatory oversight under which we operate. Inaddition, as long as we use the BCBS names and marks in marketing our health benefits products and services, any negative publicity concerning the BCBSA orother BCBSA licensees may adversely affect us and the sale of our health benefits products and services. Negative public perception or publicity of the healthbenefits industry in general, the BCBSA, other BCBSA licensees, or us or our key vendors in particular, could adversely affect our business, cash flows, financialcondition and results of operations.The failure to effectively maintain and upgrade our information systems could adversely affect our business.Our business depends significantly on effective information systems, and we have many different information systems for our various businesses. As a resultof our merger and acquisition activities, we have acquired and expect to acquire additional systems. Our information systems require an ongoing commitment ofsignificant resources to maintain and enhance existing systems and develop new systems in order to keep pace with continuing changes in information processingtechnology, emerging cybersecurity risks and threats, evolving industry and regulatory standards including public exchanges and other aspects of the ACA,compliance with legal requirements, private insurance exchanges and changing customer preferences. In addition, we may from time to time obtain significantportions of our systems-related or other services or facilities from independent third parties, which may make our operations vulnerable if such third parties fail toperform adequately.Failure to adequately implement and maintain effective and efficient information systems with sufficiently advanced technological capabilities, or our failureto efficiently and effectively consolidate our information systems to eliminate redundant or obsolete applications, could result in competitive and costdisadvantages to us compared to our competitors, a diversion of management’s time and could have a material adverse effect on our business, financial conditionand results of operations. If the information we rely upon to run our business were found to be inaccurate or unreliable or if we fail to adequately maintain ourinformation systems and data integrity effectively, we could experience problems in determining medical cost estimates and establishing appropriate pricing andreserves, have disputes with customers and providers, face regulatory problems, including sanctions and penalties, incur increases in operating expenses or sufferother adverse consequences, including a decrease in membership.We are a party to license agreements with the BCBSA that entitle us to the exclusive and, in certain areas, non-exclusive use of the BCBS names andmarks in our geographic territories. The termination of these license agreements or changes in the terms and conditions of these license agreements couldadversely affect our business, cash flows, financial condition and results of operations.We use the BCBS names and marks as identifiers for our products and services under licenses from the BCBSA. Our license agreements with the BCBSAcontain certain requirements and restrictions regarding our operations and our use of the BCBS names and marks, including: minimum capital and liquidityrequirements; enrollment and customer service performance requirements; participation in programs that provide portability of membership between plans;disclosures to the BCBSA relating to enrollment and financial conditions; disclosures as to the structure of the BCBS system in contracts with third parties and inpublic statements; plan governance requirements; cybersecurity requirements; a requirement that at least 80% (or, in the case of Blue Cross of California,substantially all) of a licensee’s annual combined local net revenue, as defined by the BCBSA, attributable to healthcare plans and related services within itsservice areas must be sold, marketed, administered or underwritten under the BCBS names and marks; a requirement that at least two-thirds of a licensee’s annualcombined national net revenue, as defined by the BCBSA, attributable to healthcare plans and related services must be sold, marketed, administered orunderwritten under the BCBS names and marks; a requirement that neither a plan nor any of its licensed affiliates may permit an entity other than a plan or alicensed affiliate to obtain control of the plan or the licensed affiliate or to acquire a substantial portion of its assets related to licensable services; a requirementthat we divide our Board of Directors into three classes serving staggered three-year terms; a requirement that we guarantee certain contractual and-35-financial obligations of our licensed affiliates; and a requirement that we indemnify the BCBSA against any claims asserted against it resulting from thecontractual and financial obligations of any subsidiary that serves as a fiscal intermediary providing administrative services for Medicare Parts A and B. Failure tocomply with the foregoing requirements could result in a termination of the license agreements.The license agreements may be modified by the BCBSA. To the extent that such amendments to the license agreements are adopted in the future, they couldhave a material adverse effect on our future expansion plans or results of operations. Further, BCBS licensees have certain requirements to perform administrativeservices for members of other BCBS licensees. As of December 31, 2019, we provided services to approximately 30 million Blue Cross and/or Blue Shieldenrollees. If we or another BCBS licensee are not in compliance with all legal requirements or are unable to perform administrative services as required, this couldhave an adverse effect on our members and our ability to maintain our licenses, which could have a material adverse effect on our business, cash flows, financialcondition and results of operations.Upon the occurrence of an event causing termination of the license agreements, we would no longer have the right to use the BCBS names and marks or to sellBCBS health insurance products and services in one or more of our service areas. Furthermore, the BCBSA would be free to issue a license to use the BCBS namesand marks in these service areas to another entity. Our existing BCBS members would be provided with instructions for obtaining alternative products and serviceslicensed by the BCBSA. Events that could cause the termination of a license agreement with the BCBSA include, without limitation, failure to comply withminimum capital requirements imposed by the BCBSA, failure to comply with governance requirements such as maintaining a classified board structure, a changeof control or violation of the BCBSA ownership limitations on our capital stock, impending financial insolvency and the appointment of a trustee or receiver or thecommencement of any action against a licensee seeking its dissolution. We believe that the BCBS names and marks are valuable identifiers of our products andservices in the marketplace.Upon termination of a license agreement, the BCBSA would have the right to impose a “Re-establishment Fee” upon us, which would be used in part to fundthe establishment of a replacement Blue Cross and/or Blue Shield licensee in the vacated service area. The fee is set at $98.33 per licensed enrollee. If the Re-establishment Fee was applied to our total Blue Cross and/or Blue Shield enrollees of approximately 30 million as of December 31, 2019, we would be assessedapproximately $3 billion by the BCBSA. As a result, termination of the license agreements would have a material adverse effect on our business, cash flows,financial condition and results of operations.Our business may be impacted by natural disasters, war, terrorism, political events, global climate change and other occurrences that could create large-scale medical emergencies or otherwise have a material adverse effect on our business, cash flows, financial condition and results of operations.Natural disasters, war, terrorism, political events, global climate change and other similar occurrences could create large-scale medical emergencies orotherwise have a material adverse effect on our business, cash flows, financial condition and results of operations. Large-scale medical emergencies can take manyforms and can cause widespread illness and death. For example, federal and state law enforcement officials have issued warnings about potential terrorist activityinvolving biological and other weapons. In addition, natural disasters such as hurricanes and the potential for a widespread pandemic of influenza or other illnessand the lack of availability of appropriate preventative medicines can have a significant impact on the health of the population of widespread areas. If the UnitedStates were to experience widespread bioterrorism or other attacks, large-scale natural disasters in our concentrated coverage areas or a large-scale pandemic orepidemic, our covered medical expenses could rise, our operations could be interrupted and we could experience a material adverse effect on our business, cashflows, financial condition and results of operations or, in the event of extreme circumstances, our viability could be threatened. Furthermore, global climate changecould result in certain types of natural disasters occurring more frequently or with more intense effects, and may have a long-term effect on general economicconditions and the healthcare or pharmacy industry in particular, which could adversely affect our business and financial results.Adverse securities and credit market conditions may significantly affect our ability to meet liquidity needs.During periods of increased volatility, adverse securities and credit markets may exert downward pressure on the availability of liquidity and credit capacityfor certain issuers. We need liquidity to pay our operating expenses, make payments on our indebtedness and pay capital expenditures. The principal sources of ourcash receipts are premiums, administrative fees, investment income, revenue received from IngenioRx and DBG, proceeds from the sale or maturity of-36-our investment securities, proceeds from borrowings and proceeds from the issuance of common stock under our employee stock plans.Our access to additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of tradingactivities, the availability of credit to our industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop anegative perception of our long- or short-term financial prospects. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies takenegative actions against us. If one or a combination of these factors were to occur, our internal sources of liquidity may prove to be insufficient, and in such case,we may not be able to successfully obtain additional financing on favorable terms, or at all.The value of our investments is influenced by varying economic and market conditions, and a decrease in value may result in a loss charged to income.The market values of our investments vary from time to time depending on economic and market conditions. For various reasons, we may sell certain of ourinvestments at prices that are less than the carrying value of the investments. During periods in which interest rates are relatively low, as in recent years, ourinvestment income could be adversely impacted. In addition, in periods of declining interest rates, bond calls and mortgage loan prepayments generally increase,resulting in the reinvestment of these funds at the then lower market rates. In periods of rising interest rates, the market values of our fixed maturity securities willgenerally decrease, which could result in material losses on investments in future periods. In addition, defaults by issuers, primarily from investments in corporateand municipal bonds, who fail to pay or perform their obligations, could reduce net investment income, which would adversely affect our profitability. We cannotassure you that our investment portfolios will produce positive returns or maintain their present values.In accordance with FASB guidance for investments, we classify fixed maturity securities in our investment portfolio as “available-for-sale” or “trading” andreport those securities at fair value. Current and long-term available-for-sale investment securities represented a significant percentage of our total consolidatedassets at December 31, 2019.Changes in the economic environment, including periods of increased volatility in the securities markets, can increase the difficulty of assessing investmentimpairment, and the same influences tend to increase the risk of potential impairment of these assets. Over time, the economic and market environment mayprovide additional insight into the value of our investment securities, which could change our judgment regarding the fair value of certain securities and/orimpairment. Given the sometimes rapidly changing market conditions and the significant judgments involved, there is continuing risk that future declines in fairvalue may occur and material other-than-temporary impairments may be charged to income in future periods, resulting in realized losses.We face intense competition to attract and retain employees. Further, managing key executive transition, succession and retention is critical to oursuccess.Our success depends on our ability to attract and retain qualified employees to meet current and future needs, and to integrate and engage employees who havejoined us through acquisitions. We face intense competition for qualified employees, and there can be no assurance that we will be able to attract and retain suchemployees or that such competition among potential employers will not result in increasing salaries. An inability to retain existing employees or attract additionalemployees could have a material adverse effect on our business, cash flows, financial condition and results of operations.-37-We would be adversely affected if we fail to adequately plan for the succession of our President and Chief Executive Officer and other senior managementand retention of key executives. While we have succession plans in place for members of our senior management, and employment arrangements with certain keyexecutives, these plans and arrangements do not guarantee that the services of our senior executives will continue to be available to us or that we will be able toattract, transition and retain suitable successors.We are subject to various risks associated with our international operations.Certain of our subsidiaries that provide services to some of our health plans operate internationally and are subject to regulation in the jurisdictions in whichthey are organized or conduct business, which requires us to devote resources to implement controls and systems in new foreign jurisdictions to comply with, andto ensure that our vendors and partners comply with, U.S. and foreign laws and regulations. These regulatory regimes encompass, among other matters, local andcross-border taxation, licensing, tariffs, intellectual property, investment, capital (including minimum solvency margin and reserve requirements), managementcontrol, labor, anti-fraud, anti-corruption and privacy and data protection regulations (including requirements for cross-border data transfers), which vary byjurisdiction. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or employees, restrictions or outrightprohibitions on the conduct of our business and significant reputational harm.Changes in U.S. tax laws and regulations could have a material adverse effect on our business, cash flow, financial condition and results of operations. Inaddition, we may not be able to realize the value of our deferred tax assets.Changes in tax laws and regulations, including with respect to corporate tax rates and the deductibility of expenses, or changes in the interpretation of tax lawsand regulations by federal and/or state authorities, could have a material impact on the future value of our deferred tax assets and deferred tax liabilities, couldresult in significant one-time charges in the current or future taxable years and could increase our future U.S. tax expense. These changes could have a materialadverse effect on our business, cash flow, financial condition and results of operations.In accordance with applicable accounting standards, we separately recognize deferred tax assets and deferred tax liabilities. Such deferred tax assets anddeferred tax liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at tax rates enacted at the time thedeferred tax asset or liability is recorded. At each financial reporting date, we evaluate our deferred tax assets to determine the likely realization of the benefit ofthe temporary differences. Our evaluation includes a review of the types of temporary differences that created the deferred tax asset; the amount of taxes paid onboth capital gains and ordinary income in prior periods and available for a carry-back claim; the forecasted future taxable income, and therefore, the likely futurededuction of the deferred tax item; and any other significant issues that might impact the realization of the deferred tax asset. If it is more likely than not that all ora portion of the deferred tax asset may not be realized, we establish a valuation allowance. Significant judgment is required in determining an appropriatevaluation allowance.Any future increase in our valuation allowance would result in additional income tax expense and a decrease in shareholders’ equity, which could materiallyaffect our financial position and results of operations in the period in which the increase occurs. A material decrease in shareholders’ equity could, in turn,negatively impact our debt ratings or potentially impact our compliance with existing debt covenants.Indiana law, other applicable laws, our articles of incorporation and bylaws, and provisions of our BCBSA license agreements may prevent or discouragetakeovers and business combinations that our shareholders might consider to be in their best interest.Indiana law and our articles of incorporation and bylaws may delay, defer, prevent or render more difficult a takeover attempt that our shareholders mightconsider to be in their best interests. For instance, they may prevent our shareholders from receiving the benefit from any premium to the market price of ourcommon stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect theprevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.We are regulated as an insurance holding company and subject to the insurance holding company acts of the states in which our insurance companysubsidiaries are domiciled, as well as similar provisions included in the health statutes and regulations of certain states where these subsidiaries are regulated asmanaged care companies or HMOs. The insurance-38-holding company acts and regulations and these similar provisions restrict the ability of any person to obtain control of an insurance company or HMO withoutprior regulatory approval. Under those statutes and regulations, without such approval or an exemption, no person may acquire any voting security of a domesticinsurance company or HMO, or an insurance holding company which controls an insurance company or HMO, or merge with such a holding company, if as aresult of such transaction such person would “control” the insurance holding company, insurance company or HMO. “Control” is generally defined as the direct orindirect power to direct or cause the direction of the management and policies of a person and is presumed to exist if a person directly or indirectly owns orcontrols 10% or more of the voting securities of another person. Further, the Indiana Business Corporation Law contains business combination provisions that, ingeneral, prohibit for five years any business combination with a beneficial owner of 10% or more of our common stock unless the holder’s acquisition of the stockwas approved in advance by our Board of Directors.Our articles of incorporation restrict the beneficial ownership of our capital stock in excess of specific ownership limits. The ownership limits restrictbeneficial ownership of our voting capital stock to less than 10% for institutional investors and less than 5% for non-institutional investors, both as defined in ourarticles of incorporation. Additionally, no person may beneficially own shares of our common stock representing a 20% or more ownership interest in us. Theserestrictions are intended to ensure our compliance with the terms of our licenses with the BCBSA. Our articles of incorporation prohibit ownership of our capitalstock beyond these ownership limits without prior approval of a majority of our continuing directors (as defined in our articles of incorporation). In addition, asdiscussed above in the risk factor describing our license agreements with the BCBSA, such license agreements are subject to termination upon a change of controland a re-establishment fee would be imposed upon termination of the license agreements.Certain other provisions included in our articles of incorporation and bylaws may also have anti-takeover effects and may delay, defer or prevent a takeoverattempt that our shareholders might consider to be in their best interests. In particular, our articles of incorporation and bylaws: divide our Board of Directors intothree classes serving staggered three-year terms (which is required by our license agreement with the BCBSA); permit our Board of Directors to determine theterms of and issue one or more series of preferred stock without further action by shareholders; restrict the maximum number of directors; limit the ability ofshareholders to remove directors; impose restrictions on shareholders’ ability to fill vacancies on our Board of Directors; impose advance notice requirements forshareholder proposals and nominations of directors to be considered at meetings of shareholders; and prohibit shareholders from amending certain provisions ofour bylaws.We also face other risks that could adversely affect our business, financial condition or results of operations, which include:•any requirement to restate financial results in the event of inappropriate application of accountingprinciples;•a significant failure of our internal control over financialreporting;•failure of our prevention and control systems related to employee compliance with internal policies, including datasecurity;•healthcare benefits fraud by providers, members and/or brokers that is not prevented or detected and impacts our medical costs or those of self-insuredcustomers;•failure to protect our proprietary information;and•failure of our corporate governance policies orprocedures.ITEM 1B. UNRESOLVED SEC STAFF COMMENTS.None.ITEM 2. PROPERTIES.We lease our principal executive offices located at 220 Virginia Avenue, Indianapolis, Indiana. In addition to this location, we have operating facilities locatedin each state where we operate as licensees of the BCBSA, in each state where Amerigroup conducts business and in certain other states and countries where ourother subsidiaries operate. A majority of these locations are also leased properties. Our facilities support our various business segments. We believe that ourproperties are adequate and suitable for our business as presently conducted as well as for the foreseeable future.-39-ITEM 3. LEGAL PROCEEDINGS.For information regarding our legal proceedings, see Note 13, “Commitments and Contingencies - Litigation and Regulatory Proceedings,” of the Notes toConsolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.ITEM 4. MINE SAFETY DISCLOSURES.Not applicable.-40-PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES.Market Information Our common stock, par value $0.01 per share, is listed on the NYSE under the symbol “ANTM.”HoldersAs of February 6, 2020, there were 57,967 shareholders of record of our common stock.Securities Authorized for Issuance under Equity Compensation PlansThe information required by this Item concerning securities authorized for issuance under our equity compensation plans is set forth in Part III, Item 12“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in this Annual Report on Form 10-K.Issuer Purchases of Equity SecuritiesThe following table presents information related to our repurchases of common stock for the periods indicated:Period Total Numberof SharesPurchased1 AveragePrice Paidper Share Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPrograms2 ApproximateDollar Valueof Shares thatMay Yet BePurchasedUnder thePrograms(In millions, except share and per share data) October 1, 2019 to October 31, 2019 672,357 $244.58 670,000 $3,934November 1, 2019 to November 30, 2019 282,903 276.20 279,500 3,857December 1, 2019 to December 31, 2019 222,613 290.75 222,294 3,792 1,177,873 1,171,794 1Total number of shares purchased includes 6,079 shares delivered to or withheld by us in connection with employee payroll tax withholding upon exercise orvesting of stock awards. Stock grants to employees and directors and stock issued for stock option plans and stock purchase plans in the consolidatedstatements of shareholders’ equity are shown net of these shares purchased.2Represents the number of shares repurchased through the common stock repurchase program authorized by our Board of Directors, which the Board evaluatesperiodically. During the year ended December 31, 2019, we repurchased 6,332,989 shares at a cost of $1,701 under the program, including the cost of optionsto purchase shares. The Board of Directors has authorized our common stock repurchase program since 2003. The Board’s most recent authorized increase tothe program was $5,000 on December 7, 2017. No duration has been placed on our common stock repurchase program, and we reserve the right todiscontinue the program at any time.-41-Performance GraphThe following Performance Graph and related information compares the cumulative total return to shareholders of our common stock for the period fromDecember 31, 2014 through December 31, 2019, with the cumulative total return over such period of (i) the Standard & Poor’s 500 Stock Index (the “S&P 500Index”) and (ii) the Standard & Poor’s Managed Health Care Index (the “S&P Managed Health Care Index”). The graph assumes an investment of $100 onDecember 31, 2014 in each of our common stock, the S&P 500 Index and the S&P Managed Health Care Index (and the reinvestment of all dividends).The comparisons shown in the graph below are based on historical data, and we caution that the stock price performance shown in the graph below is notindicative of, and is not intended to forecast, the potential future performance of our common stock. Information used in the graph was obtained from S&P GlobalMarket Intelligence, a source believed to be reliable, but we are not responsible for any errors or omissions in such information. The following graph and relatedinformation shall not be deemed “soliciting materials” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filingunder the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. December 31, 2014 2015 2016 2017 2018 2019Anthem, Inc.$100 $113 $119 $188 $222 $259S&P 500 Index100 101 114 138 132 174S&P Managed Health Care Index100 122 146 210 232 279 Based upon an initial investment of $100 on December 31, 2014 with dividends reinvested.-42-ITEM 6. SELECTED FINANCIAL DATA.The table below provides selected consolidated financial data of Anthem. The information has been derived from our consolidated financial statements foreach of the years in the five-year period ended December 31, 2019. You should read this selected consolidated financial data in conjunction with the auditedconsolidated financial statements and notes as of and for the year ended December 31, 2019 included in Part II, Item 8 “Financial Statements and SupplementaryData,” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K. As of and for the Years Ended December 31 2019 2018 1 2017 1 2016 2015 1(in millions, except where indicated and except per share data) Income Statement Data Total operating revenue2$103,141 $91,341 $89,061 $84,194 $78,405Total revenues104,213 92,105 90,040 84,863 79,157Net income4,807 3,750 3,843 2,470 2,560Per Share Data Basic net income per share$18.81 $14.53 $14.70 $9.39 $9.73Diluted net income per share18.47 14.19 14.35 9.21 9.38Dividends per share3.20 3.00 2.70 2.60 2.50Other Data (unaudited) Benefit expense ratio386.8% 84.2% 86.4% 84.8% 83.3%Selling, general and administrative expense ratio413.0% 15.3% 14.2% 14.9% 16.0%Income before income tax expense as a percentage of total revenues5.7% 5.5% 4.4% 5.4% 5.9%Net income as a percentage of total revenues4.6% 4.1% 4.3% 2.9% 3.2%Medical membership (in thousands)41,000 39,938 40,299 39,940 38,599Balance Sheet Data Cash and investments5$26,157 $22,639 $25,179 $23,263 $21,065Total assets77,453 71,571 70,540 65,083 61,718Long-term debt, less current portion17,787 17,217 17,382 14,359 15,325Total liabilities45,725 43,030 44,037 39,982 38,673Total shareholders’ equity31,728 28,541 26,503 25,101 23,045 1The net assets of and results of operations for America’s 1st Choice, HealthSun and Simply Healthcare are included from their respective acquisition dates of February 15, 2018,December 21, 2017 and February 17, 2015, respectively.2Operating revenue is obtained by adding premiums and administrative fees and other revenue.3The benefit expense ratio represents benefit expenses as a percentage of premium revenue.4The selling, general and administrative expense ratio represents selling, general and administrative expenses as a percentage of total operating revenue.5Cash and investments is obtained by adding cash and cash equivalents, current and long-term fixed maturity securities and current and long-term equity securities.-43-ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (In Millions, Except Per Share Data or As Otherwise Stated Herein) This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with our auditedconsolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. References to the terms “we,” “our,” “us,” “Anthem” or the“Company” used throughout this MD&A refer to Anthem, Inc., an Indiana corporation, and, unless the context otherwise requires, its direct and indirectsubsidiaries. References to the “states” include the District of Columbia, unless the context otherwise requires.This section of this Annual Report on Form 10-K generally discusses 2019 and 2018 items and year-over-year comparisons between 2019 and 2018. Adetailed discussion of 2017 items and year-over-year comparisons between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be foundin “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the yearended December 31, 2018.OverviewWe are one of the largest health benefits companies in the United States in terms of medical membership, serving approximately 41 medical members throughour affiliated health plans as of December 31, 2019. We are an independent licensee of the Blue Cross and Blue Shield Association, or BCBSA, an association ofindependent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield, or BCBS, licensee forColorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in theNew York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. In amajority of these service areas, we do business as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, and Empire Blue Cross Blue Shield or Empire BlueCross. We also conduct business through arrangements with other BCBS licensees as well as other strategic partners. Through our subsidiaries, we also servecustomers in numerous states across the country as Aim Specialty Health, Amerigroup, Aspire Health, CareMore, Freedom Health, HealthLink, HealthSun,Optimum HealthCare, Simply Healthcare, and/or UniCare. Also, in the second quarter of 2019, we began providing pharmacy benefits management, or PBM,services through our IngenioRx subsidiary. We are licensed to conduct insurance operations in all 50 states and the District of Columbia through our subsidiaries.We manage our operations through three reportable segments: Commercial & Specialty Business, Government Business and Other. Prior to the second quarterof 2019, our Other segment included certain eliminations and corporate expenses not allocated to either of our other reportable segments. Beginning with thesecond quarter of 2019, our Other segment also includes IngenioRx, our pharmacy benefits manager, which began operations during the second quarter of 2019. Inaddition, during the second quarter of 2019, we reclassified our Diversified Business Group, or DBG, our integrated health services business, from ourGovernment Business segment to the Other segment to reflect changes in how our segments are being managed. Amounts for prior years have been reclassifiedthrough this MD&A to conform to the current year presentation for comparability. Based on the Financial Accounting Standards Board, or FASB, guidance, as ofDecember 31, 2019, IngenioRx and DBG did not collectively meet the quantitative thresholds for a reportable segment.Our operating revenue consists of premiums and administrative fees and other revenue. Premium revenue comes from fully-insured contracts where weindemnify our policyholders against costs for covered health and life benefits. Administrative fees and other revenue come from contracts where our customers areself-insured, or where the fee is based on either the processing of transactions or a percent of network discount savings realized, revenues from our Medicareprocessing business and from other health-related businesses, including disease management programs and miscellaneous other income. Administrative fees andother revenue also include product revenue for PBM services performed by IngenioRx to unaffiliated PBM customers, including our self-funded groups that havecontracted with IngenioRx for PBM services, and beginning in 2020, to third-party health plans.Our benefit expense primarily includes costs of care for health services consumed by our fully-insured members, such as outpatient care, inpatient hospitalcare, professional services (primarily physician care) and pharmacy benefit costs. All four components are affected both by unit costs and utilization rates. Unitcosts include the cost of outpatient medical procedures-44-per visit, inpatient hospital care per admission, physician fees per office visit and prescription drug prices. Utilization rates represent the volume of consumption ofhealth services and typically vary with the age and health status of our members and their social and lifestyle choices, along with clinical protocols and medicalpractice patterns in each of our markets. A portion of benefit expense recognized in each reporting period consists of actuarial estimates of claims incurred but notyet paid by us. Any changes in these estimates are recorded in the period the need for such an adjustment arises. While we offer a diversified mix of managed careproducts and services through our managed care plans, our aggregate cost of care can fluctuate based on a change in the overall mix of these products and services.Our managed care plans include: Preferred Provider Organizations; Health Maintenance Organizations, or HMOs; Point-of-Service plans; traditional indemnityplans and other hybrid plans, including Consumer-Driven Health Plans; and hospital only and limited benefit products.We classify certain claims-related costs as benefit expense to reflect costs incurred for our members’ traditional medical care, as well as those expenses whichimprove our members’ health and medical outcomes. These claims-related costs may be comprised of expenses incurred for: (i) medical management, includingcase and prospective utilization management; (ii) health and wellness, including disease management services for such conditions as diabetes, high-riskpregnancies, congestive heart failure and asthma management and wellness initiatives like weight-loss programs and smoking cessation treatments; and(iii) clinical health policy, such as identification and use of best clinical practices to avoid harm, identifying clinical errors and safety concerns, and identifyingpotential adverse drug interactions. These types of claims-related costs are designed to ultimately lower our members’ cost of care. Our cost of products sold represents the cost of prescription drugs dispensed by IngenioRx to unaffiliated PBM customers (net of rebates or discounts),including any co-payments made by or on behalf of the customer, per-claim administrative fees for prescription fulfillment and certain direct costs related to salesand administration of customer contracts.Our selling, general and administrative expenses consist of fixed and variable costs. Examples of fixed costs are depreciation, amortization and certainfacilities expenses. Certain variable costs, such as premium taxes, vary directly with premium volume. Commission expense generally varies with premium ormembership volume. Other variable costs, such as salaries and benefits, do not vary directly with changes in premium but are more aligned with changes inmembership. The acquisition or loss of a significant block of business would likely impact staffing levels and thus, associated compensation expense. Othervariable costs include professional and consulting expenses and advertising. Other factors can impact our administrative cost structure, including systemsefficiencies, inflation and changes in productivity.Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting withproviders of care to our members and our medical management and health and wellness programs. Several economic factors related to healthcare costs, such asregulatory mandates of coverage as well as direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of careconsumed by our members. The potential effect of escalating healthcare costs, any changes in our ability to negotiate competitive rates with our providers and anyregulatory or market-driven restrictions on our ability to obtain adequate premium rates to offset overall inflation in healthcare costs, including increases in unitcosts and utilization resulting from the aging of the population and other demographics, as well as advances in medical technology, may impose further risks to ourability to profitably underwrite our business, and may have a material adverse impact on our results of operations.For additional information about our business and reportable segments, see Part I, Item 1, “Business” and Note 19, “Segment Information” of the Notes toConsolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.Business TrendsThe Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended, or collectively, the ACA, haschanged and may continue to make broad-based changes to the U.S. healthcare system. We expect the ACA will continue to impact our business model andstrategy. Also, the legal challenges regarding the ACA, including a federal district court decision invalidating the ACA, or the “2018 ACA Decision”, whichjudgment has been stayed pending appeal, could significantly disrupt our business. During 2019, we modestly expanded our participation in the Individual ACA-compliant market. Our strategy has been, and will continue to be, to only participate in rating regions where we have an appropriate level of confidence that thesemarkets are on a path toward sustainability, including, but not limited to, factors such as expected financial performance, regulatory environment, and underlyingmarket characteristics. We-45-currently offer Individual ACA-compliant products in 91 of the 143 rating regions in which we operate. In addition, the continuing growth in our government-sponsored business exposes us to increased regulatory oversight.In the second quarter of 2019, we began using our new pharmacy benefits manager called IngenioRx to market and sell a PBM product to fully-insured andself-funded Anthem health plan customers throughout the country, as well as to customers outside of the health plans we own. This comprehensive productportfolio includes features such as drug formularies, a pharmacy network, prescription drug database, member services and mail order capabilities. In July 2019,we announced our first contract win with a third-party health insurer, Blue Cross of Idaho, and we began providing PBM services under that contract beginning onJanuary 1, 2020. Also beginning in the second quarter of 2019, we began delegating certain PBM administrative functions, such as claims processing andprescription fulfillment, to CaremarkPCS Health, L.L.C., or CVS Health, which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement withCVS Health, or the CVS PBM Agreement. We intend to retain the responsibilities for IngenioRx’s clinical and formulary strategy and development, member andemployer experiences, operations, sales, marketing, account management and retail network strategy. From December 2009 through December 2019, wedelegated certain PBM functions and administrative services to Express Scripts, Inc., or Express Scripts, pursuant to our PBM agreement with Express Scripts, orthe ESI PBM Agreement. In January 2019, we exercised our contractual right to terminate the ESI PBM Agreement earlier than the original expiration date ofDecember 31, 2019 due to the acquisition of Express Scripts by Cigna Corporation, or Cigna. We began transitioning existing members from Express Scripts toIngenioRx in the second quarter of 2019, and completed the transition of all of our members on January 1, 2020. Prior to the termination of the ESI PBMAgreement, Express Scripts managed the network of pharmacy providers, operated mail order pharmacies and processed prescription drug claims on our behalf,while we sold and supported the product for our members, made formulary decisions, sold drug benefit design strategy and provided front line members support.We expect IngenioRx to provide our members with more cost-effective solutions and improve our ability to integrate pharmacy benefits within our medical andspecialty platform.Pricing Trends: We strive to price our healthcare benefit products consistent with anticipated underlying medical trends. We frequently make adjustments torespond to legislative and regulatory changes as well as pricing and other actions taken by existing competitors and new market entrants. Product pricing in ourCommercial & Specialty Business segment, including our Individual and Small Group lines of business, remains competitive. Revenues from the Medicare andMedicaid programs are dependent, in whole or in part, upon annual funding from the federal government and/or applicable state governments. The ACA imposedan annual Health Insurance Provider Fee, or HIP Fee, on health insurers that write certain types of health insurance on U.S. risks. We price our affected products tocover the impact of the HIP Fee when applicable. The HIP Fee was suspended for 2019, has resumed for 2020 and has been permanently repealed beginning in2021.Medical Cost Trends: Our medical cost trends are primarily driven by increases in the utilization of services across all provider types and the unit cost increases ofthese services. We work to mitigate these trends through various medical management programs such as utilization management, condition management, programintegrity and specialty pharmacy management, as well as benefit design changes. There are many drivers of medical cost trends that can cause variance from ourestimates, such as changes in the level and mix of services utilized, regulatory changes, aging of the population, health status and other demographic characteristicsof our members, epidemics, advances in medical technology, new high cost prescription drugs, and healthcare provider or member fraud. Our underlying LocalGroup medical cost trends reflect the “allowed amount,” or contractual rate, paid to providers. We estimate that our aggregate cost of care trend for the full year of2019 was approximately 6.0%, at the midpoint of our 5.5% to 6.5% estimated range for the year. We anticipate the Local Group medical cost trend in 2020 will bein the range of 3.5% to 4.5%, including the benefit of lower pharmacy cost from the launch of IngenioRx and other medical cost management initiatives.For additional discussion regarding business trends, see Part I, Item 1 “Business” of this Annual Report on Form 10-K.Regulatory Trends and UncertaintiesThe ACA presented us with new growth opportunities, but also introduced new risks, regulatory challenges and uncertainties, and required changes in the wayproducts are designed, underwritten, priced, distributed and administered. Changes to our business environment are likely to continue as elected officials at thenational and state levels continue to enact, and both elected officials and candidates for election continue to propose, significant modifications to existing laws andregulations, including changes to taxes and fees. In addition, the legal challenges regarding the ACA, including the 2018-46-ACA Decision, which judgment has been stayed pending appeal, continue to contribute to this uncertainty. We will continue to evaluate the impact of the ACA asany further developments or judicial rulings occur.The annual HIP Fee is allocated to health insurers based on the ratio of the amount of an insurer’s net premium revenues written during the preceding calendaryear to the amount of health insurance premium for all U.S. health risk for those certain lines of business written during the preceding calendar year. We record ourestimated liability for the HIP Fee in full at the beginning of the year with a corresponding deferred asset that is amortized on a straight-line basis to selling, generaland administrative expense. The final calculation and payment of the annual HIP Fee is due by September 30th of each fee year. The HIP Fee is non-deductible forfederal income tax purposes. Our affected products are priced to cover the increased selling, general and administrative and income tax expenses associated withthe HIP Fee. The total amount due from allocations to health insurers was $14,300 for 2018, and we recognized $1,544 as selling, general and administrativeexpense related to the HIP Fee. There was no corresponding expense for 2019 due to the suspension of the HIP Fee for 2019. The HIP Fee has resumed andincreased to $15,523 for 2020 and has been permanently eliminated beginning in 2021.As a result of the ACA, the U.S. Department of Health and Human Services, or HHS, issued Medical Loss Ratio, or MLR, regulations that require us to meetminimum MLR thresholds of 85% for Large Group and 80% for Small Group and Individual lines of business. Plans that do not meet the minimum thresholdshave to pay a MLR rebate. For purposes of determining MLR rebates, HHS has defined the types of costs that should be included in the MLR rebate calculation.However, certain components of the MLR calculation as defined by HHS cannot be classified consistently under U.S. generally accepted accounting principles, orGAAP. While considered benefit expense or a reduction of premium revenue by HHS, certain of these costs are classified as other types of expense, such asselling, general and administrative expense or income tax expense, in our GAAP basis financial statements. Accordingly, the benefit expense ratio determinedusing our consolidated GAAP operating results is not comparable to the MLR calculated under HHS regulations.The ACA also imposed a separate minimum MLR threshold of 85% for Medicare Advantage and Medicare Part D prescription drug plans, or Medicare PartD. Medicare Advantage or Medicare Part D plans that do not meet this threshold have to pay an MLR rebate. If a plan’s MLR is below 85% for three consecutiveyears beginning with 2014, enrollment is restricted. A Medicare Advantage or Medicare Part D plan contract will be terminated if the plan’s MLR is below 85%for five consecutive years.For additional discussion regarding regulatory trends and uncertainties, and risk factors that could cause actual results to differ materially from thosecontained in forward-looking statements made in this Annual Report on Form 10-K, see Part I, Item 1 “Business - Regulation” and Part I, Item 1A “Risk Factors.”Other Significant Items or TransactionsIn January 2019, we exercised our contractual right to terminate the ESI PBM Agreement, and we completed the transition of our members from ExpressScripts to IngenioRx on January 1, 2020. Notwithstanding our termination of the ESI PBM Agreement, the litigation between us and Express Scripts regarding theESI PBM Agreement continues. In March 2016, we filed a lawsuit against Express Scripts seeking to recover damages for pharmacy pricing that is higher thancompetitive benchmark pricing and damages related to operational breaches. Express Scripts filed an answer to the lawsuit disputing our contractual claims andalleging various defenses and counterclaims. For additional information regarding this lawsuit, see Note 13, “Commitments and Contingencies - Litigation andRegulatory Proceedings - Express Scripts, Inc. Pharmacy Benefit Management Litigation,” of the Notes to Consolidated Financial Statements included in Part II,Item 8 of this Annual Report on Form 10-K.In February 2018, we completed our acquisition of Freedom Health, Inc., Optimum HealthCare, Inc., America’s 1st Choice of South Carolina, Inc. and relatedentities, or collectively, America’s 1st Choice, a Medicare Advantage organization that offers HMO products, including Chronic Special Needs Plans and Dual-Eligible Special Needs Plans under its Freedom Health and Optimum HealthCare brands in Florida and its America’s 1st Choice of South Carolina brand in SouthCarolina. At the time of acquisition, through its Medicare Advantage Plans, America’s 1st Choice served approximately one hundred and thirty-five thousandmembers in 25 Florida and 3 South Carolina counties. This acquisition aligned with our plans for continued growth in the Medicare Advantage and Special Needspopulations.In December 2017, we acquired HealthSun Health Plans, Inc., or HealthSun, which at the time of acquisition served approximately forty thousand members inthe state of Florida through its Medicare Advantage plans, and which received a-47-five-star rating from the Centers for Medicare & Medicaid Services. This acquisition aligned with our plans for continued growth in the Medicare Advantage anddual-eligible populations.For additional information related to the acquisitions of America’s 1st Choice and HealthSun, see Note 3, “Business Acquisitions,” of the Notes toConsolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.In May 2017, we announced that we were terminating the Agreement and Plan of Merger, or Cigna Merger Agreement, between us and Cigna. Both we andCigna have commenced litigation against the other seeking various actions and damages, including Cigna’s damage claim for a $1,850 termination fee pursuant tothe terms of the Cigna Merger Agreement. For additional information about the ongoing litigation related to the Cigna Merger Agreement, see Note 13,“Commitments and Contingencies - Litigation and Regulatory Proceedings - Cigna Corporation Merger Litigation,” of the Notes to Consolidated FinancialStatements included in Part II, Item 8 of this Annual Report on Form 10-K.Other significant transactions in recent years that have impacted or will impact our capital structure or that have influenced or will influence how we conductour business operations include our Board of Directors’ declarations of dividends on our common stock, repurchases of our common stock, and debt repurchasesand new debt issuances (2019 and prior). For additional information regarding these transactions, see Note 12, “Debt” and Note 14, “Capital Stock,” of the Notesto Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.Selected Operating PerformanceDuring the year ended December 31, 2019, total medical membership increased by 1.1, or 2.7%, and this increase was driven primarily by growth in our fully-insured businesses.Operating revenue for the year ended December 31, 2019 was $103,141, an increase of $11,800, or 12.9%, from the year ended December 31, 2018. Theincrease in operating revenue was primarily from higher premiums, and, to a lesser extent, increased administrative fees and other revenue.Net income for the year ended December 31, 2019 was $4,807, an increase of $1,057, or 28.2%, from the year ended December 31, 2018. The increase in netincome was due to higher operating results in both our Commercial & Specialty Business and Government Business segments, in part due to the benefits realizedfrom the launch of IngenioRx in 2019, net realized gains on financial instruments and lower income tax expense.Our fully-diluted earnings per share, or EPS, for the year ended December 31, 2019 were $18.47, an increase of $4.28, or 30.2%, from the year endedDecember 31, 2018. Our diluted shares for the year ended December 31, 2019 were 260.3, a decrease of 3.9, or 1.5%, compared to the year ended December 31,2018. The increase in EPS resulted primarily from the increase in net income in 2019.Operating cash flow for the year ended December 31, 2019 was $6,061, or approximately 1.3 times net income. Operating cash flow for the year endedDecember 31, 2018 was $3,827, or approximately 1.0 times net income. The increase in operating cash flow was primarily due to the impact of membership growthin our Government Business segment as well as higher net income in 2019. These increases were partially offset by the impact of the timing of working capitalchanges.Our results of operations discussed throughout this MD&A are determined in accordance with GAAP. We also calculate operating gain to further aid investorsin understanding and analyzing our core operating results. We define operating revenue as premium income and administrative fees and other revenue. Operatinggain is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense. We use these measures as abasis for evaluating segment performance, allocating resources, forecasting future operating periods and setting incentive compensation targets. This information isnot intended to be considered in isolation or as a substitute for income before income tax expense, net income or EPS prepared in accordance with GAAP, andmay not be comparable to similarly titled measures reported by other companies. For additional details on operating gain, see our “Reportable Segments Results ofOperations” discussion included in this MD&A. For a reconciliation of reportable segment operating revenue to the amounts of total revenue included in theconsolidated statements of income and a reconciliation of reportable segment operating gain to income before income tax expense, see Note 19, “SegmentInformation,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.-48-We intend to expand through a combination of organic growth, strategic acquisitions and efficient use of capital in both existing and new markets. Our growthstrategy is designed to enable us to take advantage of additional economies of scale, as well as providing us access to new and evolving technologies and products.In addition, we believe geographic and product diversity reduces our exposure to local or regional regulatory, economic and competitive pressures and provides uswith increased opportunities for growth. In 2019, we continued growing our government-sponsored business and modestly increased our participation in theIndividual ACA-compliant market. In all other markets, we intend to maintain our position by delivering excellent service, offering competitively priced products,providing access to high-quality provider networks and effectively capitalizing on the brand strength of the Blue Cross and Blue Shield names and marks.MembershipOur medical membership includes seven different customer types: Local Group, Individual, National Accounts, BlueCard®, Medicare, Medicaid and ourFederal Employees Health Benefits, or FEHB, Program. BCBS-branded business generally refers to members in our service areas licensed by the BCBSA. Non-BCBS-branded business refers to members in our non-BCBS-branded Amerigroup, Freedom Health, HealthSun, Optimum HealthCare and Simply Healthcareplans, as well as HealthLink and UniCare members. In addition to the above medical membership, we also serve customers who purchase one or more of our otherproducts or services that are often ancillary to our health business.•Local Group consists of those employer customers with less than 5% of eligible employees located outside of the headquarter state, as well as customerswith more than 5% of eligible employees located outside of the headquarter state with up to 5,000 eligible employees. In addition, Local Group includesUniCare members. Local Group accounts are generally sold through brokers or consultants who work with industry specialists from our in-house salesforce and are offered both on and off the public exchanges. Local Group insurance premiums may be based on claims incurred by the group or sold on aself-insured basis. The customer’s buying decision is typically based upon the size and breadth of our networks, customer service, the quality of ourmedical management services, the administrative cost included in our quoted price, our financial stability, our reputation and our ability to effectivelyservice large complex accounts. Local Group accounted for 38.2%, 39.4% and 39.4% of our medical members at December 31, 2019, 2018 and 2017,respectively.•Individual consists of individual customers under age 65 and their covered dependents. Individual policies are generally sold through independent agentsand brokers, retail partnerships, our in-house sales force or via the exchanges. Individual business is sold on a fully-insured basis. We offer on-exchangeproducts through public exchanges and off-exchange products. Federal premium subsidies are available only for certain public exchange Individualproducts. Unsubsidized Individual customers are generally more sensitive to product pricing and, to a lesser extent, the configuration of the network andthe efficiency of administration. Customer turnover is generally higher with Individual as compared to Local Group. Individual business accounted for1.7%, 1.6% and 3.9% of our medical members at December 31, 2019, 2018 and 2017, respectively.•National Accounts generally consist of multi-state employer groups primarily headquartered in an Anthem service area with at least 5% of the eligibleemployees located outside of the headquarter state and with more than 5,000 eligible employees. Some exceptions are allowed based on broker andconsultant relationships. Service area is defined as the geographic area in which we are licensed to sell BCBS products. National Accounts are generallysold through independent brokers or consultants retained by the customer working with our in-house sales force. We believe we have an advantage whencompeting for very large National Accounts due to the size and breadth of our networks and our ability to access the national provider networks of BCBScompanies at their competitive local market rates. National Accounts represented 18.5%, 19.0% and 18.5% of our medical members at December 31,2019, 2018 and 2017, respectively.•BlueCard® host customers represent enrollees of Blue Cross and/or Blue Shield plans not owned by Anthem who receive healthcare services in ourBCBSA licensed markets. BlueCard® membership consists of estimated host members using the national BlueCard® program. Host members aregenerally members who reside in or travel to a state in which an Anthem subsidiary is the Blue Cross and/or Blue Shield licensee and who are coveredunder an employer-sponsored health plan issued by a non-Anthem controlled BCBSA licensee (i.e., the “home plan”). We perform certain administrativefunctions for BlueCard® members, for which we receive administrative fees from the BlueCard® members’ home plans. Other administrative functions,including maintenance of enrollment information and customer service, are performed by the home plan. Host members are computed using, among otherthings, the-49-average number of BlueCard® claims received per month. BlueCard® host membership accounted for 14.8%, 14.6% and 14.2% of our medical membersat December 31, 2019, 2018 and 2017, respectively.•Medicare customers are Medicare-eligible individual members age 65 and over who have enrolled in Medicare Supplement plans; Medicare Advantage,including Special Needs Plans or SNPs, also known as Medicare Advantage SNPs; Medicare Part D; and dual-eligible programs through Medicare-Medicaid Plans, or MMPs. Medicare Supplement plans typically pay the difference between healthcare costs incurred by a beneficiary and amounts paidby Medicare. Medicare Advantage plans provide Medicare beneficiaries with a managed care alternative to traditional Medicare and often include aMedicare Part D benefit. In addition, our Medicare Advantage SNPs provide tailored benefits to special needs individuals who are institutionalized orhave severe or disabling chronic conditions and to dual-eligible customers, who are low-income seniors and persons under age 65 with disabilities.Medicare Advantage SNPs are coordinated care plans specifically designed to provide targeted care, covering all the health care services consideredmedically necessary for members and often providing professional care coordination services, with personal guidance and programs that help membersmaintain their health. Medicare Advantage membership also includes Employer Group Medicare Advantage members who are related to NationalAccounts or retired members of Local Group accounts who have selected a Medicare Advantage product. Medicare Part D offers a prescription drug planto Medicare and MMP beneficiaries. MMP, which was established as a result of the passage of the ACA, is a demonstration program focused on servingmembers who are dually eligible for Medicaid and Medicare. Medicare Supplement and Medicare Advantage products are marketed in the same manner,primarily through independent agents and brokers. Medicare business accounted for 5.2%, 4.6% and 3.9% of our medical members at December 31, 2019,2018 and 2017, respectively.•Medicaid membership represents eligible members who receive healthcare benefits through publicly funded healthcare programs, including Medicaid,ACA-related Medicaid expansion programs, Temporary Assistance for Needy Families, programs for seniors and people with disabilities, Children’sHealth Insurance Programs, and specialty programs such as those focused on long-term services and support, HIV/AIDS, foster care, behavioral healthand/or substance abuse disorders, and intellectual disabilities or developmental disabilities, among others. Total Medicaid program business accounted for17.7%, 16.8% and 16.1% of our medical members at December 31, 2019, 2018 and 2017, respectively.•FEHB members consist of United States government employees and their dependents within our geographic markets through our participation in thenational contract between the BCBSA and the U.S. Office of Personnel Management. FEHB business accounted for 3.9% of our medical members at eachof December 31, 2019, 2018 and 2017.In addition to reporting our medical membership by customer type, we report by funding arrangement according to the level of risk that we assume in theproduct contract. Our two principal funding arrangement categories are fully-insured and self-funded. Fully-insured products are products in which we indemnifyour policyholders against costs for health benefits. Self-funded products are offered to customers, generally larger employers, who elect to retain most or all of thefinancial risk associated with their employees’ healthcare costs. Some self-funded customers choose to purchase stop loss coverage to limit their retained risk.-50-The following table presents our medical membership by customer type, funding arrangement and reportable segment as of December 31, 2019, 2018 and2017. Also included below is other membership by product. The medical membership and other membership presented are unaudited and in certain instancesinclude estimates of the number of members represented by each contract at the end of the period. December 31 2019 vs. 2018 2018 vs. 2017(In thousands)2019 2018 2017 Change % Change Change % ChangeMedical Membership Customer Type Local Group15,682 15,733 15,888 (51) (0.3)% (155) (1.0)%Individual684 655 1,588 29 4.4 % (933) (58.8)%National: National Accounts7,596 7,588 7,463 8 0.1 % 125 1.7 %BlueCard®6,060 5,838 5,733 222 3.8 % 105 1.8 %Total National13,656 13,426 13,196 230 1.7 % 230 1.7 %Medicare: Medicare Advantage1,214 1,006 746 208 20.7 % 260 34.9 %Medicare Supplement905 846 823 59 7.0 % 23 2.8 %Total Medicare2,119 1,852 1,569 267 14.4 % 283 18.0 %Medicaid7,265 6,716 6,496 549 8.2 % 220 3.4 %FEHB1,594 1,556 1,562 38 2.4 % (6) (0.4)%Total Medical Membership by Customer Type41,000 39,938 40,299 1,062 2.7 % (361) (0.9)%Funding Arrangement Self-Funded25,418 25,287 24,862 131 0.5 % 425 1.7 %Fully-Insured15,582 14,651 15,437 931 6.4 % (786) (5.1)%Total Medical Membership by Funding Arrangement41,000 39,938 40,299 1,062 2.7 % (361) (0.9)%Reportable Segment Commercial & Specialty Business30,022 29,814 30,672 208 0.7 % (858) (2.8)%Government Business10,978 10,124 9,627 854 8.4 % 497 5.2 %Total Medical Membership by Reportable Segment41,000 39,938 40,299 1,062 2.7 % (361) (0.9)%Other Membership Life and Disability Members5,259 4,795 4,700 464 9.7 % 95 2.0 %Dental Members5,962 5,807 5,864 155 2.7 % (57) (1.0)%Dental Administration Members5,516 5,327 5,342 189 3.5 % (15) (0.3)%Vision Members7,261 6,946 6,867 315 4.5 % 79 1.2 %Medicare Part D Standalone Members283 309 318 (26) (8.4)% (9) (2.8)% December 31, 2019 Compared to December 31, 2018Medical MembershipTotal medical membership increased across our reportable business segments, and the increase was driven primarily by growth in our fully-insured businesses.Fully-insured membership increased primarily due to growth in our Medicaid and Medicare businesses. Self-funded medical membership increased primarily dueto higher activity from BlueCard® membership, partially offset by the decrease in our Large Group self-funded membership, which declined as a result ofcompetitive pressures. Medicaid membership increased primarily due to expansions in new and existing markets, partially offset by the membership decreaseresulting from the loss of a contract. Medicare membership increased primarily due to-51-higher sales during open enrollment exceeding lapses. BlueCard® membership increased due to higher activity by members of other BCBSA plans who reside in ortravel to our licensed areas.Other MembershipGrowth in our other membership can be impacted by changes in our medical membership, as our medical members often purchase our other products that areancillary to our health business. We have experienced growth in our life and disability and dental memberships primarily due to higher sales in our Large Groupbusiness. Vision membership increased primarily due to higher sales in our Medicare Advantage plans and Large Group business. Dental administrationmembership increased primarily due to growth in our FEHB program.-52-Consolidated Results of OperationsOur consolidated summarized results of operations and other information for the years ended December 31, 2019, 2018 and 2017 are as follows: Change Years Ended December 31 2019 vs. 2018 2018 vs. 2017 2019 2018 2017 $ % $ %Total operating revenue$103,141 $91,341 $89,061 $11,800 12.9 % $2,280 2.6 %Net investment income1,005 970 867 35 3.6 % 103 11.9 %Net realized gains (losses) on financial instruments114 (180) 145 294 163.3 % (325) (224.1)%Other-than-temporary impairment lossesrecognized in income(47) (26) (33) (21) (80.8)% 7 21.2 %Total revenues104,213 92,105 90,040 12,108 13.1 % 2,065 2.3 %Benefit expense81,786 71,895 72,236 9,891 13.8 % (341) (0.5)%Cost of products sold1,992 — — 1,992 NM — —Selling, general and administrative expense13,364 14,020 12,650 (656) (4.7)% 1,370 10.8 %Other expense1 1,086 1,122 1,190 (36) (3.2)% (68) (5.7)%Total expenses98,228 87,037 86,076 11,191 12.9 % 961 1.1 %Income before income tax expense5,985 5,068 3,964 917 18.1 % 1,104 27.9 %Income tax expense1,178 1,318 121 (140) (10.6)% 1,197 989.3 %Net income$4,807 $3,750 $3,843 $1,057 28.2 % $(93) (2.4)% Average diluted shares outstanding260.3 264.2 267.8 (3.9) (1.5)% (3.6) (1.3)%Diluted net income per share$18.47 $14.19 $14.35 $4.28 30.2 % $(0.16) (1.1)%Effective tax rate19.7% 26.0% 3.1% (630)bp3 2,290bp3Benefit expense ratio286.8% 84.2% 86.4% 260bp3 (220)bp3Selling, general and administrative expense ratio4 13.0% 15.3% 14.2% (230)bp3 110bp3Income before income tax expense as a percentageof total revenues5.7% 5.5% 4.4% 20bp3 110bp3Net income as a percentage of total revenues4.6% 4.1% 4.3% 50bp3 (20)bp3 Certain of the following definitions are also applicable to all other results of operations tables in this discussion:NM Not meaningful.1Includes interest expense, amortization of other intangible assets and loss on extinguishment of debt.2Benefit expense ratio represents benefit expense as a percentage of premium revenue. Premiums for the years ended December 31, 2019, 2018 and 2017 were $94,173,$85,421 and $83,648, respectively. Premiums are included in total operating revenue presented above.3bp = basis point; one hundred basis points = 1%.4Selling, general and administrative expense ratio represents selling, general and administrative expense as a percentage of total operating revenue.Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018The increase in total operating revenue was primarily from higher premiums, and, to a lesser extent, increased administrative fees and other revenue. Thehigher premiums were largely due to Medicaid expansions in new and existing markets and membership growth in our Medicare business. The increase inpremiums was further attributable to rate increases across our businesses designed to cover overall cost trends. These increases in premiums were partially offset bythe impact of the HIP Fee suspension for 2019. The increase in administrative fees and other revenue was primarily driven by IngenioRx, our PBM, which beganits operations during the second quarter of 2019.-53-We recognized net realized gains on financial instruments in 2019 compared to net realized losses on financial instruments in 2018. This change was primarilydue to a decrease in the net losses recognized for changes in the fair values of our equity securities.Benefit expense increased primarily due to membership growth across our reportable business segments and higher medical cost experience in our Medicaidbusiness.Our benefit expense ratio increased largely due to the loss of revenue associated with the HIP Fee suspension for 2019, and, to a lesser extent, less favorableprior year reserve development in our Commercial & Specialty business segment during 2019 and margin normalization in our Individual business.Cost of products sold reflects the cost of pharmaceuticals dispensed by IngenioRx for our self-funded customers. IngenioRx began operations during thesecond quarter of 2019, so there was no cost of products sold recognized in 2018.Selling, general and administrative expense decreased primarily due to the suspension of the HIP Fee for 2019. This decrease was partially offset by a netincrease in spend to support growth in our businesses.Our selling, general and administrative expense ratio decreased due to the growth in total operating revenue and the suspension of the HIP Fee for 2019.Our effective tax rate decreased primarily due to the suspension of the non-tax deductible HIP Fee for 2019.Our net income as a percentage of total revenue increased as a result of all factors discussed above.Reportable Segments Results of OperationsWe use operating gain to evaluate the performance of our reportable segments, which are Commercial & Specialty Business, Government Business, andOther. Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense. It does notinclude net investment income, net realized gains (losses) on financial instruments, other-than-temporary impairment losses recognized in income, interest expense,amortization of other intangible assets, loss (gain) on extinguishment of debt or income taxes, as these items are managed in a corporate shared serviceenvironment and are not the responsibility of operating segment management.The discussion of segment results presented below are based on operating gain, as described above, and operating margin, which is calculated as operatinggain divided by operating revenue. Our definitions of operating gain and operating margin may not be comparable to similarly titled measures reported by othercompanies. For additional information, see Note 19, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of thisAnnual Report on Form 10-K.-54-The following table presents a summary of our reportable segment financial information for the years ended December 31, 2019, 2018 and 2017: Change Years Ended December 31 2019 vs. 2018 2018 vs. 2017 2019 2018 2017 $ % $ %Operating Revenue Commercial & Specialty Business$37,421 $35,782 $40,363 1,639 4.6 % (4,581) (11.3)%Government Business62,632 55,348 48,587 7,284 13.2 % 6,761 13.9 %Other7,695 1,519 127 6,176 406.6 % 1,392 NMEliminations(4,607) (1,308) (16) (3,299) NM (1,292) NMTotal operating revenue$103,141 $91,341 $89,061 $11,800 12.9 % $2,280 2.6 % Operating Gain (Loss) Commercial & Specialty Business$4,046 $3,600 $2,847 446 12.4 % 753 26.4 %Government Business2,054 1,928 1,442 126 6.5 % 486 33.7 %Other(101) (102) (114) 1 (1.0)% 12 (10.5)% Operating Margin Commercial & Specialty Business10.8% 10.1% 7.1% 70bp1 300bp1Government Business3.3% 3.5% 3.0% (20)bp1 50bp1 NM Not meaningful.1bp = basis point; one hundred basis points = 1%.Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018Commercial & Specialty BusinessOperating revenue increased primarily due to higher premium revenue and, to a lesser extent, increased administrative fees and other revenue. Premiumrevenue was higher as a result of rate increases in our Local Group business designed to cover overall cost trends and membership increases in our fully-insuredbusinesses. These increases in premium revenue were partially offset by the impact of the HIP Fee suspension for 2019. The increase in administrative fees andother revenue was due to higher penetration of value-added services for self-funded members in our Large Group and National Accounts businesses.The increase in operating gain was primarily driven by the benefits realized in pharmacy cost as a result of the launch of IngenioRx in 2019 and greaterpenetration of value-added services and integrated health offerings. These increases were partially offset by less favorable prior year reserve development during2019 and margin normalization in our Individual business.Government BusinessOperating revenue increased primarily due to higher premium revenue as a result of Medicaid expansions in new and existing markets, including specializedservice populations, and membership growth in our Medicare business. The increase in premium revenue was further attributable to rate increases designed tocover overall cost trends in our Medicare and Medicaid businesses as well as increased reimbursed benefit utilization in our Federal Health Products & Servicesbusiness. These increases were partially offset by the impact of the HIP Fee suspension for 2019.The increase in operating gain was primarily driven by the impact of premium increases due to rate adjustments and membership growth in our Medicaidbusiness. This increase was partially offset by the impact of the HIP Fee suspension for 2019 and an increase in selling, general and administrative spend to supportgrowth in our businesses.-55-OtherOperating revenue increased due to higher administrative fees and other revenue from IngenioRx and DBG. The increase was primarily driven by growth inour pharmacy services provided by IngenioRx, which commenced operations and began transitioning existing clients from Express Scripts to IngenioRx in thesecond quarter of 2019.Operating loss remained steady, as there were no substantial changes in unallocated corporate expenses. For our segment reporting, operating gains (losses)generated from IngenioRx and DBG affiliated activity have been included in our Commercial & Specialty Business and Government Business based upon theirutilization of services from IngenioRx and DBG.Critical Accounting Policies and EstimatesWe prepare our consolidated financial statements in conformity with GAAP. Application of GAAP requires management to make estimates and assumptionsthat affect the amounts reported in our consolidated financial statements and accompanying notes and within this MD&A. We consider our most importantaccounting policies that require significant estimates and management judgment to be those policies with respect to liabilities for medical claims payable, incometaxes, goodwill and other intangible assets, investments and retirement benefits, which are discussed below. Our other significant accounting policies aresummarized in Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part II, Item 8of this Annual Report on Form 10-K.We continually evaluate the accounting policies and estimates used to prepare the consolidated financial statements. In general, our estimates are based onhistorical experience, evaluation of current trends, information from third-party professionals and various other assumptions that we believe to be reasonable underthe known facts and circumstances. Estimates can require a significant amount of judgment and a different set of assumptions could result in material changes toour reported results.Medical Claims PayableThe most subjective accounting estimate in our consolidated financial statements is our liability for medical claims payable. At December 31, 2019, thisliability was $8,842 and represented 19% of our total consolidated liabilities. We record this liability and the corresponding benefit expense for incurred but notpaid claims, including the estimated costs of processing such claims. Incurred but not paid claims include (1) an estimate for claims that are incurred but notreported, as well as claims reported to us but not yet processed through our systems, which approximated 98%, or $8,633, of our total medical claims liability as ofDecember 31, 2019; and (2) claims reported to us and processed through our systems but not yet paid, which approximated 2%, or $209, of the total medicalclaims payable as of December 31, 2019. The level of claims payable processed through our systems but not yet paid may fluctuate from one period-end to thenext, from approximately 1% to 5% of our total medical claims liability, due to timing of when claim payments are made.Liabilities for both claims incurred but not reported and reported but not yet processed through our systems are determined in the aggregate, employingactuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. Actuarial Standards of Practice require that theclaim liabilities be appropriate under moderately adverse circumstances. We determine the amount of the liability for incurred but not paid claims by following adetailed actuarial process that uses both historical claim payment patterns as well as emerging medical cost trends to project our best estimate of claim liabilities.Under this process, historical paid claims data is formatted into “claim triangles,” which compare claim incurred dates to the dates of claim payments. Thisinformation is analyzed to create “completion factors” that represent the average percentage of total incurred claims that have been paid through a given date afterbeing incurred. Completion factors are applied to claims paid through the period-end date to estimate the ultimate claim expense incurred for the period. Actuarialestimates of incurred but not paid claim liabilities are then determined by subtracting the actual paid claims from the estimate of the ultimate incurred claims. For the most recent incurred months (typically the most recent two months), the percentage of claims paid for claims incurred in those months is generallylow. This makes the completion factor methodology less reliable for such months. Therefore, incurred claims for recent months are not projected from historicalcompletion and payment patterns; rather, they are projected by estimating the claims expense for those months based on recent claims expense levels andhealthcare trend levels, or “trend factors.”-56-Because the reserve methodology is based upon historical information, it must be adjusted for known or suspected operational and environmental changes.These adjustments are made by our actuaries based on their knowledge and their estimate of emerging impacts to benefit costs and payment speed. Circumstancesto be considered in developing our best estimate of reserves include changes in utilization levels, unit costs, mix of business, benefit plan designs, providerreimbursement levels, processing system conversions and changes, claim inventory levels, claim processing patterns, claim submission patterns and operationalchanges resulting from business combinations. A comparison of prior period liabilities to re-estimated claim liabilities based on subsequent claims development isalso considered in making the liability determination. In our comparison to prior periods, the methods and assumptions are not changed as reserves arerecalculated; rather, the availability of additional paid claims information drives changes in the re-estimate of the unpaid claim liability. To the extent appropriate,changes in such development are recorded as a change to current period benefit expense.We regularly review and set assumptions regarding cost trends and utilization when initially establishing claim liabilities. We continually monitor and adjustthe claims liability and benefit expense based on subsequent paid claims activity. If it is determined that our assumptions regarding cost trends and utilization arematerially different than actual results, our income statement and financial position could be impacted in future periods. Adjustments of prior year estimates mayresult in additional benefit expense or a reduction of benefit expense in the period an adjustment is made. Further, due to the considerable variability of healthcarecosts, adjustments to claim liabilities occur each period and are sometimes significant as compared to the net income recorded in that period. Prior perioddevelopment is recognized immediately upon the actuary’s judgment that a portion of the prior period liability is no longer needed or that an additional liabilityshould have been accrued. That determination is made when sufficient information is available to ascertain that the re-estimate of the liability is reasonable.While there are many factors that are used as a part of the estimation of our medical claims payable liability, the two key assumptions having the mostsignificant impact on our incurred but not paid claims liability as of December 31, 2019 were the completion and trend factors. As discussed above, these two keyassumptions can be influenced by utilization levels, unit costs, mix of business, benefit plan designs, provider reimbursement levels, processing system conversionsand changes, claim inventory levels, claim processing patterns, claim submission patterns and operational changes resulting from business combinations.There is variation in the reasonable choice of completion factors by duration for durations of three months through twelve months where the completionfactors have the most significant impact. As previously discussed, completion factors tend to be less reliable for the most recent months and therefore are notspecifically utilized for months one and two. In our analysis for the claim liabilities at December 31, 2019, the variability in months three to five was estimated tobe between 40 and 90 basis points, while months six through twelve have much lower estimated variability ranging from 0 to 30 basis points.The difference in completion factor assumptions, assuming moderately adverse experience, results in variability of 3%, or approximately $241, in theDecember 31, 2019 incurred but not paid claims liability, depending on the completion factors chosen. It is important to note that the completion factormethodology inherently assumes that historical completion rates will be reflective of the current period. However, it is possible that the actual completion rates forthe current period will develop differently from historical patterns and therefore could fall outside the possible variations described herein.The other major assumption used in the establishment of the December 31, 2019 incurred but not paid claim liability was the trend factors. In our analysis forthe period ended December 31, 2019, there was a 320 basis point differential in the high and low trend factors assuming moderately adverse experience. This rangeof trend factors would imply variability of 5%, or approximately $468, in the incurred but not paid claims liability, depending upon the trend factors used. Becausehistorical trend factors are often not representative of current claim trends, the trend experience for the most recent six to nine months, plus knowledge of recentevents likely affecting current trends, have been taken into consideration in establishing the incurred but not paid claims liability at December 31, 2019. See Note 11, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K,for a reconciliation of the beginning and ending balance for medical claims payable for the years ended December 31, 2019, 2018 and 2017. Components of thetotal incurred claims for each year include amounts accrued for current year estimated claims expense as well as adjustments to prior year estimated accruals. InNote 11, “Medical Claims Payable,” the line labeled “Net incurred medical claims: Prior years redundancies” accounts for those-57-adjustments made to prior year estimates. The impact of any reduction of “Net incurred medical claims: Prior years redundancies” may be offset as we establishthe estimate of “Net incurred medical claims: Current year.” Our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liabilityfor our claims. When we recognize a release of the redundancy, we disclose the amount that is not in the ordinary course of business, if material. The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 89.3% for 2019, 90.2% for 2018 and 89.4% for2017. This ratio serves as an indicator of claims processing speed whereby claims were processed slightly slower during 2019 than in 2018 and close to the samespeed as in 2017.We calculate the percentage of prior year redundancies in the current year as a percent of prior year net incurred claims payable less prior year redundanciesin the current year in order to demonstrate the development of the prior year reserves. For the year ended December 31, 2019, this metric was 7.4%, largely drivenby favorable trend factor development at the end of 2018 as well as favorable completion factor development from 2018. For the year ended December 31, 2018,this metric was 13.7%, largely driven by favorable trend factor development at the end of 2017 as well as favorable completion factor development from 2017. Forthe year ended December 31, 2017, this metric was 18.9%, largely driven by favorable trend factor development at the end of 2016.We calculate the percentage of prior year redundancies in the current year as a percent of prior year net incurred medical claims to indicate the percentage ofredundancy included in the preceding year calculation of current year net incurred medical claims. We believe this calculation supports the reasonableness of ourprior year estimate of incurred medical claims and the consistency in our methodology. For the year ended December 31, 2019, this metric was 0.7%, which wascalculated using the redundancy of $500. This metric was 1.3% for 2018 and 1.8% for 2017. These metrics demonstrate a generally consistent level of reserveconservatism.The following table shows the variance between total net incurred medical claims as reported in Note 11, “Medical Claims Payable,” of the Notes toConsolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for each of 2018 and 2017 and the incurred claims for suchyears had it been determined retrospectively (computed as the difference between “net incurred medical claims – current year” for the year shown and “netincurred medical claims – prior years redundancies” for the immediately following year): Years Ended December 31 2018 2017Total net incurred medical claims, as reported$68,651 $69,244Retrospective basis, as described above69,081 69,447Variance$(430) $(203)Variance to total net incurred medical claims, as reported(0.6)% (0.3)%Given that our business is primarily short tailed (which means that medical claims are generally paid within twelve months of the member receiving servicefrom the provider), the variance to total net incurred medical claims, as reported above, is used to assess the reasonableness of our estimate of ultimate incurredmedical claims for a given calendar year with the benefit of one year of experience. We expect that substantially all of the development of the 2019 estimate ofmedical claims payable will be known during 2020.The 2018 variance to total net incurred medical claims, as reported of (0.6)% was higher than the 2017 percentage of (0.3)%. This was driven by the fact thatthe change in the prior year redundancy reported for 2019 as compared to 2018 was greater than the change in the prior year redundancy reported for 2018 ascompared to 2017.Income TaxesWe account for income taxes in accordance with FASB guidance, which requires, among other things, the separate recognition of deferred tax assets anddeferred tax liabilities. Such deferred tax assets and deferred tax liabilities represent the tax effect of temporary differences between financial reporting and taxreporting measured at tax rates enacted at the time the deferred tax asset or liability is recorded. A valuation allowance must be established for deferred tax assetsif it is “more-58-likely than not” that all or a portion may be unrealized. Our judgment is required in determining an appropriate valuation allowance.At each financial reporting date, we assess the adequacy of the valuation allowance by evaluating each of our deferred tax assets based on the following:•the types of temporary differences that created the deferred taxasset;•the amount of taxes paid in prior periods and available for a carry-backclaim;•the tax rate at which the deferred tax assets will likely be utilized in thefuture;•the forecasted future taxable income, and therefore, likely future deduction of the deferred tax item;and•any significant other issues impacting the likely realization of the benefit of the temporarydifferences.We, like other companies, frequently face challenges from tax authorities regarding the amount of taxes due. These challenges include questions regarding thetiming and amount of deductions that we have taken on our tax returns. In evaluating any additional tax liability associated with various positions taken in our taxreturn filings, we record additional liabilities for potential adverse tax outcomes. Based on our evaluation of our tax positions, we believe we have appropriatelyaccrued for uncertain tax benefits, as required by the applicable guidance. To the extent we prevail in matters we have accrued for, our future effective tax ratewould be reduced and net income would increase. If we are required to pay more than accrued, our future effective tax rate would increase and net income woulddecrease. Our effective tax rate and net income in any given future period could be materially impacted.In the ordinary course of business, we are regularly audited by federal and other tax authorities, and from time to time, these audits result in proposedassessments. We believe our tax positions comply with applicable tax law, and we intend to defend our positions vigorously through the federal, state and localappeals processes. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. Accordingly, although their ultimateresolution may require additional tax payments, we do not anticipate any material impact on our results of operations or financial condition from these matters.For additional information, see Note 7, “Income Taxes,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Reporton Form 10-K.Goodwill and Other Intangible AssetsOur consolidated goodwill at December 31, 2019 was $20,500 and other intangible assets were $8,674. The sum of goodwill and other intangible assetsrepresented 37.7% of our total consolidated assets and 92.0% of our consolidated shareholders’ equity at December 31, 2019.We follow FASB guidance for business combinations and goodwill and other intangible assets, which specifies the types of acquired intangible assets that arerequired to be recognized and reported separately from goodwill. Under the guidance, goodwill and other intangible assets (with indefinite lives) are not amortizedbut are tested for impairment at least annually. Furthermore, goodwill and other intangible assets are allocated to reporting units for purposes of the annualimpairment test. Our impairment tests require us to make assumptions and judgments regarding the estimated fair value of our reporting units, which includegoodwill and other intangible assets. In addition, certain other intangible assets with indefinite lives, such as trademarks, are also tested separately.We complete our annual impairment tests of existing goodwill and other intangible assets with indefinite lives during the fourth quarter of each year. Thesetests involve the use of estimates related to the fair value of goodwill at the reporting unit level and other intangible assets with indefinite lives, and require asignificant degree of management judgment and the use of subjective assumptions. Certain interim impairment tests are also performed when potential impairmentindicators exist or changes in our business or other triggering events occur. We have the option of first performing a qualitative assessment for each reporting unitto determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, which is an indication that our goodwill maybe impaired. These qualitative impairment tests include assessing events and factors that could affect the fair value of the indefinite-lived intangible assets. Ourprocedures include assessing our financial performance, macroeconomic conditions, industry and market considerations, various asset specific-59-factors and entity specific events. If we determine that a reporting unit’s goodwill may be impaired after utilizing these qualitative impairment analysis procedures,we are required to perform a quantitative impairment test.Our quantitative impairment test utilizes the projected income and market valuation approaches for goodwill and the projected income approach for ourindefinite lived intangible assets. Use of the projected income and market valuation approaches for our goodwill impairment test reflects our view that bothvaluation methodologies provide a reasonable estimate of fair value. The projected income approach is developed using assumptions about future revenue,expenses and net income derived from our internal planning process. These estimated future cash flows are then discounted. Our assumed discount rate is based onour industry’s weighted-average cost of capital. Market valuations are based on observed multiples of certain measures including revenue; earnings before interest,taxes, depreciation and amortization; and book value of invested capital (debt and equity) and include market comparisons to publicly traded companies in ourindustry.We did not incur any impairment losses as a result of our 2019 annual impairment tests, as it was determined that it is more likely than not that the estimatedfair values of our reporting units were substantially in excess of the carrying values as of December 31, 2019. Additionally, we do not believe that the estimatedfair values of our reporting units are at risk of becoming impaired in the next twelve months.If estimated fair values are less than the carrying values of goodwill and other intangibles with indefinite lives in future annual impairment tests, or ifsignificant impairment indicators are noted relative to other intangible assets subject to amortization, we may be required to record impairment losses against futureincome.For additional information, see Note 3, “Business Acquisitions” and Note 9, “Goodwill and Other Intangible Assets,” of the Notes to Consolidated FinancialStatements included in Part II, Item 8 of this Annual Report on Form 10-K. InvestmentsCurrent and long-term marketable investment securities were $21,220 at December 31, 2019 and represented 27.4% of our total consolidated assets atDecember 31, 2019. We classify fixed maturity securities in our investment portfolio as “available-for-sale” or “trading” and report those securities at fair value.Certain fixed maturity securities are available to support current operations and, accordingly, we classify such investments as current assets without regard to theircontractual maturity. Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity.We review fixed maturity investment securities to determine if declines in fair value below cost are other-than-temporary. This review is subjective andrequires a high degree of judgment. We conduct this review on a quarterly basis, using both qualitative and quantitative factors, to determine whether a decline invalue is other-than-temporary. Such factors considered include the extent to which a security’s market value has been less than its cost, the reasons for the declinein value (i.e., credit event compared to liquidity, general credit spread widening, currency exchange rate or interest rate factors), financial condition and near termprospects of the issuer, including the credit ratings and changes in the credit ratings of the issuer, recommendations of investment advisors, and forecasts ofeconomic, market or industry trends.FASB other-than-temporary impairment, or OTTI, guidance applies to fixed maturity securities and provides guidance on the recognition, presentation of, anddisclosures for OTTIs. If a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely thannot that we will have to sell the fixed maturity security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and ispresented within the other-than-temporary impairment losses recognized in our consolidated statements of income. For impaired fixed maturity securities that wedo not intend to sell or it is more likely than not that we will not have to sell such securities, but we expect that we will not fully recover the amortized cost basis,the credit component of the OTTI is presented within the other-than-temporary impairment losses recognized in our consolidated statements of income and thenon-credit component of the OTTI is recognized in accumulated other comprehensive loss in our consolidated balance sheets. Furthermore, unrealized lossesentirely caused by non-credit related factors related to fixed maturity securities for which we expect to fully recover the amortized cost basis continue to berecognized in accumulated other comprehensive loss. The credit component of an OTTI is determined primarily by comparing the net present value of projected future cash flows with the amortized cost basis ofthe fixed maturity security. The net present value is calculated by discounting our best estimate of projected future cash flows at the effective interest rate implicitin the fixed maturity security at the date of-60-acquisition. For mortgage-backed and asset-backed securities, cash flow estimates are based on assumptions regarding the underlying collateral, includingprepayment speeds, vintage, type of underlying asset, geographic concentrations, default rates, recoveries and changes in value. For all other securities, cash flowestimates are driven by assumptions regarding probability of default, including changes in credit ratings and estimates regarding timing and amount of recoveriesassociated with a default.We have a committee of accounting and investment associates and management that is responsible for managing the impairment review process. We believewe have adequately reviewed our investment securities for impairment and that our investment securities are carried at fair value. However, over time, theeconomic and market environment may provide additional insight regarding the fair value of certain securities, which could change our judgment regardingimpairment. This could result in OTTI losses on investments being charged against future income. Given the uncertainty of future market conditions, as well as thesignificant judgments involved, there is continuing risk that declines in fair value may occur and material OTTI losses on investments may be recorded in futureperiods.In addition to marketable investment securities, we held additional long-term investments of $4,228, or 5.5% of total consolidated assets, at December 31,2019. These long-term investments consisted primarily of certain other equity investments, the cash surrender value of corporate-owned life insurance policies andreal estate. Due to their less liquid nature, these investments are classified as long-term.Through our investing activities, we are exposed to financial market risks, including those resulting from changes in interest rates and changes in equitymarket valuations. We manage market risks through our investment policy, which establishes credit quality limits and limits on investments in individual issuers.Ineffective management of these risks could have an impact on our future results of operations and financial condition. Our investment portfolio includes fixedmaturity securities with a fair value of $20,181 at December 31, 2019. The weighted-average credit rating of these securities was “A” as of December 31, 2019.Included in this balance are investments in fixed maturity securities of states, municipalities and political subdivisions of $900 that are guaranteed by third parties.With the exception of four securities with a fair value of $12, these securities are all investment-grade and carry a weighted-average credit rating of “A” as ofDecember 31, 2019. The securities are guaranteed by a number of different guarantors, and we do not have any material exposure to any single guarantor, neitherindirectly through the guarantees, nor directly through investment in the guarantor. Further, due to the high underlying credit rating of the issuers, the weighted-average credit rating of the fixed maturity securities without a guarantee, for which such information is available, was “A” as of December 31, 2019.Fair values of fixed maturity and equity securities are based on quoted market prices, where available. These fair values are obtained primarily from third-party pricing services, which generally use Level I or Level II inputs for the determination of fair value in accordance with FASB guidance for fair valuemeasurements and disclosures. We have controls in place to review the pricing services’ qualifications and procedures used to determine fair values. In addition,we periodically review the pricing services’ pricing methodologies, data sources and pricing inputs to ensure the fair values obtained are reasonable.We obtain quoted market prices for each security from the pricing services, which are derived through recently reported trades for identical or similarsecurities, making adjustments through the reporting date based upon available market observable information. For securities not actively traded, the pricingservices may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in themarkets for similar securities. Inputs that are often used in these valuation methodologies include, but are not limited to, broker quotes, benchmark yields, creditspreads, default rates and prepayment speeds. As we are responsible for the determination of fair value, we perform analysis on the prices received from the pricingservices to determine whether the prices are reasonable estimates of fair value. Our analysis includes procedures such as a review of month-to-month pricefluctuations and price comparisons to secondary pricing services. There were no adjustments to quoted market prices obtained from the pricing services during theyears ended December 31, 2019 and 2018.In certain circumstances, it may not be possible to derive pricing model inputs from observable market activity, and therefore, such inputs are estimatedinternally. Such securities are designated Level III in accordance with FASB guidance. Securities designated Level III at December 31, 2019 totaled $397 andrepresented approximately 1.7% of our total assets measured at fair value on a recurring basis. Our Level III securities primarily consisted of certain corporatesecurities and equity securities for which observable inputs were not always available and the fair values of these securities were estimated using inputs including,but not limited to, prepayment speeds, credit spreads, default rates and benchmark yields.-61-For additional information, see Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk,” and Note 2, “Basis of Presentation andSignificant Accounting Policies,” Note 4, “Investments,” and Note 6, “Fair Value,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 ofthis Annual Report on Form 10-K.Retirement BenefitsPension BenefitsWe sponsor defined benefit pension plans for some of our employees. These plans are accounted for in accordance with FASB guidance for retirementbenefits, which requires that amounts recognized in financial statements be determined on an actuarial basis. As permitted by the guidance, we calculate the valueof plan assets as described below. Further, the difference between our expected rate of return and the actual performance of plan assets, as well as certain changesin pension liabilities, are amortized over future periods. An important factor in determining our pension expense is the assumption for expected long-term return on plan assets. As of our December 31, 2019measurement date, we selected a weighted-average long-term rate of return on plan assets of 7.33%. We use a total portfolio return analysis in the development ofour assumption. Factors such as past market performance, the long-term relationship between fixed maturity and equity securities, interest rates, inflation and assetallocations are considered in the assumption. The assumption includes an estimate of the additional return expected from active management of the investmentportfolio. Peer data and an average of historical returns are also reviewed for appropriateness of the selected assumption. We believe our assumption of futurereturns is reasonable. However, if we lower our expected long-term return on plan assets, future contributions to the pension plan and pension expense wouldlikely increase.This assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in asystematic manner over three years, producing the expected return on plan assets that is included in the determination of pension expense. We apply a corridorapproach to amortize unrecognized actuarial gains or losses. Under this approach, only accumulated net actuarial gains or losses in excess of 10% of the greater ofthe projected benefit obligation or the fair value of plan assets are amortized over the average remaining service or lifetime of the workforce as a component ofpension expense. The net deferral of past asset gains or losses affects the calculated value of plan assets and, ultimately, future pension expense. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year based on our most recentmeasurement date. We use the annual spot rate approach for setting our discount rate. Under the spot rate approach, individual spot rates from a full yield curve ofpublished rates are used to discount each plan’s cash flows to determine the plan’s obligation. At the December 31, 2019 measurement date, the weighted-averagediscount rate under the annual spot rate approach was 3.11%, compared to 4.15% at the December 31, 2018 measurement date. The net effect of changes in thediscount rate, as well as the net effect of other changes in actuarial assumptions and experience, have been deferred and amortized as a component of pensionexpense in accordance with FASB guidance.In managing the plan assets, our objective is to be a responsible fiduciary while minimizing financial risk. Plan assets include a diversified mix of equitysecurities, investment grade fixed maturity securities and other types of investments across a range of sectors and levels of capitalization to maximize long-termreturn for a prudent level of risk. In addition to producing a reasonable return, the investment strategy seeks to minimize the volatility in our expense and cash flow.Effective January 1, 2019, we curtailed the benefits under the Anthem Cash Balance Plan B pension plan. All grandfathered participants no longer have paycredits added to their accounts, but continue to earn interest on existing account balances. Participants continue to earn years of pension service for vestingpurposes.Other Postretirement BenefitsWe provide most associates with certain medical, vision and dental benefits upon retirement. We use various actuarial assumptions, including a discount rateand the expected trend in healthcare costs, to estimate the costs and benefit obligations for our retiree benefits.-62-At our December 31, 2019 measurement date, the selected discount rate for all plans was 2.93%, compared to a discount rate of 4.04% at the December 31,2018 measurement rate. We developed this rate using the annual spot rate approach as described above.The assumed healthcare cost trend rates used to measure the expected cost of pre-Medicare (those who are not currently eligible for Medicare benefits) otherbenefits at our December 31, 2019 measurement date was 7.00% for 2020 with a gradual decline to 4.50% by the year 2028. The assumed healthcare cost trendrates used to measure the expected cost of post-Medicare (those who are currently eligible for Medicare benefits) other benefits at our December 31, 2019measurement date was 6.00% for 2020 with a gradual decline to 4.50% by the year 2028. These estimated trend rates are subject to change in the future. Thehealthcare cost trend rate assumption affects the amounts reported. For example, an increase in the assumed healthcare cost trend rate of one percentage pointwould increase the postretirement benefit obligation as of December 31, 2019 by $23 and would increase service and interest costs by $1. Conversely, a decrease inthe assumed healthcare cost trend rate of one percentage point would decrease the postretirement benefit obligation as of December 31, 2019 by $20 and woulddecrease service and interest costs by $1. For additional information regarding our retirement benefits, see Note 10, “Retirement Benefits,” of the Notes to Consolidated Financial Statements includedin Part II, Item 8 of this Annual Report on Form 10-K.New Accounting PronouncementsFor information regarding new accounting pronouncements that were issued or became effective during the year ended December 31, 2019 that had, or areexpected to have, a material impact on our financial position, results of operations or financial statement disclosures, see the “Recently Adopted AccountingGuidance” and “Recent Accounting Guidance Not Yet Adopted” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes toConsolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.Liquidity and Capital ResourcesIntroductionOur cash receipts result primarily from premiums, administrative fees and other revenue, investment income, proceeds from the sale or maturity of ourinvestment securities, proceeds from borrowings, and proceeds from the issuance of common stock under our employee stock plans. Cash disbursements resultmainly from claims payments, administrative expenses, taxes, purchases of investment securities, interest expense, payments on borrowings, acquisitions, capitalexpenditures, repurchases of our debt securities and common stock and the payment of cash dividends. Cash outflows fluctuate with the amount and timing ofsettlement of these transactions. Any future decline in our profitability would likely have an unfavorable impact on our liquidity.We manage our cash, investments and capital structure so we are able to meet the short-term and long-term obligations of our business while maintainingfinancial flexibility and liquidity. We forecast, analyze and monitor our cash flows to enable investment and financing within the overall constraints of ourfinancial strategy.A substantial portion of the assets held by our regulated subsidiaries are in the form of cash and cash equivalents and investments. After considering expectedcash flows from operating activities, we generally invest cash that exceeds our near term obligations in longer term marketable fixed maturity securities to improveour overall investment income returns. Our investment strategy is to make investments consistent with insurance statutes and other regulatory requirements, whilepreserving our asset base. Our investments are generally available-for-sale to meet liquidity and other needs. Our subsidiaries pay out excess capital annually in theform of dividends to their respective parent companies for general corporate use, as permitted by applicable regulations.The availability of financing in the form of debt or equity is influenced by many factors, including our profitability, operating cash flows, debt levels, debtratings, contractual restrictions, regulatory requirements and market conditions. The securities and credit markets have in the past experienced higher than normalvolatility, although current market conditions are more stable. During recent years, the federal government and various governmental agencies have taken anumber of steps to improve liquidity in the financial markets and strengthen the regulation of the financial services market. In addition,-63-governments around the world have developed their own plans to provide liquidity and security in the credit markets and to ensure adequate capital in certainfinancial institutions. We have a $3,500 commercial paper program. Should commercial paper issuance be unavailable, we have the ability to use a combination of cash on handand/or our two senior revolving credit facilities, which provide for combined credit in the amount of $3,500, to redeem any outstanding commercial paper uponmaturity. Additionally, we believe the lenders participating in our credit facilities would be willing and able to provide financing in accordance with their legalobligations. In addition to the senior revolving credit facilities, we estimate that we expect to receive approximately $3,035 of dividends from our subsidiariesduring 2020, which also provides further operating and financial flexibility. A summary of our major sources and uses of cash and cash equivalents for the years ended December 31, 2019, 2018 and 2017 is as follows: Years Ended December 31 $ Change 2019 2018 2017 2019 vs. 2018 2018 vs. 2017Sources of Cash: Net cash provided by operating activities$6,061 $3,827 $4,185 $2,234 $(358)Proceeds from sales, maturities, calls and redemptions of investments, net ofpurchases— 1,929 — (1,929) 1,929Issuance of common stock under Equity Units stock purchase contracts— 1,250 — (1,250) 1,250Issuances of commercial paper and short- and long-term debt, net of repayments608 — 3,653 608 (3,653)Issuances of common stock under employee stock plans187 173 225 14 (52)Changes in bank overdrafts— — 71 — (71)Other sources of cash, net254 174 703 80 (529)Total sources of cash7,110 7,353 8,837 (243) (1,484)Uses of Cash: Purchases of investments, net of proceeds from sales, maturities, calls andredemptions(1,919) — (2,913) (1,919) 2,913Purchases of subsidiaries, net of cash acquired— (1,760) (2,080) 1,760 320Repurchase and retirement of common stock(1,701) (1,685) (1,998) (16) 313Purchases of property and equipment(1,077) (1,208) (791) 131 (417)Repayments of commercial paper and short- and long-term debt, net ofissuances— (1,086) — 1,086 (1,086)Cash dividends(818) (776) (705) (42) (71)Changes in bank overdrafts(169) (210) — 41 (210)Other uses of cash, net(423) (301) (820) (122) 519Total uses of cash(6,107) (7,026) (9,307) 919 2,281Effect of foreign exchange rates on cash and cash equivalents— (2) 4 2 (6)Net increase (decrease) in cash and cash equivalents$1,003 $325 $(466) $678 $791Liquidity—Year Ended December 31, 2019 Compared to Year Ended December 31, 2018The increase in cash provided by operating activities was primarily due to the impact of membership growth in our Medicaid and Medicare businesses as wellas higher net income in 2019. These increases in operating cash flow were partially offset by the impact of the timing of working capital changes.Other significant changes in sources and uses of cash year-over-year included an increase in net purchases of investments in 2019 compared to net proceedsreceived from sales, maturities, calls and redemptions of investments in 2018, a decrease in cash paid for acquisitions, an increase in net proceeds from theissuance of commercial paper and short- and long-term debt-64-in 2019 compared to net repayments in 2018 and cash received from the issuance of common stock under our Equity Units stock purchase contracts in 2018 thatdid not recur in 2019.Financial ConditionWe maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equitysecurities of $26,157 at December 31, 2019. Since December 31, 2018, total cash, cash equivalents and investments in fixed maturity and equity securitiesincreased by $3,518, primarily due to cash generated from operations and issuances of commercial paper and short- and long-term debt, net of repayments. Theseincreases were partially offset by cash used for repurchases of our common stock, purchases of property and equipment and cash dividends paid to shareholders.Many of our subsidiaries are subject to various government regulations that restrict the timing and amount of dividends and other distributions that may bepaid to their respective parent companies. Certain accounting practices prescribed by insurance regulatory authorities, or statutory accounting practices, differ fromGAAP. Changes that occur in statutory accounting practices, if any, could impact our subsidiaries’ future dividend capacity. In addition, we have agreed to certainundertakings to regulatory authorities, including the requirement to maintain certain capital levels in certain of our subsidiaries.At December 31, 2019, we held $2,673 of cash, cash equivalents and investments at the parent company, which are available for general corporate use,including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities anddebt and interest payments. DebtPeriodically, we access capital markets and issue debt, or Notes, for long-term borrowing purposes, for example, to refinance debt, to finance acquisitions orfor share repurchases. Certain of these Notes may have a call feature that allows us to redeem the Notes at any time at our option and/or a put feature that allows aNote holder to redeem the Notes upon the occurrence of both a change in control event and a downgrade of the Notes below an investment grade rating. For moreinformation on our debt, including redemptions and issuances, see Note 12, “Debt” of the Notes to Consolidated Financial Statements included in Part II, Item 8 ofthis Annual Report on Form 10-K.We calculate our consolidated debt-to-capital ratio, a non-GAAP measure, from the amounts presented on our audited consolidated balance sheets included inPart II, Item 8 of this Annual Report on Form 10-K. Our debt-to-capital ratio is calculated as total debt divided by total debt plus total shareholders’ equity. Totaldebt is the sum of short-term borrowings, current portion of long-term debt, and long-term debt, less current portion. We believe our debt-to-capital ratio assistsinvestors and rating agencies in measuring our overall leverage and additional borrowing capacity. In addition, our bank covenants include a maximum debt-to-capital ratio that we cannot and did not exceed. Our debt-to-capital ratio may not be comparable to similarly titled measures reported by other companies. Ourconsolidated debt-to-capital ratio was 39.5% and 40.2% as of December 31, 2019 and 2018, respectively.Our senior debt is rated “A” by S&P Global, “BBB” by Fitch Ratings, Inc., “Baa2” by Moody’s Investor Service, Inc. and “bbb+” by AM Best Company, Inc.We intend to maintain our senior debt investment grade ratings. If our credit ratings are downgraded, our business, financial condition and results of operationscould be adversely impacted by limitations on future borrowings and a potential increase in our borrowing costs.Future Sources and Uses of LiquidityWe have a shelf registration statement on file with the Securities and Exchange Commission to register an unlimited amount of any combination of debt orequity securities in one or more offerings. Specific information regarding terms and securities being offered will be provided at the time of an offering. Proceedsfrom future offerings are expected to be used for general corporate purposes, including, but not limited to, the repayment of debt, investments in or extensions ofcredit to our subsidiaries and the financing of possible acquisitions or business expansions.We have a senior revolving credit facility, or the 5-Year Facility, with a group of lenders for general corporate purposes. In June 2019, we amended andrestated the credit agreement for the 5-Year Facility to, among other things, extend the-65-maturity date from August 2020 to June 2024 and decrease the amount of credit available from $3,500 to $2,500. In June 2019, we also entered into a 364-daysenior revolving credit facility, or the 364-Day Facility, with a group of lenders for general corporate purposes, which provides for credit in the amount of $1,000and matures in June 2020. Our ability to borrow under these credit facilities is subject to compliance with certain covenants. We do not believe the restrictionscontained in these covenants materially affect our financial or operating flexibility. As of December 31, 2019, we were in compliance with all of our debtcovenants. There were no amounts outstanding under the 5-Year Facility or the 364-Day Facility at December 31, 2019.Through certain subsidiaries, we have entered into multiple 364-day lines of credit, or the Subsidiary Credit Facilities, with separate lenders for generalcorporate purposes. The Subsidiary Credit Facilities provide combined credit up to $600. Our ability to borrow under the Subsidiary Credit Facilities is subject tocompliance with certain covenants. At December 31, 2019, we had $50 outstanding under the Subsidiary Credit Facilities.We have an authorized commercial paper program, the proceeds of which may be used for general corporate purposes. In August 2019, we increased theamount available under the commercial paper program from $2,500 to $3,500. At December 31, 2019, we had $400 outstanding under our commercial paperprogram.We are a member, through certain subsidiaries, of the Federal Home Loan Bank of Indianapolis, the Federal Home Loan Bank of Cincinnati and the FederalHome Loan Bank of Atlanta, or collectively, the FHLBs. As a member, we have the ability to obtain short-term cash advances, subject to certain minimumcollateral requirements. At December 31, 2019, we had $650 in outstanding short-term borrowings from FHLBs.As discussed in “Financial Condition” above, many of our subsidiaries are subject to various government regulations that restrict the timing and amount ofdividends and other distributions that may be paid. Based upon these requirements, we currently estimate that approximately $3,035 of dividends will be paid tothe parent company during 2020. During 2019, we received $3,790 of dividends from our subsidiaries.We regularly review the appropriate use of capital, including acquisitions, common stock and debt security repurchases and dividends to shareholders. Thedeclaration and payment of any dividends or repurchases of our common stock or debt is at the discretion of our Board of Directors and depends upon ourfinancial condition, results of operations, future liquidity needs, regulatory and capital requirements and other factors deemed relevant by our Board of Directors.On January 28, 2020, our Audit Committee declared a quarterly cash dividend to shareholders of $0.95 per share on the outstanding shares of our commonstock. This quarterly dividend is payable on March 27, 2020 to the shareholders of record as of March 16, 2020.Under our Board of Directors’ authorization, we maintain a common stock repurchase program. As of December 31, 2019, we had Board authorization of$3,792 to repurchase our common stock.For additional information regarding our sources and uses of capital, see Note 4, “Investments,” Note 5 “Derivative Financial Instruments,” Note 12 “Debt”and Note 14 “Capital Stock–Use of Capital–Dividends and Stock Repurchase Program” of the Notes to Consolidated Financial Statements included in Part II,Item 8 of this Annual Report on Form 10-K.-66-Contractual Obligations and CommitmentsOur estimated contractual obligations and commitments as of December 31, 2019 are as follows: Payments Due by Period Total Less than1 Year 1-3 Years 3-5 Years More than5 YearsOn-Balance Sheet: Debt1 $31,249 $3,447 $3,653 $3,853 $20,296Operating leases, including imputed interest2795 172 285 203 135Investment commitments328 11 16 — 1Other long-term liabilities4 752 9 295 293 155Off-Balance Sheet: Purchase obligations53,531 1,236 630 1,076 589Operating leases, including imputed interest2394 13 60 66 255Investment commitments6971 287 378 106 200Total contractual obligations and commitments$37,720 $5,175 $5,317 $5,597 $21,631 1Includes estimated interest expense. 2See Note 17, “Leases,” of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this Annual Report on Form 10-K.3Represents low income housing tax credits.4Primarily consists of reserves for future policy benefits, projected other postretirement benefits, deferred compensation, supplemental executive retirement plan liabilitiesand certain other miscellaneous long-term obligations. Estimated future payments for funded pension benefits have been excluded from this table, as we had no fundingrequirements under ERISA at December 31, 2019 as a result of the value of the assets in the plans.5Includes estimated payments for future services under contractual arrangements from third-party service contracts.6Includes unfunded capital commitments for alternative investments.The above table does not contain $172 of gross liabilities for uncertain tax positions and interest for which we cannot reasonably estimate the timing of theresolutions with the respective taxing authorities. For further information, see Note 7, “Income Taxes,” of the Notes to Consolidated Financial Statements includedin Part II, Item 8 of this Annual Report on Form 10-K.In addition to the contractual obligations and commitments discussed above, we have a variety of other contractual agreements related to acquiring materialsand services used in our operations. However, we do not believe these other agreements contain material noncancelable commitments. We believe that funds from future operating cash flows, cash and investments and funds available under our senior revolving credit facilities and/or frompublic or private financing sources will be sufficient for future operations and commitments, and for capital acquisitions and other strategic transactions.Off-Balance Sheet ArrangementsWe do not have any off-balance sheet derivative instruments, guarantee transactions, agreements or other contractual arrangements or any indemnificationagreements that will require funding in future periods. We have not transferred assets to an unconsolidated entity that serves as credit, liquidity or market risksupport to such entity. We do not hold any variable interest in an unconsolidated entity where such entity provides us with financing, liquidity, market risk or creditrisk support.Risk-Based CapitalOur regulated subsidiaries’ states of domicile have statutory risk-based capital, or RBC, requirements for health and other insurance companies and HMOslargely based on the National Association of Insurance Commissioners, or NAIC,-67-Risk-Based Capital (RBC) For Health Organizations Model Act, or RBC Model Act. These RBC requirements are intended to measure capital adequacy, takinginto account the risk characteristics of an insurer’s investments and products. The NAIC sets forth the formula for calculating the RBC requirements, which aredesigned to take into account asset risks, insurance risks, interest rate risks and other relevant risks with respect to an individual insurance company’s business. Ingeneral, under the RBC Model Act, an insurance company must submit a report of its RBC level to the state insurance department or insurance commissioner, asappropriate, at the end of each calendar year. Our regulated subsidiaries’ respective RBC levels as of December 31, 2019, which was the most recent date forwhich reporting was required, were in excess of all applicable mandatory RBC requirements. In addition to exceeding these RBC requirements, we are incompliance with the liquidity and capital requirements for a licensee of the BCBSA and with the tangible net worth requirements applicable to certain of ourCalifornia subsidiaries.For additional information, see Note 21, “Statutory Information,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this AnnualReport on Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. (In Millions, Except Per Share Data or As Otherwise Stated Herein)As a result of our investing and borrowing activities, we are exposed to financial market risks, including those resulting from changes in interest rates andchanges in market valuations. Potential impacts discussed below are based upon sensitivity analyses performed on our financial position as of December 31, 2019.Actual results could vary from these estimates. Our primary objectives with our investment portfolio are to provide safety and preservation of capital, sufficientliquidity to meet cash flow requirements, the integration of investment strategy with the business operations and an attainment of a competitive after-tax totalreturn.InvestmentsOur investment portfolio is exposed to three primary sources of risk: credit quality risk, interest rate risk and market valuation risk.The primary risks associated with our fixed maturity securities, which are classified as available-for-sale, are credit quality risk and interest rate risk. Creditquality risk is defined as the risk of a credit event, such as a ratings downgrade or default, to an individual fixed maturity security and the potential loss attributableto that event. Credit quality risk is managed through our investment policy, which establishes credit quality limitations on the overall portfolio as well asdiversification and percentage limits on securities of individual issuers. The result is a well-diversified portfolio of fixed maturity securities, with an average creditrating of approximately “A.” Interest rate risk is defined as the potential for economic losses on fixed maturity securities due to a change in market interest rates.Our fixed maturity portfolio is invested primarily in U.S. government securities, corporate bonds, asset-backed bonds, mortgage-related securities and municipalbonds, all of which have exposure to changes in the level of market interest rates. Interest rate risk is managed by maintaining asset duration within a band basedupon our liabilities, operating performance and liquidity needs. Additionally, we have the capability of holding any security to maturity, which would allow us torealize full par value.Investments in fixed maturity securities include corporate securities, which account for 45.5% of our total fixed maturity securities at December 31, 2019 andare subject to credit/default risk. In a declining economic environment, corporate yields will usually increase, prompted by concern over the ability of corporationsto make interest payments, thus causing a decrease in the price of corporate securities, and the decline in value of the corporate fixed maturity portfolio. Wemanage this risk through fundamental credit analysis, diversification of issuers and industries and an average credit rating of our corporate fixed maturity portfolioof approximately “BBB.”Market risk for fixed maturity securities is addressed by actively managing the duration, allocation and diversification of our investment portfolio. We haveevaluated the impact on the fixed maturity portfolio’s fair value considering an immediate 100 basis point change in interest rates. A 100 basis point increase ininterest rates would result in an approximate $860 decrease in fair value, whereas a 100 basis point decrease in interest rates would result in an approximate $871increase in fair value. While we classify our fixed maturity securities as “available-for-sale” for accounting purposes, we believe our cash flows and the duration ofour portfolio should allow us to hold securities to maturity, thereby avoiding the recognition of losses should interest rates rise significantly.-68-Our equity portfolio is comprised of large capitalization and small capitalization domestic equities, foreign equities, exchange-traded funds and index mutualfunds. Our equity portfolio is subject to the volatility inherent in the stock market, driven by concerns over economic conditions, earnings and sales growth,inflation, and consumer confidence. These systemic risks cannot be managed through diversification alone. However, more routine risks, such as stock/industryspecific risks, are managed by investing in a diversified equity portfolio.As of December 31, 2019, 4.9% of our investments were equity securities. An immediate 10% decrease in each equity investment’s value, arising from marketmovement, would result in a fair value decrease of $104. Alternatively, an immediate 10% increase in each equity investment’s value, attributable to the samefactor, would result in a fair value increase of $104.For additional information regarding our investments, see Note 4, “Investments,” of the Notes to Consolidated Financial Statements included in Part II, Item 8and “Critical Accounting Policies and Estimates - Investments” within Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” included in this Annual Report on Form 10-K.Long-Term DebtOur total long-term debt at December 31, 2019 consists of senior unsecured notes, convertible debentures, commercial paper and subordinated surplus notesby one of our insurance subsidiaries. At December 31, 2019, the carrying value and estimated fair value of our long-term debt was $19,385 and $21,774,respectively. This debt is subject to interest rate risk, as these instruments have fixed interest rates and the fair value is affected by changes in market interest rates.Should interest rates increase or decrease in the future, the estimated fair value of our fixed rate debt would decrease or increase accordingly.For additional information regarding our long-term debt, see Note 6, “Fair Value” and Note 12, “Debt,” of the Notes to Consolidated Financial Statementsincluded in Part II, Item 8 of this Annual Report on Form 10-K.DerivativesWe have exposure to economic losses due to interest rate risk arising from changes in the level or volatility of interest rates. We attempt to mitigate ourexposure to interest rate risk through the use of derivative financial instruments. These strategies include the use of interest rate swaps and forward contracts,which are used to lock-in interest rates or to hedge (on an economic basis) interest rate risks associated with variable rate debt. We have used these types ofinstruments as designated hedges against specific liabilities.Changes in interest rates will affect the estimated fair value of these derivatives. As of December 31, 2019, we recorded a net asset of $21, the estimated fairvalue of the swaps at that date. We have evaluated the impact on the interest rate swaps’ fair value considering an immediate 100 basis point change in interestrates. A 100 basis point increase in interest rates would result in an approximate $20 decrease in fair value, whereas a 100 basis point decrease in interest rateswould result in an approximate $20 increase in fair value.For additional information regarding our derivatives, see Note 5, “Derivative Financial Instruments” of the Notes to Consolidated Financial Statementsincluded in Part II, Item 8 of this Annual Report on Form 10-K.-69-ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ANTHEM, INC. CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2019, 2018 and 2017 ContentsReport of Independent Registered Public Accounting Firm71 Audited Consolidated Financial Statements: Consolidated Balance Sheets74Consolidated Statements of Income75Consolidated Statements of Comprehensive Income76Consolidated Statements of Cash Flows77Consolidated Statements of Shareholders’ Equity78Notes to Consolidated Financial Statements79-70-Report of Independent RegisteredPublic Accounting Firm To the Shareholders and the Board of Directors of Anthem, Inc. Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Anthem, Inc. (the Company) as of December 31, 2019 and 2018, the related consolidatedstatements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and therelated notes and financial statement schedule listed in the Index at Item 15(c) (collectively referred to as the “consolidated financial statements”). In our opinion,the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the resultsof its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accountingprinciples.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internalcontrol over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 19, 2020 expressed an unqualified opinion thereon.Adoption of New Accounting StandardsAs discussed in Note 2 to the consolidated financial statements, on January 1, 2018, the Company changed its method of accounting for non-consolidated equityinvestments that are not accounted for under the equity method of accounting.As discussed in Note 2 to the consolidated financial statements, on January 1, 2019, the Company changed its method of accounting for leases.Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statementsbased on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordancewith the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required tobe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financialstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate.-71-Valuation of Incurred but Not Paid Claims Description of the Matter Medical claims payable was $8,842 million at December 31, 2019, a significant portion of which related to the Company’sestimate for claims that are incurred but not paid. As discussed in Note 2 to the consolidated financial statements, the Company’sliability for incurred but not paid claims is determined using actuarial methods that include a number of factors and assumptions,including completion factors, which represent the average percentage of total incurred claims that have been paid through a givendate after being incurred based on historical paid claims data, and trend factors, which represent an estimate of claims expensebased on recent claims expense levels and healthcare cost levels. There is significant uncertainty inherent in determiningmanagement’s best estimate of completion and trend factors, which are used to calculate actuarial estimates of incurred but notpaid claims. Auditing management’s estimate of incurred but not paid claims was complex and required the involvement of our actuarialspecialists due to the highly judgmental nature of the completion and trend factor assumptions used in the valuation process. Thesignificant judgment was primarily due to the sensitivity of management’s best estimate of completion and trend factorassumptions, which have a significant impact on the valuation of incurred but not paid claims. How We Addressed theMatter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s actuarialprocess for estimating the liability for incurred but not paid claims. These audit procedures included among others, testingmanagement review controls over completion and trend factor assumptions and the review and approval processes thatmanagement has in place for estimating the liability for incurred but not paid claims. To test the Company’s liability for incurred but not paid claims, our audit procedures included, among others, testing thecompleteness and accuracy of the underlying claims and membership data recorded in the source claims processing anddisbursement systems to the data used by management in developing completion and trend factor assumptions and comparing asample of incurred and paid claims to source documentation. With the support of actuarial specialists, we analyzed the Company’scompletion and trend factor assumptions based on historical claim experience and emerging cost trends, and independentlycalculated a range of reasonable reserve estimates for comparison to management’s best estimate of the liability for incurred butnot paid claims. Additionally, we performed a review of the prior period liabilities for incurred but not paid claims to subsequentclaims development. -72-Revenue Recognition for New Pharmacy Benefits Manager Business Description of the Matter Beginning in the second quarter of 2019, the Company commenced operations of its new pharmacy benefits manager (PBM),IngenioRx. Administrative fees and other revenue of $8,968 million for the year ended December 31, 2019 included productrevenue for services performed by IngenioRx to unaffiliated PBM customers. As discussed in Note 2 to the consolidated financialstatements, product revenue for PBM services to unaffiliated PBM customers is recognized using the gross method at thenegotiated contract price when IngenioRx has concluded it is the principal and it controls the PBM services before prescriptiondrugs are transferred to the customer. There is significant judgment in determining whether IngenioRx is the principal of the PBMservices, which requires the identification of PBM activities relevant to evaluating control and an assessment of IngenioRx's abilityto direct the identified activities. In particular, the PBM activities that determine control include formulary management, networkmanagement and pricing discretion. Auditing management’s revenue recognition for PBM services to unaffiliated PBM customers required a high degree of auditorjudgment due to the subjectivity in determining whether IngenioRx is the principal in the performance of PBM services. Thesejudgments have a significant impact on the presentation and disclosure of product revenue for services performed by IngenioRx tounaffiliated PBM customers. How We Addressed theMatter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’sevaluation of revenue recognition for PBM services performed by IngenioRx to unaffiliated PBM customers. These auditprocedures included among others, testing management review controls over the identification of PBM activities relevant toevaluating control and the evaluation performed to assess IngenioRx’s ability to direct the identified activities. To test the Company’s revenue recognition for PBM services to unaffiliated PBM customers, our audit procedures included, amongothers, assessing the PBM activities provided by IngenioRx to the customer and analyzing the contractual rights and obligationscontained in its PBM services agreement with CaremarkPCS Health, L.L.C. Further, we evaluated IngenioRx’s ability to direct theidentified PBM activities determined to be significant in fulfilling the promise to provide PBM services to its customers byevaluating evidence of management’s control over such activities. In addition, we inspected the terms and conditions of a sample ofunaffiliated PBM customer contracts to evaluate IngenioRx’s assertion of control./s/ ERNST & YOUNG LLPWe have served as the Company’s auditor since 1944.Indianapolis, IndianaFebruary 19, 2020-73-Anthem, Inc.Consolidated Balance Sheets December 31, 2019 December 31, 2018(In millions, except share data) Assets Current assets: Cash and cash equivalents$4,937 $3,934Fixed maturity securities, current (amortized cost of $19,021 and $16,894)19,676 16,692Equity securities, current1,009 1,493Other invested assets, current13 21Accrued investment income173 162Premium receivables5,173 4,465Self-funded receivables2,411 2,278Other receivables2,634 2,558Income taxes receivable335 10Securities lending collateral353 604Other current assets2,319 2,104Total current assets39,033 34,321Long-term investments: Fixed maturity securities (amortized cost of $487 and $486)505 487Equity securities30 33Other invested assets4,228 3,726Property and equipment, net3,133 2,735Goodwill20,500 20,504Other intangible assets8,674 9,007Other noncurrent assets1,350 758Total assets$77,453 $71,571 Liabilities and shareholders’ equity Liabilities Current liabilities: Policy liabilities: Medical claims payable$8,842 $7,454Reserves for future policy benefits85 75Other policyholder liabilities3,050 2,590Total policy liabilities11,977 10,119Unearned income1,017 902Accounts payable and accrued expenses4,198 4,959Security trades pending payable84 197Securities lending payable351 604Short-term borrowings700 1,145Current portion of long-term debt1,598 849Other current liabilities3,692 3,190Total current liabilities23,617 21,965Long-term debt, less current portion17,787 17,217Reserves for future policy benefits, noncurrent674 706Deferred tax liabilities, net2,227 1,960Other noncurrent liabilities1,420 1,182Total liabilities45,725 43,030 Commitments and contingencies—Note 13 Shareholders’ equity Preferred stock, without par value, shares authorized - 100,000,000; shares issued and outstanding - none— —Common stock, par value $0.01, shares authorized - 900,000,000; shares issued and outstanding - 252,922,161 and 257,395,5773 3Additional paid-in capital9,448 9,536Retained earnings22,573 19,988Accumulated other comprehensive loss(296) (986)Total shareholders’ equity31,728 28,541Total liabilities and shareholders’ equity$77,453 $71,571See accompanying notes.-74-Anthem, Inc.Consolidated Statements of Income Years Ended December 31(In millions, except per share data)2019 2018 2017Revenues Premiums$94,173 $85,421 $83,648Administrative fees and other revenue8,968 5,920 5,413Total operating revenue103,141 91,341 89,061Net investment income1,005 970 867Net realized gains (losses) on financial instruments114 (180) 145Other-than-temporary impairment losses on investments: Total other-than-temporary impairment losses on investments(53) (29) (35)Portion of other-than-temporary impairment losses recognized in other comprehensive income(loss)6 3 2Other-than-temporary impairment losses recognized in income(47) (26) (33)Total revenues104,213 92,105 90,040Expenses Benefit expense81,786 71,895 72,236Cost of products sold1,992 — —Selling, general and administrative expense13,364 14,020 12,650Interest expense746 753 739Amortization of other intangible assets338 358 169Loss on extinguishment of debt2 11 282Total expenses98,228 87,037 86,076Income before income tax expense5,985 5,068 3,964Income tax expense1,178 1,318 121Net income$4,807 $3,750 $3,843Net income per share Basic$18.81 $14.53 $14.70Diluted$18.47 $14.19 $14.35Dividends per share$3.20 $3.00 $2.70See accompanying notes.-75-Anthem, Inc.Consolidated Statements of Comprehensive Income Years Ended December 31(In millions) 2019 2018 2017Net income $4,807 $3,750 $3,843Other comprehensive income (loss), net of tax: Change in net unrealized gains/losses on investments 680 (418) 173Change in non-credit component of other-than-temporary impairment losses oninvestments — (2) 4Change in net unrealized gains/losses on cash flow hedges (16) 37 (65)Change in net periodic pension and postretirement costs 26 (90) 51Foreign currency translation adjustments — (1) 3Other comprehensive income (loss) 690 (474) 166Total comprehensive income $5,497 $3,276 $4,009 See accompanying notes.-76-Anthem, Inc.Consolidated Statements of Cash Flows Years Ended December 31(In millions)2019 2018 2017Operating activities Net income$4,807 $3,750 $3,843Adjustments to reconcile net income to net cash provided by operating activities: Net realized (gains) losses on financial instruments(114) 180 (145)Other-than-temporary impairment losses recognized in income47 26 33Loss on extinguishment of debt2 11 282Loss on disposal of assets3 13 15Deferred income taxes81 91 (1,272)Amortization, net of accretion986 1,008 780Depreciation expense147 124 111Share-based compensation294 226 170Changes in operating assets and liabilities: Receivables, net(1,053) (695) (22)Other invested assets(48) (1) (36)Other assets(170) (26) (629)Policy liabilities1,826 (1,059) 732Unearned income115 (36) (120)Accounts payable and accrued expenses(593) 122 922Other liabilities148 (25) (120)Income taxes(325) 323 (194)Other, net(92) (205) (165)Net cash provided by operating activities6,061 3,827 4,185Investing activities Purchases of fixed maturity securities(10,487) (8,244) (9,795)Proceeds from fixed maturity securities: Sales5,914 6,442 7,932Maturities, calls and redemptions2,437 1,938 1,848Purchases of equity securities(11,825) (896) (5,416)Proceeds from sales of equity securities12,364 2,809 3,463Purchases of other invested assets(642) (531) (1,164)Proceeds from sales of other invested assets320 411 219Changes in collateral and settlement of non-hedging derivatives— — 65Changes in securities lending collateral254 (149) 625Purchases of subsidiaries, net of cash acquired— (1,760) (2,080)Purchases of property and equipment(1,077) (1,208) (791)Other, net(50) (71) 12Net cash used in investing activities(2,792) (1,259) (5,082)Financing activities Net (repayments of) proceeds from commercial paper borrowings(297) (107) 175Proceeds from long-term borrowings2,473 835 5,458Repayments of long-term borrowings(1,123) (1,684) (2,815)Proceeds from short-term borrowings7,590 9,120 5,835Repayments of short-term borrowings(8,035) (9,250) (5,000)Changes in securities lending payable(254) 150 (625)Changes in bank overdrafts(169) (210) 71Premiums paid on equity call options(1) — —Proceeds from sale of put options— 1 1Proceeds from issuance of common stock under Equity Units stock purchase contracts— 1,250 —Repurchase and retirement of common stock(1,701) (1,685) (1,998)Change in collateral and settlements of debt-related derivatives(34) 23 (149)Cash dividends(818) (776) (705)Proceeds from issuance of common stock under employee stock plans187 173 225Taxes paid through withholding of common stock under employee stock plans(84) (81) (46)Net cash (used in) provided by financing activities(2,266) (2,241) 427Effect of foreign exchange rates on cash and cash equivalents— (2) 4Change in cash and cash equivalents1,003 325 (466)Cash and cash equivalents at beginning of year3,934 3,609 4,075Cash and cash equivalents at end of year$4,937 $3,934 $3,609See accompanying notes.-77-Anthem, Inc.Consolidated Statements of Shareholders’ Equity Common Stock AdditionalPaid-inCapital AccumulatedOtherComprehensiveLoss TotalShareholders’Equity(In millions)Numberof Shares ParValue RetainedEarnings January 1, 2017263.7 $3 $8,805 $16,560 $(267) $25,101Net income— — — 3,843 — 3,843Other comprehensive income— — — — 166 166Premiums for and settlement of equity options— — 1 — — 1Repurchase and retirement of common stock(10.5) — (356) (1,642) — (1,998)Dividends and dividend equivalents— — — (707) — (707)Issuance of common stock under employee stock plans, netof related tax benefits2.9 — 342 — — 342Convertible debenture conversions— — (245) — — (245)December 31, 2017256.1 3 8,547 18,054 (101) 26,503Adoption of Accounting Standards Update No. 2016-01(Note 2)— — — 320 (320) —January 1, 2018256.1 3 8,547 18,374 (421) 26,503Net income— — — 3,750 — 3,750Other comprehensive loss— — — — (474) (474)Issuance of common stock under Equity Units stockpurchase contracts6.0 — 1,250 — — 1,250Premiums for and settlement of equity options— — 1 — — 1Repurchase and retirement of common stock(6.8) — (243) (1,442) — (1,685)Dividends and dividend equivalents— — — (785) — (785)Issuance of common stock under employee stock plans, netof related tax benefits2.1 — 318 — — 318Convertible debenture conversions— — (337) — — (337)Adoption of Accounting Standards Update No. 2018-02(Note 2)— — — 91 (91) —December 31, 2018257.4 3 9,536 19,988 (986) 28,541Adoption of Accounting Standards Update No. 2016-02(Note 2)— — — 26 — 26January 1, 2019257.4 3 9,536 20,014 (986) 28,567Net income— — — 4,807 — 4,807Other comprehensive income— — — — 690 690Repurchase and retirement of common stock(6.3) — (275) (1,426) — (1,701)Dividends and dividend equivalents— — — (822) — (822)Issuance of common stock under employee stock plans, netof related tax benefits1.8 — 396 — — 396Convertible debenture repurchases and conversions— — (209) — — (209)December 31, 2019252.9 $3 $9,448 $22,573 $(296) $31,728See accompanying notes.-78-Anthem, Inc. Notes to Consolidated Financial Statements December 31, 2019 (In Millions, Except Per Share Data or As Otherwise Stated Herein)1. OrganizationReferences to the terms “we,” “our,” “us” or “Anthem” used throughout these Notes to Consolidated Financial Statements refer to Anthem, Inc., an Indianacorporation, and unless the context otherwise requires, its direct and indirect subsidiaries.We are one of the largest health benefits companies in the United States in terms of medical membership, serving approximately 41 medical members throughour affiliated health plans as of December 31, 2019. We offer a broad spectrum of network-based managed care plans to Large Group, Small Group, Individual,Medicaid and Medicare markets. Our managed care plans include: Preferred Provider Organizations, or PPOs; Health Maintenance Organizations, or HMOs;Point-of-Service plans; traditional indemnity plans and other hybrid plans, including Consumer-Driven Health Plans; and hospital only and limited benefitproducts. In addition, we provide a broad array of managed care services to self-funded customers, including claims processing, stop loss insurance, actuarialservices, provider network access, medical cost management, disease management, wellness programs and other administrative services. We provide an array ofspecialty and other insurance products and services such as pharmacy benefits management, or PBM, dental, vision, life and disability insurance benefits,radiology benefit management and analytics-driven personal healthcare. We also provide services to the federal government in connection with our Federal HealthProducts & Services business, which administers the Federal Employees Health Benefits, or FEHB, Program.We are an independent licensee of the Blue Cross and Blue Shield Association, or BCBSA, an association of independent health benefit plans. We serve ourmembers as the Blue Cross licensee for California and as the Blue Cross and Blue Shield, or BCBS, licensee for Colorado, Connecticut, Georgia, Indiana,Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area andupstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. In a majority of these service areas, we dobusiness as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, and Empire Blue Cross Blue Shield or Empire Blue Cross. We also conduct businessthrough arrangements with other BCBS licensees as well as other strategic partners. Through our subsidiaries, we also serve customers in numerous states acrossthe country as Aim Specialty Health, Amerigroup, Aspire Health, CareMore, Freedom Health, HealthLink, HealthSun, Optimum HealthCare, Simply Healthcare,and/or UniCare. Also, in the second quarter of 2019, we began providing PBM services through our IngenioRx subsidiary. We are licensed to conduct insuranceoperations in all 50 states and the District of Columbia through our subsidiaries.2. Basis of Presentation and Significant Accounting PoliciesBasis of Presentation: The accompanying consolidated financial statements include the accounts of Anthem and its subsidiaries and have been prepared inconformity with U.S. generally accepted accounting principles, or GAAP. All significant intercompany accounts and transactions have been eliminated inconsolidation.Certain of our subsidiaries operate outside of the United States and have functional currencies other than the U.S. dollar, or USD. We translate the assets andliabilities of those subsidiaries to USD using the exchange rate in effect at the end of the period. We translate the revenues and expenses of those subsidiaries toUSD using the average exchange rates in effect during the period. The net effect of these translation adjustments is included in “Foreign currency translationadjustments” in our consolidated statements of comprehensive income.Reclassifications: Certain prior year amounts have been reclassified to conform to the current year presentation.Use of Estimates: The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affectthe amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from those estimates.-79-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Cash and Cash Equivalents: Cash and cash equivalents includes available cash and all highly liquid investments with maturities of three months or less whenpurchased. We control a number of bank accounts that are used exclusively to hold customer funds for the administration of customer benefits, and we have cashand cash equivalents on deposit to meet certain regulatory requirements. These amounts totaled $215 and $222 at December 31, 2019 and 2018, respectively, andare included in the cash and cash equivalents line on our consolidated balance sheets.Investments: Financial Accounting Standards Board, or FASB, other-than-temporary impairment, or OTTI, guidance applies to fixed maturity securities andprovides guidance on the recognition, presentation of, and disclosures for OTTIs. If a fixed maturity security is in an unrealized loss position and we have the intentto sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, thedecline in value is deemed to be other-than-temporary and is presented within the other-than-temporary impairment losses recognized in our consolidatedstatements of income. For impaired fixed maturity securities that we do not intend to sell or it is more likely than not that we will not have to sell such securities,but we expect that we will not fully recover the amortized cost basis, the credit component of the OTTI is presented within the other-than-temporary impairmentlosses recognized in our consolidated statements of income and the non-credit component of the OTTI is recognized in accumulated other comprehensive loss inour consolidated balance sheets. Furthermore, unrealized losses entirely caused by non-credit related factors related to fixed maturity securities for which weexpect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive loss.The credit component of an OTTI is determined primarily by comparing the net present value of projected future cash flows with the amortized cost basis ofthe fixed maturity security. The net present value is calculated by discounting our best estimate of projected future cash flows at the effective interest rate implicitin the fixed maturity security at the date of acquisition. For mortgage-backed and asset-backed securities, cash flow estimates are based on assumptions regardingthe underlying collateral, including prepayment speeds, vintage, type of underlying asset, geographic concentrations, default rates, recoveries and changes invalue. For all other securities, cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings and estimatesregarding timing and amount of recoveries associated with a default.For asset-backed securities included in fixed maturity securities, we recognize income using an effective yield based on anticipated prepayments and theestimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date andanticipated future payments. The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied sincethe acquisition of the securities. Such adjustments are reported within net investment income.Effective January 1, 2018 and in accordance with the FASB guidance, the changes in fair value of our marketable equity securities are recognized in ourresults of operations within net realized gains and losses on financial instruments. Prior to 2018, the unrealized gains or losses on our equity securities previouslyclassified as available-for-sale were included in accumulated other comprehensive loss as a separate component of shareholders’ equity, unless the decline in valuewas deemed to be other-than-temporary and we did not have the intent and ability to hold such equity securities until their full cost could be recovered, in whichcase such equity securities were written down to fair value and the loss was charged to other-than-temporary impairment losses recognized in income.We maintain various rabbi trusts to account for the assets and liabilities under certain deferred compensation plans. Under these plans, the participants candefer certain types of compensation and elect to receive a return on the deferred amounts based on the changes in fair value of various investment options,primarily a variety of mutual funds. We have corporate-owned life insurance policies on certain participants in our deferred compensation plans. The cashsurrender value of the corporate-owned life insurance policies is reported in other invested assets, long-term, in the consolidated balance sheets. The remainingrabbi trust assets are generally invested according to the participant’s investment election and are classified as trading, which are reported in other invested assets,current, in the consolidated balance sheets.We use the equity method of accounting for investments in companies in which our ownership interest enables us to influence the operating or financialdecisions of the investee company. Our proportionate share of equity in net income of these unconsolidated affiliates is reported within net investment income.-80-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Investment income is recorded when earned. All securities sold resulting in investment gains and losses are recorded on the trade date. Realized gains andlosses are determined on the basis of the cost or amortized cost of the specific securities sold.We participate in securities lending programs whereby marketable securities in our investment portfolio are transferred to independent brokers or dealers inexchange for cash and securities collateral. Under FASB guidance related to accounting for transfers and servicing of financial assets and extinguishments ofliabilities, we recognize the collateral as an asset, which is reported as securities lending collateral on our consolidated balance sheets, and we record acorresponding liability for the obligation to return the collateral to the borrower, which is reported as securities lending payable. The securities on loan are reportedin the applicable investment category on our consolidated balance sheets. Unrealized gains or losses on securities lending collateral are included in accumulatedother comprehensive loss as a separate component of shareholders’ equity. The market value of loaned securities and that of the collateral pledged can fluctuate innon-synchronized fashions. To the extent the loaned securities’ value appreciates faster or depreciates slower than the value of the collateral pledged, we areexposed to the risk of the shortfall. As a primary mitigating mechanism, the loaned securities and collateral pledged are marked to market on a daily basis and theshortfall, if any, is collected accordingly. Secondarily, the collateral level is set at 102% of the value of the loaned securities, which provides a cushion before anyshortfall arises. The investment of the cash collateral is subject to market risk, which is managed by limiting the investments to higher quality and shorter durationinstruments.Receivables: Premium receivables include the uncollected amounts from insured groups, individuals and government programs. Premium receivables arereported net of an allowance for doubtful accounts of $237 and $278 at December 31, 2019 and 2018, respectively. Self-funded receivables include administrativefees, claims and other amounts due from self-funded customers. Self-funded receivables are reported net of an allowance for doubtful accounts of $46 and $47 atDecember 31, 2019 and 2018, respectively. The allowance for doubtful accounts is based on historical collection trends and our judgment regarding the ability tocollect specific accounts.Other receivables include pharmacy rebates, provider advances, claims recoveries, reinsurance receivables, proceeds due from brokers on investment trades,other government receivables and other miscellaneous amounts due to us. These receivables are reported net of an allowance for doubtful accounts of $242 and$280 at December 31, 2019 and 2018, respectively, which is based on historical collection trends and our judgment regarding the ability to collect specificaccounts.Income Taxes: We file a consolidated income tax return. Deferred income tax assets and liabilities are recognized for temporary differences between thefinancial statement and tax return basis of assets and liabilities based on enacted tax rates and laws. The deferred tax benefits of the deferred tax assets arerecognized to the extent realization of such benefits is more likely than not. Deferred income tax expense or benefit generally represents the net change in deferredincome tax assets and liabilities during the year, excluding the impact from amounts initially recorded for business combinations, if any, and amounts recorded toaccumulated other comprehensive loss. Current income tax expense represents the tax consequences of revenues and expenses currently taxable or deductible onvarious income tax returns for the year reported.We account for income tax contingencies in accordance with FASB guidance that contains a model to address uncertainty in tax positions and clarifies theaccounting for income taxes by prescribing a minimum recognition threshold, which all income tax positions must achieve before being recognized in the financialstatements.Property and Equipment: Property and equipment is recorded at cost, net of accumulated depreciation. Depreciation is computed principally by the straight-line method over estimated useful lives ranging from fifteen to thirty-nine years for buildings and improvements, three to five years for computer equipment andsoftware, and the lesser of the remaining life of the building lease, if any, or seven years for furniture and other equipment. Leasehold improvements aredepreciated over the term of the related lease. Certain costs related to the development or purchase of internal-use software are capitalized and amortized overestimated useful lives ranging from five to ten years.Goodwill and Other Intangible Assets: FASB guidance requires business combinations to be accounted for using the acquisition method of accounting, and italso specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. Goodwill represents the excess ofthe cost of acquisition over the fair value of net assets acquired. Other intangible assets represent the values assigned to customer relationships, provider andhospital networks, Blue Cross and Blue Shield and other trademarks, licenses and other agreements, such as non-compete. Goodwill and other intangible assets areallocated to reportable segments based on the relative fair value of the components of the businesses acquired.-81-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment at least annually. We complete our annualimpairment tests of existing goodwill and other intangible assets with indefinite lives during the fourth quarter of each year. Certain interim impairment tests arealso performed when potential impairment indicators exist or changes in our business or other triggering events occur. Goodwill and other intangible assets areallocated to reporting units for purposes of the annual goodwill impairment test. Other intangible assets with indefinite lives, such as trademarks, are tested forimpairment separately.FASB guidance allows for qualitative assessments of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount forpurposes of a goodwill impairment analysis and whether it is more likely than not that an indefinite-lived intangible asset is impaired for purposes of an indefinite-lived intangible asset impairment analysis. Quantitative analysis must be performed if qualitative analyses are not conclusive. Entities also have the option tobypass the assessment of qualitative factors and proceed directly to performing quantitative analyses. Our impairment tests require us to make assumptions andjudgments regarding the estimated fair value of our reporting units, including goodwill and other intangible assets with indefinite lives. Estimated fair valuesdeveloped based on our assumptions and judgments might be significantly different if other reasonable assumptions and estimates were to be used.Qualitative analysis involves assessing situations and developments that could affect key drivers used to evaluate whether the fair value of our goodwill andindefinite-lived intangible assets are impaired. Our procedures include assessing our financial performance, macroeconomic conditions, industry and marketconsiderations, various asset specific factors, and entity specific events.Fair value for purposes of a quantitative goodwill impairment test is calculated using a blend of the projected income and market valuation approaches. Theprojected income approach is developed using assumptions about future revenue, expenses and net income derived from our internal planning process. Ourassumed discount rate is based on our industry’s weighted-average cost of capital and reflects volatility associated with the cost of equity capital. Marketvaluations include market comparisons to publicly traded companies in our industry and are based on observed multiples of certain measures including revenue;earnings before interest, taxes, depreciation and amortization, or EBITDA; and book value of invested capital. A goodwill impairment loss is recognized to theextent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level and consists of two steps. First, the fair value ofa reporting unit is determined and compared to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss isrecognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill isdetermined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation on a business acquisition, at the impairment test date.Fair value for purposes of a quantitative impairment test for indefinite-lived intangible assets is estimated using a projected income approach. We recognize animpairment loss when the estimated fair value of indefinite-lived intangible assets is less than the carrying value. If significant impairment indicators are notedrelative to other intangible assets subject to amortization, we may be required to record impairment losses against future income.Derivative Financial Instruments: We primarily invest in the following types of derivative financial instruments: interest rate swaps, futures, forwardcontracts, put and call options, swaptions, embedded derivatives and warrants. Derivatives embedded within non-derivative instruments, such as options embeddedin convertible fixed maturity securities, are bifurcated from the host instrument when the embedded derivative is not clearly and closely related to the hostinstrument. Our use of derivatives is limited by statutes and regulations promulgated by the various regulatory bodies to which we are subject, and by our ownderivative policy. Our derivative use is generally limited to hedging purposes, on an economic basis, and we generally do not use derivative instruments forspeculative purposes.We have exposure to economic losses due to interest rate risk arising from changes in the level or volatility of interest rates. We attempt to mitigate ourexposure to interest rate risk through active portfolio management, including rebalancing our existing portfolios of assets and liabilities, as well as changing thecharacteristics of investments to be purchased or sold in the future. In addition, derivative financial instruments are used to modify the interest rate exposure ofcertain liabilities or forecasted transactions. These strategies include the use of interest rate swaps and forward contracts, which are used to lock-in interest rates orto hedge, on an economic basis, interest rate risks associated with variable rate debt. We have used these types of instruments as designated hedges against specificliabilities.-82-Anthem, Inc.Notes to Consolidated Financial Statements (continued)All investments in derivatives are recorded as assets or liabilities at fair value. If certain correlation, hedge effectiveness and risk reduction criteria are met, aderivative may be specifically designated as a hedge of exposure to changes in fair value or cash flow. The accounting for changes in the fair value of a derivativedepends on the intended use of the derivative and the nature of any hedge designation thereon. Amounts excluded from the assessment of hedge effectiveness, ifany, as well as the ineffective portion of the gain or loss, are reported in results of operations immediately. If the derivative is not designated as a hedge, the gain orloss resulting from the change in the fair value of the derivative is recognized in results of operations in the period of change. Cash flows associated with thesettlement of non-designated derivatives are shown on a net basis in investing activity in our consolidated statements of cash flow.From time to time, we may also purchase derivatives to hedge, on an economic basis, our exposure to foreign currency exchange fluctuations associated withthe operations of certain of our subsidiaries. We generally use futures or forward contracts for these transactions. We generally do not designate these contracts ashedges and, accordingly, the changes in fair value of these derivatives are recognized in results of operations immediately.Credit exposure associated with non-performance by the counterparties to derivative instruments is generally limited to the uncollateralized fair value of theasset related to instruments recognized in the consolidated balance sheets. We attempt to mitigate the risk of non-performance by selecting counterparties with highcredit ratings and monitoring their creditworthiness and by diversifying derivatives among multiple counterparties. At December 31, 2019, we believe there wereno material concentrations of credit risk with any individual counterparty.We generally enter into master netting agreements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Certain ofour derivative agreements also contain credit support provisions that require us or the counterparty to post collateral if there are declines in the derivative fair valueor our credit rating. The derivative assets and derivative liabilities are reported at their fair values net of collateral and netting by the counterparty.Retirement Benefits: We recognize the funded status of pension and other postretirement benefit plans on the consolidated balance sheets based on fiscal-year-end measurements of plan assets and benefit obligations. Prepaid pension benefits represent prepaid costs related to defined benefit pension plans and arereported with other noncurrent assets. Postretirement benefits represent outstanding obligations for retiree medical, life, vision and dental benefits. Liabilities forpension and other postretirement benefits are reported with current and noncurrent liabilities based on the amount by which the actuarial present value of benefitspayable in the next twelve months included in the benefit obligation exceeds the fair value of plan assets.We determine the expected return on plan assets using the calculated value of plan assets, which recognizes changes in the fair value of plan assets in asystematic manner over three years. We apply a corridor approach to amortize unrecognized actuarial gains or losses. Under this approach, only accumulated netactuarial gains or losses in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets are amortized over the average remainingservice or lifetime of the workforce as a component of net periodic benefit cost.The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year based on our most recentmeasurement date. We use the annual spot rate approach for setting our discount rate. Under the spot rate approach, individual spot rates from a full yield curve ofpublished rates are used to discount each plan’s cash flows to determine the plan’s obligations.The assumed healthcare cost trend rates used to measure the expected cost of other postretirement benefits are based on an initial assumed healthcare costtrend rate declining to an ultimate healthcare cost trend rate over a select number of years.Medical Claims Payable: Liabilities for medical claims payable include estimated provisions for incurred but not paid claims on an undiscounted basis, aswell as estimated provisions for expenses related to the processing of claims. Incurred but not paid claims include (1) an estimate for claims that are incurred butnot reported, as well as claims reported to us but not yet processed through our systems; and (2) claims reported to us and processed through our systems but notyet paid.Liabilities for both claims incurred but not reported and reported but not yet processed through our systems are determined in the aggregate, employingactuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. Actuarial Standards of Practice require that theclaim liabilities be appropriate under moderately adverse circumstances. We determine the amount of the liability for incurred but not paid claims by following a-83-Anthem, Inc.Notes to Consolidated Financial Statements (continued)detailed actuarial process that uses both historical claim payment patterns as well as emerging medical cost trends to project our best estimate of claim liabilities.Under this process, historical paid claims data is formatted into “claim triangles,” which compare claim incurred dates to the dates of claim payments. Thisinformation is analyzed to create “completion factors” that represent the average percentage of total incurred claims that have been paid through a given date afterbeing incurred. Completion factors are applied to claims paid through the period-end date to estimate the ultimate claim expense incurred for the period. Actuarialestimates of incurred but not paid claim liabilities are then determined by subtracting the actual paid claims from the estimate of the ultimate incurred claims. For the most recent incurred months (typically the most recent two months), the percentage of claims paid for claims incurred in those months is generallylow. This makes the completion factor methodology less reliable for such months. Therefore, incurred claims for recent months are not projected from historicalcompletion and payment patterns; rather, they are projected by estimating the claims expense for those months based on recent claims expense levels andhealthcare trend levels, or “trend factors.”We regularly review and set assumptions regarding cost trends and utilization when initially establishing claim liabilities. We continually monitor and adjustthe claims liability and benefit expense based on subsequent paid claims activity. If it is determined that our assumptions regarding cost trends and utilization arematerially different than actual results, our income statement and financial position could be impacted in future periods.Premium deficiencies are recognized when it is probable that expected claims and administrative expenses will exceed future premiums on existing medicalinsurance contracts without consideration of investment income. Determination of premium deficiencies for longer duration life and disability contracts includesconsideration of investment income. For purposes of premium deficiencies, contracts are deemed to be either short or long duration and are grouped in a mannerconsistent with our method of acquiring, servicing and measuring the profitability of such contracts. Once established, premium deficiencies are releasedcommensurate with actual claims experience over the remaining life of the contract. No premium deficiencies were established at December 31, 2019 or 2018.Benefit expense includes incurred medical claims as well as quality improvement expenses for our fully-insured members. Quality improvement activities arethose designed to improve member health outcomes, prevent hospital readmissions and improve patient safety. They also include expenses for wellness and healthpromotion provided to our members.Reserves for Future Policy Benefits: Reserves for future policy benefits include liabilities for life and long-term disability insurance policy benefits basedupon interest, mortality and morbidity assumptions from published actuarial tables, modified based upon our experience. Future policy benefits also includeliabilities for insurance policies for which some of the premiums received in earlier years are intended to pay anticipated benefits to be incurred in future years.Future policy benefits are continually monitored and reviewed, and when reserves are adjusted, differences are reflected in benefit expense.The current portion of reserves for future policy benefits relates to the portion of such reserves that we expect to pay within one year. We believe that ourliabilities for future policy benefits, along with future premiums received, are adequate to satisfy our ultimate benefit liability; however, these estimates areinherently subject to a number of variable circumstances. Consequently, the actual results could differ materially from the amounts recorded in our consolidatedfinancial statements. Other Policyholder Liabilities: Other policyholder liabilities include rate stabilization reserves associated with retrospectively rated insurance contracts andcertain case-specific reserves. Other policyholder liabilities also includes liabilities for premium refunds based upon the minimum medical loss ratio, or MLR, therelative health risk of members, or other contractual or regulatory requirements. Rate stabilization reserves represent accumulated premiums that exceed whatcustomers owe us based on actual claim experience. The timing of payment of these retrospectively rated refunds is based on the contractual terms with ourcustomers and can vary from period to period based on the specific contractual requirements.We are required to meet certain minimum MLR thresholds prescribed by the Patient Protection and Affordable Care Act and the Health Care and EducationReconciliation Act of 2010, as amended, or collectively, the ACA. If we do not meet or exceed the minimum MLR thresholds specified by the ACA, we arerequired to pay rebates to certain customers. Minimum MLR rebates are calculated by subsidiary, state and applicable line of business (Large Group, Small Group,Individual, Student Health and Medicare) in accordance with regulations issued by the Department of Health and Human Services, or HHS. Such calculations aremade using estimated calendar year medical loss expense and premiums, as defined by HHS.-84-Anthem, Inc.Notes to Consolidated Financial Statements (continued)We follow HHS guidelines for determining the types of expenses that may be included in our minimum MLR rebate calculations, which differ from benefitexpense and premiums as reported in our consolidated financial statements prepared in conformity with GAAP. Certain amounts reported as expense in ourconsolidated GAAP financial statements may be reported as a reduction of premiums in accordance with HHS regulations. In addition, profit amounts included inour payments to third-party administrative service providers are recorded as benefit expense in our consolidated GAAP financial statements while HHS does notallow for the inclusion of these expenses within the medical loss expense for purposes of calculating minimum MLR.Revenue Recognition: Premiums for fully-insured contracts are recognized as revenue over the period insurance coverage is provided, and, if applicable, netof amounts recognized for MLR rebates, risk adjustment, reinsurance and risk corridor under contractual premium stabilization arrangements, the ACA or otherregulatory requirements. Premium payments from contracted government agencies are based on eligibility lists produced by the government agencies. Premiumsrelated to the unexpired contractual coverage periods are reflected in the accompanying consolidated balance sheets as unearned income. Premiums includerevenue adjustments for retrospectively rated contracts where revenue is based on the estimated loss experience of the contract. Premium rates for certain lines ofbusiness are subject to approval by the Department of Insurance of each respective state. Additionally, delays in annual premium rate changes from contractedgovernment agencies require that we defer the recognition of any increases to the period in which the premium rates become final. The value of the impact can besignificant in the period in which it is recognized depending on the magnitude of the premium rate increase, the membership to which it applies and the length ofthe delay between the effective date of the rate increase and the final contract date. Premium rate decreases are recognized in the period the change in premium ratebecomes effective and the change in the rate is known, which may be prior to the period when the contract amendment affecting the rate is finalized.Administrative fees and other revenue include revenue from certain group contracts that provide for the group to be at risk for all, or with supplementalinsurance arrangements, a portion, of their claims experience. We charge these self-funded groups an administrative fee, which is based on the number of membersin a group or the group’s claim experience. In addition, administrative fees and other revenue include amounts received for the administration of Medicare orcertain other government programs. Under our self-funded arrangements, revenue is recognized as administrative services are performed. All benefit paymentsunder these programs are excluded from benefit expense.Administrative fees and other revenue also include product revenue for services performed by our IngenioRx pharmacy benefit manager, or PBM, forunaffiliated PBM customers. Unaffiliated PBM customers include our self-funded groups that have contracted with IngenioRx for PBM services and, beginning onJanuary 1, 2020, third-party health plans. Product revenues and costs of goods sold for Anthem health plans are eliminated in consolidation. Product revenue forPBM services is recognized using the gross method at the negotiated contract price when IngenioRx has concluded that it is the principal and it controls theservices before prescription drugs are transferred to the customer. IngenioRx determined it is the principal due to its contractual rights to design and develop alisting of prescription drugs offered to the customer (formulary management); its control over establishing the pharmacy network available to the customer to haveits prescription fulfilled (network management); and its discretion over establishing the pricing for prescription drugs. Overall, control over these activities indicateIngenioRx is primarily responsible for fulfilling the promise to provide PBM services. Product revenues include ingredient costs (net of any rebates or discounts),including any co-payments made by or on behalf of the customer, and administrative fees. IngenioRx recognizes revenue when control of the prescription drugs istransferred to customers, in an amount it expects to be entitled to in exchange for the services provided.For our non-fully-insured contracts, we had no material contract assets, contract liabilities or deferred contract costs recorded on our consolidated balancesheet at December 31, 2019. Revenue recognized in 2019 and 2018 from performance obligations related to prior years, such as due to changes in transactionprice, was not material. For contracts that have an original expected duration of greater than one year, revenue expected to be recognized in future periods relatedto unfulfilled contractual performance obligations and contracts with variable consideration related to undelivered performance obligations is not material.Cost of Products Sold: IngenioRx’s cost of products sold includes the cost of prescription drugs dispensed to unaffiliated PBM customers (net of rebates ordiscounts). This cost includes any co-payments made by or on behalf of the customer. Cost of products sold also includes per-claim administrative fees forprescription fulfillment by its vendor and certain IngenioRx direct costs related to sales and administration of customer contracts.-85-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Share-Based Compensation: Our current compensation philosophy provides for share-based compensation, including stock options, restricted stock awardsand an employee stock purchase plan. Stock options are granted for a fixed number of shares with an exercise price at least equal to the fair value of the shares atthe date of the grant. Restricted stock awards are issued at the fair value of the stock on the grant date. The employee stock purchase plan allows for a purchaseprice per share which is 90% of the fair value of a share of common stock on the lower of the first or last trading day of the plan quarter. The employee stockpurchase plan discount is recognized as compensation expense based on GAAP guidance. All other share-based payments to employees are recognized ascompensation expense in our consolidated statements of income based on their fair values. Additionally, excess tax benefits, which result from actual tax benefitsrealized when awards vest or options are exercised exceeding deferred tax benefits previously recognized based on grant date fair value, are recognized as taxbenefits in the income statement. Our share-based employee compensation plans and assumptions are described in Note 14, “Capital Stock.” Also see “RecentlyAdopted Accounting Guidance” within this Note 2 for reference to accounting changes adopted related to share-based compensation.Advertising and Marketing Costs: We use print, broadcast and other advertising to promote our products and to develop our corporate image. We market ourproducts through direct marketing activities and an extensive network of independent agents, brokers and retail partnerships for Individual and Medicarecustomers, and for certain Local Group customers with a smaller employee base. Products for National Accounts and Local Group customers with a largeremployee base are generally sold through independent brokers or consultants retained by the customer who work with industry specialists from our in-house salesforce. In the Individual and Small Group markets, we offer products through state or federally facilitated marketplaces, or public exchanges, and off-exchangeproducts. The cost of advertising and marketing for product promotion is expensed as incurred, while advertising and marketing costs associated with our corporateimage is expensed when first aired. Total advertising and marketing expense was $467, $385 and $338 for the years ended December 31, 2019, 2018 and 2017,respectively.Health Insurance Provider Fee: The ACA imposed an annual Health Insurance Provider Fee, or HIP Fee, on health insurers that write certain types of healthinsurance on U.S. risks, which has been permanently repealed effective January 1, 2021. The annual HIP Fee is allocated to health insurers based on the ratio of theamount of an insurer’s net premium revenues written during the preceding calendar year to the amount of health insurance premium for all U.S. health risk forthose certain lines of business written during the preceding calendar year. We record our estimated liability for the HIP Fee in full at the beginning of the year witha corresponding deferred asset that is amortized on a straight-line basis to selling, general and administrative expense. The final calculation and payment of theannual HIP Fee is due by September 30th of each fee year. The HIP Fee is non-deductible for federal income tax purposes. Our affected products are priced tocover the increased selling, general and administrative and income tax expenses associated with the HIP Fee. The total amount due from allocations to healthinsurers was $14,300 for 2018. The HIP Fee was suspended for 2017 and 2019, has resumed and increased to $15,523 for 2020 and has been permanentlyeliminated beginning in 2021. For the year ended December 31, 2018, we recognized $1,544 as selling, general and administrative expense related to the HIP Fee.There was no corresponding expense for 2019 or 2017 due to the suspension of the HIP Fee for 2019 and 2017.Leases: We lease office space and certain computer and related equipment under noncancelable operating leases. We determine whether an arrangement is orcontains a lease at its inception. We recognize lease liabilities based on the present value of the minimum lease payments not yet paid by using the lease term, anyamounts probable of being owed under any residual value guarantees and the discount rate determined at lease commencement. As our leases do not generallyprovide an implicit rate, we use our incremental secured borrowing rate commensurate with the underlying lease terms to determine the present value of our leasepayments. Our lease liabilities may include amounts for options to extend or terminate a lease when it is reasonably certain that we will exercise that option. Werecognize operating right-of-use, or ROU, assets at an amount equal to the lease liability adjusted for prepaid or accrued rent, the remaining balance of any leaseincentives and unamortized initial direct costs.The operating lease liabilities are reported in other current liabilities and other noncurrent liabilities and the related ROU assets are reported in othernoncurrent assets on our consolidated balance sheet as of December 31, 2019. Lease expense for our operating leases is calculated on a straight-line basis over thelease term and is reported in selling, general and administrative expense on our consolidated statements of income. For our office space leases, we account for thelease and non-lease components (such as common area maintenance) as a single lease component. We also do not recognize a lease liability or ROU asset for ouroffice space leases whose lease terms, at commencement, are twelve months or less and that do not include a purchase option or option to extend that we arereasonably certain to exercise.-86-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Earnings per Share: Earnings per share amounts, on a basic and diluted basis, have been calculated based upon the weighted-average common sharesoutstanding for the period.Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number ofcommon shares outstanding for the period. Diluted earnings per share may include the dilutive effect of stock options, restricted stock, convertible debentures andEquity Units, using the treasury stock method. See Note 12, “Debt,” for a description of our Equity Units. The treasury stock method assumes exercise of stockoptions and vesting of restricted stock, with the assumed proceeds used to purchase common stock at the average market price for the period. The differencebetween the number of shares assumed issued and number of shares assumed purchased represents the dilutive shares.Recently Adopted Accounting Guidance: In March 2019, the FASB issued Accounting Standards Update No. 2019-01, Leases (Topic 842): CodificationImprovements. In July 2018, the FASB issued Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements and Accounting StandardsUpdate No. 2018-10, Codification Improvements to Topic 842, Leases. These updates provide additional clarification, an optional transition method, a practicalexpedient and implementation guidance on the previously issued Accounting Standards Update No. 2016-02, Leases (Topic 842). Collectively, these updatessupersede the lease guidance in Accounting Standards Codification, or ASC, Topic 840 and require lessees to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees arerequired to recognize an ROU asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. We adoptedthis standard on January 1, 2019 by applying the optional transition method on the adoption date and did not adjust comparative periods. We also elected thepackage of practical expedients permitted, which, among other things, allowed us to carry forward the lease classification for our existing leases. In preparation forthe adoption of this standard and to enable preparation of the required financial information, we implemented a new lease accounting software solution as well asnew internal controls. The adoption of this standard impacted our 2019 opening consolidated balance sheet, as we recorded operating lease liabilities of $728 andROU assets of $637, which equals the lease liabilities net of accrued rent, lease incentives and the carrying amount of ceased-use liabilities previously recorded onour consolidated balance sheet under the prior guidance. We also recognized a cumulative-effect adjustment of $26 to our opening retained earnings for deferredgains on our previous sale-leaseback transactions. The adoption of this standard did not have an impact on our consolidated statements of income or cash flows.In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to theDisclosure Requirements for Fair Value Measurement, or ASU 2018-13. The amendments in ASU 2018-13 eliminate, add, and modify certain disclosurerequirements for fair value measurements. The amendments are effective for interim and annual periods beginning after December 15, 2019, with early adoptionpermitted for either the entirety of ASU 2018-13 or only the provisions that eliminate or modify disclosure requirements. We early adopted the provisions thateliminate and modify disclosure requirements, on a retrospective basis, effective in our 2018 Annual Report on Form 10-K. We adopted the new disclosurerequirements on January 1, 2020, on a prospective basis. The new disclosure requirements are effective for our interim and annual reporting periods beginning onor after the adoption date.In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220):Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, or ASU 2018-02. On December 22, 2017, the federal government enacteda tax bill, H.R.1, An act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, or the Tax Cuts andJobs Act. The Tax Cuts and Jobs Act contains significant changes to corporate taxation, including, but not limited to, reducing the U.S. federal corporate incometax rate from 35% to 21% and modifying or limiting many business deductions. Current FASB guidance requires adjustments of deferred taxes due to a change inthe federal corporate income tax rate to be included in income from operations. As a result, the tax effects of items within accumulated other comprehensive lossdid not reflect the appropriate tax rate. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive loss to retained earningsfor stranded tax effects resulting from the change in the federal corporate income tax rate. We adopted the amendments in ASU 2018-02 for our interim and annualreporting periods beginning on January 1, 2018 and reclassified $91 of stranded tax effects from accumulated other comprehensive loss to retained earnings on ourconsolidated balance sheets. The adoption of ASU 2018-02 did not have any impact on our consolidated results of operations or cash flows.-87-Anthem, Inc.Notes to Consolidated Financial Statements (continued)In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accountingfor Hedging Activities, or ASU 2017-12. This update amends the hedge accounting recognition and presentation requirements in ASC Topic 815 with the objectiveof improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financialstatements. The update also makes certain targeted improvements to simplify the application of the hedge accounting guidance and provides several transitionelections. We adopted ASU 2017-12 on October 1, 2017. The adoption of ASU 2017-12 did not have a material impact on our consolidated financial position,results of operations or cash flows.In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of ModificationAccounting, or ASU 2017-09. This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity toapply modification accounting in ASC Topic 718. We adopted ASU 2017-09 on January 1, 2018. The guidance has been and will be applied prospectively toawards modified on or after the adoption date. The adoption of ASU 2017-09 did not have any impact on our consolidated financial position, results of operationsor cash flows.In March 2017, the FASB issued Accounting Standards Update No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20):Premium Amortization on Purchased Callable Debt Securities, or ASU 2017-08. This update changes the amortization period for certain purchased callable debtsecurities held at a premium by shortening the amortization period for the premium to the earliest call date. Under current guidance, the premium is generallyamortized over the contractual life of the instrument. The amendments are to be applied on a modified retrospective basis through a cumulative-effect adjustmentdirectly to retained earnings as of the beginning of the period of adoption. We adopted ASU 2017-08 on January 1, 2019, and the adoption of this standard did nothave a material impact on our beginning retained earnings or on our consolidated financial position, results of operations or cash flows.In March 2017, the FASB issued Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation ofNet Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, or ASU 2017-07. This amendment requires entities to disaggregate the service costcomponent from the other components of the benefit cost and present the service cost component in the same income statement line item as other employeecompensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to bepresented in the income statement separately from the service cost component and outside a subtotal of income from operations. Certain of our defined benefitplans have previously been frozen, resulting in no annual service costs, and the remaining service costs for our non-frozen plan are not material. We adopted ASU2017-07 on January 1, 2018 and it did not have a material impact on our results of operations, cash flows or consolidated financial position.In December 2016, the FASB issued Accounting Standards Update No. 2016-20, Technical Corrections andImprovements to Topic 606, Revenue from Contracts with Customers. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue fromContracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. In April 2016, the FASB issued Accounting Standards Update No.2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, or ASU 2016-10. In March 2016, the FASBissued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (ReportingRevenue Gross verses Net). These updates provide additional clarification and implementation guidance on the previously issued Accounting Standards UpdateNo. 2014-09, Revenue from Contracts with Customers (Topic 606). Collectively, these updates require a company to recognize revenue when it transfers promisedgoods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.These updates supersede almost all existing revenue recognition guidance under GAAP, with certain exceptions, including an exception for our premium revenues,which are recorded on the Premiums line item on our consolidated statements of income and will continue to be accounted for in accordance with the provisions ofASC Topic 944, Financial Services - Insurance. Our administrative service and other contracts that are subject to these Accounting Standards Updates arerecorded in the Administrative fees and other revenue line item on our consolidated statements of income and were immaterial to our consolidated total operatingrevenue at the time of adoption. We adopted these standards on January 1, 2018 using the modified retrospective approach. The adoption of these standards did nothave a material impact on our beginning retained earnings, results of operations, cash flows or consolidated financial position.In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, or ASU 2016-18.This update amends ASC Topic 230 to add and clarify guidance on the classification and-88-Anthem, Inc.Notes to Consolidated Financial Statements (continued)presentation of restricted cash in the statement of cash flows. The guidance requires entities to show the changes in the total of cash, cash equivalents, restrictedcash and restricted cash equivalents in the statement of cash flows. We adopted ASU 2016-18 on January 1, 2018 using a retrospective approach. The adoption ofASU 2016-18 did not have a material impact on our consolidated statements of cash flows and did not impact our results of operations or consolidated financialposition.In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receiptsand Cash Payments, or ASU 2016-15. This update addresses the presentation and classification on the statement of cash flows for eight specific items, with theobjective of reducing existing diversity in practice in how certain cash receipts and cash payments are presented and classified. We adopted ASU 2016-15 onJanuary 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated statements of cash flows, results of operations or consolidatedfinancial position.In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to EmployeeShare-Based Payment Accounting, or ASU 2016-09. The amendments in this update simplify several aspects of accounting for and reporting on share-basedpayment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cashflows. We adopted the amendments in ASU 2016-09 on January 1, 2017. We continue to estimate forfeitures expected to occur in determining stock compensationrecognized in each period. We prospectively recognized tax benefits of $36, or $0.13 per diluted share, for the year ended December 31, 2017 in our consolidatedstatements of income, which previously would have been recorded to additional paid-in capital. In addition, we prospectively recognized excess tax benefits as anoperating activity within our consolidated statement of cash flows for the year ended December 31, 2017. Finally, we retrospectively recognized taxes paid on ouremployees’ behalf through the withholding of common stock as a financing activity within our consolidated statements of cash flows for the years endedDecember 31, 2017 and 2016.In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition andMeasurement of Financial Assets and Financial Liabilities, or ASU 2016-01. The amendments in ASU 2016-01 change the accounting for non-consolidated equityinvestments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. Additionally, ASU2016-01 simplifies the impairment assessment of equity investments without readily determinable fair values; requires entities to use the exit price when estimatingthe fair value of financial instruments; and modifies various presentation disclosure requirements for financial instruments. We adopted ASU 2016-01 on January1, 2018 as a cumulative-effect adjustment and reclassified $320 of unrealized gains on equity investments, net of tax, from accumulated other comprehensive lossto retained earnings on our consolidated balance sheet. Effective January 1, 2018, our results of operations include the changes in fair value of these financialinstruments.Recent Accounting Guidance Not Yet Adopted: In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740):Simplifying the Accounting for Income Taxes, or ASU 2019-12. The amendments in ASU 2019-12 remove certain exceptions to the general principles in ASCTopic 740. The amendments also clarify and amend existing guidance to improve consistent application. The amendments are effective for our annual reportingperiods beginning after December 15, 2020, with early adoption permitted. The transition method (retrospective, modified retrospective, or prospective basis)related to the amendments depends on the applicable guidance, and all amendments for which there is no transition guidance specified are to be applied on aprospective basis. We are currently evaluating the effects the adoption of ASU 2019-12 will have on our consolidated financial statements.In November 2019, the FASB issued Accounting Standards Update No. 2019-11, Codification Improvements to Topic 326, Financial Instruments - CreditLosses. In May 2019, the FASB issued Accounting Standards Update No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief.In April 2019, the FASB issued Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. In November 2018, the FASB issued Accounting Standards Update No. 2018-19,Codification Improvements to Topic 326, Financial Instruments - Credit Losses. These updates provide an option to irrevocably elect to measure certain individualfinancial assets at fair value instead of amortized cost and provide additional clarification and implementation guidance on certain aspects of the previously issuedAccounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU2016-13, and have the same effective date and transition requirements as ASU 2016-13. ASU 2016-13 introduces a current expected credit loss model formeasuring expected credit losses for certain types of financial instruments-89-Anthem, Inc.Notes to Consolidated Financial Statements (continued)held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. ASU 2016-13 replaces the current incurred lossmodel for measuring expected credit losses, requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit lossesrather than as reductions in the amortized cost of the securities and provides for additional disclosure requirements. ASU 2016-13 requires a cumulative-effectadjustment to the opening balance of retained earnings on the statement of financial position at the date of adoption and a prospective transition approach for debtsecurities for which an OTTI had been recognized before the adoption date. The effect of a prospective transition approach is to maintain the same amortized costbasis before and after the date of adoption. We adopted ASU 2016-13 on January 1, 2020, and the adoption did not have a material impact on our beginningretained earnings or on our consolidated financial position, results of operations or cash flows.In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, or ASU 2018-15. The amendments inASU 2018-15 require implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of thearrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance. The amendmentsalso require an entity to disclose the nature of its hosting arrangements and adhere to certain presentation requirements in its balance sheet, income statement andstatement of cash flows. We adopted ASU 2018-15 on January 1, 2020 using a prospective approach for all implementation costs incurred after the date ofadoption, and the adoption did not have an impact on our consolidated financial position, results of operations or cash flows.In August 2018, the FASB issued Accounting Standards Update No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General(Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, or ASU 2018-14. The amendments in ASU 2018-14 eliminate, add and modify certain disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendmentsare effective for our annual reporting periods beginning after December 15, 2020, with early adoption permitted. The guidance is to be applied on a retrospectivebasis to all periods presented. We are currently evaluating the effects the adoption of ASU 2018-14 will have on our disclosures.In August 2018, the FASB issued Accounting Standards Update No. 2018-12, Financial Services Insurance (Topic944): Targeted Improvements to the Accounting for Long-Duration Contracts, or ASU 2018-12. The amendments in ASU 2018-12 make changes to a variety ofareas to simplify or improve the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insuranceentity. The amendments require insurers to annually review the assumptions they make about their policyholders and update the liabilities for future policy benefitsif the assumptions change. The amendments also simplify the amortization of deferred contract acquisition costs and add new disclosure requirements about theassumptions insurers use to measure their liabilities and how they may affect future cash flows. The amendments in ASU 2018-12 will be effective for our interimand annual reporting periods beginning after December 15, 2021. The amendments related to the liability for future policy benefits for traditional and limited-payment contracts and deferred acquisition costs are to be applied to contracts in force as of the beginning of the earliest period presented, with an option to applysuch amendments retrospectively with a cumulative-effect adjustment to the opening balance of retained earnings as of the earliest period presented. Theamendments for market risk benefits are to be applied retrospectively. We are currently evaluating the effects the adoption of ASU 2018-12 will have on ourconsolidated financial position, results of operations, cash flows, and related disclosures.In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test forGoodwill Impairment, or ASU 2017-04. This update removes Step 2 of the goodwill impairment test under current guidance, which requires a hypotheticalpurchase price allocation. The new guidance requires an impairment charge to be recognized for the amount by which the carrying amount exceeds the reportingunit’s fair value. Upon adoption, the guidance is to be applied prospectively. We adopted ASU 2017-04 on January 1, 2020, and the adoption did not have animpact on our consolidated financial position, results of operations or cash flows.There were no other new accounting pronouncements that were issued or became effective during the year ended December 31, 2019 that had, or are expectedto have, a material impact on our financial position, results of operations, cash flows or financial statement disclosures.-90-Anthem, Inc.Notes to Consolidated Financial Statements (continued)3. Business AcquisitionsPending Acquisition of BeaconOn June 6, 2019, we announced our entrance into an agreement to acquire Beacon Health Options, Inc., or Beacon, the largest independently held behavioralhealth organization in the country. Beacon services approximately forty million individuals across all fifty states. This acquisition aligns with our strategy todiversify into health services and deliver both integrated solutions and care delivery models that personalize care for people with complex and chronic conditions.The acquisition is expected to close during the first quarter of 2020 and is subject to standard closing conditions and customary approvals.Acquisition of America’s 1st ChoiceOn February 15, 2018, we completed our acquisition of Freedom Health, Inc., Optimum HealthCare, Inc., America’s 1st Choice of South Carolina, Inc. andrelated entities, or collectively, America’s 1st Choice, a Medicare Advantage organization that offers HMO products, including Chronic Special Needs Plans andDual-Eligible Special Needs Plans under its Freedom Health and Optimum HealthCare brands in Florida and its America’s 1st Choice of South Carolina brand inSouth Carolina. At the time of acquisition, through its Medicare Advantage Plans, America’s 1st Choice served approximately one hundred and thirty-fivethousand members in twenty-five Florida and three South Carolina counties. This acquisition aligns with our plans for continued growth in the MedicareAdvantage and Special Needs populations.In accordance with FASB accounting guidance for business combinations, the consideration transferred was allocated to the fair value of America’s 1stChoice’s assets acquired and liabilities assumed, including identifiable intangible assets. The excess of the consideration transferred over the fair value of net assetsacquired resulted in goodwill of $1,029 at December 31, 2018, of which $333 was tax deductible. All of the goodwill was allocated to our Government Businesssegment. Goodwill recognized from the acquisition of America’s 1st Choice primarily relates to the future economic benefits arising from the assets acquired andis consistent with our stated intentions to strengthen our position and expand operations in the government sector to service Medicare Advantage and SpecialNeeds populations.The fair value of the net assets acquired from America’s 1st Choice includes $711 of other intangible assets at December 31, 2018, which primarily consist offinite-lived customer relationships with amortization periods ranging from 7 to 13 years. The results of operations of America’s 1st Choice are included in ourconsolidated financial statements within our Government Business segment for the periods following February 15, 2018. The pro forma effects of this acquisitionfor prior periods were not material to our consolidated results of operations.Acquisition of HealthSunOn December 21, 2017, we completed our acquisition of HealthSun Health Plans, Inc., or HealthSun, which at the time of acquisition served approximatelyforty thousand members in the state of Florida through its Medicare Advantage Plans, and which received a five-star rating from the Centers for Medicare &Medicaid Services. This acquisition aligns with our plans for continued growth in the Medicare Advantage and dual-eligible populations. The results of operationsof HealthSun are included in our consolidated financial statements within our Government Business segment for the periods following December 21, 2017. Thepro forma effects of this acquisition for prior periods were not material to our consolidated results of operations.Termination of Agreement and Plan of Merger with Cigna CorporationOn July 24, 2015, we and Cigna Corporation, or Cigna, announced that we entered into an Agreement and Plan of Merger, or Cigna Merger Agreement, datedas of July 23, 2015, to acquire all outstanding shares of Cigna. On May 12, 2017, we delivered to Cigna a notice terminating the Cigna Merger Agreement. Bothwe and Cigna have commenced litigation against the other seeking various actions and damages, including Cigna’s damage claim for a $1,850 termination feepursuant to the terms of the Cigna Merger Agreement. For additional information, see Note 13, “Commitments and Contingencies - Litigation and RegulatoryProceedings - Cigna Corporation Merger Litigation.”-91-Anthem, Inc.Notes to Consolidated Financial Statements (continued)4. InvestmentsA summary of current and long-term fixed maturity securities, available-for-sale, at December 31, 2019 and 2018 is as follows: Non-CreditComponent ofOTTIs Recognized inAccumulated OtherComprehensive Loss Cost orAmortizedCost GrossUnrealizedGains Gross Unrealized Losses EstimatedFair Value Less than12 Months 12 Monthsor Greater December 31, 2019 Fixed maturity securities: United States Government securities$524 $4 $(3) $— $525 $—Government sponsored securities136 5 — — 141 —States, municipalities and political subdivisions,tax-exempt4,592 262 (3) — 4,851 —Corporate securities8,870 339 (9) (15) 9,185 (3)Residential mortgage-backed securities3,654 87 (6) (3) 3,732 —Commercial mortgage-backed securities84 2 — — 86 —Other securities1,648 21 (3) (5) 1,661 —Total fixed maturity securities$19,508 $720 $(24) $(23) $20,181 $(3)December 31, 2018 Fixed maturity securities: United States Government securities$414 $3 $— $(1) $416 $—Government sponsored securities108 1 — (1) 108 —States, municipalities and political subdivisions,tax-exempt4,716 91 (3) (19) 4,785 —Corporate securities8,189 33 (170) (115) 7,937 (3)Residential mortgage-backed securities2,769 31 (3) (47) 2,750 —Commercial mortgage-backed securities69 — — (2) 67 —Other securities1,115 14 (8) (5) 1,116 —Total fixed maturity securities$17,380 $173 $(184) $(190) $17,179 $(3)-92-Anthem, Inc.Notes to Consolidated Financial Statements (continued)For fixed maturity securities in an unrealized loss position at December 31, 2019 and 2018, the following table summarizes the aggregate fair values and grossunrealized losses by length of time those securities have continuously been in an unrealized loss position. Less than 12 Months 12 Months or Greater Number ofSecurities EstimatedFair Value GrossUnrealizedLoss Number ofSecurities EstimatedFair Value GrossUnrealizedLoss(Securities are whole amounts) December 31, 2019 Fixed maturity securities: United States Government securities27 $250 $(3) 2 $1 $—Government sponsored securities14 12 — 3 1 —States, municipalities and political subdivisions,tax-exempt114 306 (3) 14 11 —Corporate securities386 558 (9) 224 286 (15)Residential mortgage-backed securities321 635 (6) 189 237 (3)Commercial mortgage-backed securities1 3 — 4 8 —Other securities166 415 (3) 113 358 (5)Total fixed maturity securities1,029 $2,179 $(24) 549 $902 $(23)December 31, 2018 Fixed maturity securities: United States Government securities5 $47 $— 25 $79 $(1)Government sponsored securities8 11 — 24 31 (1)States, municipalities and political subdivisions,tax-exempt177 295 (3) 604 1,032 (19)Corporate securities2,185 4,503 (170) 1,220 2,072 (115)Residential mortgage-backed securities259 383 (3) 816 1,458 (47)Commercial mortgage-backed securities6 11 — 19 37 (2)Other securities193 599 (8) 93 237 (5)Total fixed maturity securities2,833 $5,849 $(184) 2,801 $4,946 $(190)The amortized cost and fair value of fixed maturity securities at December 31, 2019, by contractual maturity, are shown below. Expected maturities may differfrom contractual maturities because the issuers of the securities may have the right to prepay obligations. AmortizedCost EstimatedFair ValueDue in one year or less$532 $534Due after one year through five years5,367 5,503Due after five years through ten years5,633 5,864Due after ten years4,238 4,462Mortgage-backed securities3,738 3,818Total fixed maturity securities$19,508 $20,181-93-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Equity SecuritiesA summary of current and long-term marketable equity securities at December 31, 2019 and 2018 is as follows: December 31, 2019 December 31, 2018Equity Securities: Exchange traded funds$44 $2Fixed maturity mutual funds643 557Common equity securities267 654Private equity securities85 313Total$1,039 $1,526Investment IncomeThe major categories of net investment income for the years ended December 31, 2019, 2018 and 2017 are as follows:201920182017Fixed maturity securities$721$681$614Equity securities10086116Cash equivalents645125Other149193153Investment income1,0341,011908Investment expense(29)(41)(41)Net investment income$1,005$970$867-94-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Investment GainsNet realized investment gains/losses and the net change in unrealized appreciation/depreciation on investments for the years ended December 31, 2019, 2018and 2017 are as follows: 2019 2018 2017Net realized gains (losses): Fixed maturity securities: Gross realized gains from sales$125 $85 $137Gross realized losses from sales(59) (116) (55)Net realized gains (losses) from sales of fixed maturity securities66 (31) 82Equity securities: Gross realized gains147 77 140Gross realized losses(84) (276) (17)Net realized gains (losses) on equity securities63 (199) 123Other investments: Gross realized gains from sales3 27 —Gross realized losses from sales(1) — (5)Net realized gains (losses) from sales of other investments2 27 (5)Net realized gains (losses) on investments131 (203) 200 Other-than-temporary impairment losses recognized in income: Fixed maturity securities(13) (9) (4)Equity securities— — (15)Other investments(34) (17) (14)Other-than-temporary impairment losses recognized in income(47) (26) (33) Change in net unrealized gains (losses) on investments: Fixed maturity securities874 (529) 156Equity securities— — 111Other investments— 5 (10)Total change in net unrealized gains (losses) on investments874 (524) 257Deferred income tax (expense) benefit(194) 106 (84)Change in net unrealized gains (losses) on investments680 (418) 173 Net realized gains (losses) on investments, other-than-temporary impairment losses recognizedin income and change in net unrealized gains (losses) on investments$764 $(647) $340The gains and losses related to equity securities for the years ended December 31, 2019 and 2018 are as follows: 2019 2018Net realized gains (losses) recognized on equity securities $63 $(199)Less: Net realized (gains) losses recognized on equity securities sold during the period (39) 57Unrealized gains (losses) recognized in income on equity securities still held at December 31 $24 $(142)-95-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A primary objective in the management of our fixed maturity and equity portfolios is to maximize total return relative to underlying liabilities and respectiveliquidity needs. In achieving this goal, assets may be sold to take advantage of market conditions or other investment opportunities as well as tax considerations.Sales will generally produce realized gains and losses. In the ordinary course of business, we may sell securities at a loss for a number of reasons, including, butnot limited to: (i) changes in the investment environment; (ii) expectations that the fair value could deteriorate further; (iii) desire to reduce exposure to an issuer oran industry; (iv) changes in credit quality; or (v) changes in expected cash flow.Proceeds from sales, maturities, calls or redemptions of fixed maturity securities and the related gross realized gains and gross realized losses for the yearsended December 31 are as follows: 2019 2018 2017Proceeds$8,351 $8,380 $9,780Gross realized gains125 85 137Gross realized losses(59) (116) (55)A significant judgment in the valuation of investments is the determination of when an other-than-temporary decline in value has occurred. We follow aconsistent and systematic process for recognizing impairments on securities that sustain other-than-temporary declines in value. We have established a committeeresponsible for the impairment review process. The decision to impair a security incorporates both quantitative criteria and qualitative information. The impairmentreview process considers a number of factors including, but not limited to: (i) the extent to which the fair value is less than book value, (ii) the financial conditionand near term prospects of the issuer, (iii) our intent and ability to retain impaired investments for a period of time sufficient to allow for any anticipated recovery infair value, (iv) our intent to sell or the likelihood that we will need to sell a fixed maturity security before recovery of its amortized cost basis, (v) whether thedebtor is current on interest and principal payments, (vi) the reasons for the decline in value (i.e., credit event compared to liquidity, general credit spread widening,currency exchange rate or interest rate factors) and (vii) general market conditions and industry or sector specific factors. For securities that are deemed to be other-than-temporarily impaired, the security is adjusted to fair value and the resulting losses are recognized in the consolidated statements of income. The new cost basisof the impaired security is not increased for future recoveries in fair value.Other-than-temporary impairments recorded in 2019, 2018 and 2017 were primarily the result of the continued credit deterioration on specific issuers in thebond markets. There were no individually material OTTI losses on investments by issuer during 2019, 2018 or 2017.Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securitiesand the level of uncertainty related to changes in the value of investment securities, it is possible that changes in these risk factors in the near term could have amaterial adverse impact on our results of operations or shareholders’ equity.The changes in the amount of the credit component of OTTI losses on fixed maturity securities recognized in income, for which a portion of the OTTI losseswas recognized in other comprehensive income, was not material for the years ended December 31, 2019, 2018 or 2017.At December 31, 2019 and 2018, there were no investments that exceeded 10% of shareholders’ equity and no fixed maturity investments that did not produceincome during the years then ended.As of December 31, 2019 and 2018, we had committed approximately $999 and $873, respectively, to future capital calls from various third-party investmentsin exchange for an ownership interest in the related entities.At December 31, 2019 and 2018, securities with carrying values of approximately $505 and $487, respectively, were deposited by our insurance subsidiariesunder requirements of regulatory authorities.-96-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Securities Lending ProgramsThe fair value of the collateral received at the time of the securities lending transactions amounted to $351 and $604 at December 31, 2019 and 2018,respectively. The value of the collateral represented 103% and 102% of the market value of the securities on loan at December 31, 2019 and 2018, respectively.The remaining contractual maturities of our securities lending transactions at December 31, 2019 is as follows: Overnight andContinuousSecurities lending transactions Cash$291United States Government securities59Other securities1Total$351-97-Anthem, Inc.Notes to Consolidated Financial Statements (continued)5. Derivative Financial InstrumentsWe primarily invest in the following types of derivative financial instruments: interest rate swaps, futures, forward contracts, put and call options, swaptions,embedded derivatives and warrants. We also enter into master netting agreements which reduce credit risk by permitting net settlement of transactions. AtDecember 31, 2019 we had received collateral of $22 related to our derivative financial instruments. As of December 31, 2018 we had posted collateral of $1related to our derivative financial instruments.A summary of the aggregate contractual or notional amounts and estimated fair values related to derivative financial instruments at December 31, 2019 and2018 is as follows: Contractual/NotionalAmount Balance Sheet Location Estimated Fair Value Asset (Liability)December 31, 2019 Hedging instruments Interest rate swaps - fixed to floating$1,200 Other assets/other liabilities $22 $(1) Non-hedging instruments Interest rate swaps1 Equity securities — —Futures134 Equity securities 1 —Subtotal non-hedging135 Subtotal non-hedging 1 —Total derivatives$1,335 Total derivatives 23 (1) Amounts netted (1) 1 Net derivatives $22 $— December 31, 2018 Hedging instruments Interest rate swaps - fixed to floating$1,200 Other assets/other liabilities $7 $(11) Non-hedging instruments Interest rate swaps164 Equity securities 4 (1)Options100 Other assets/other liabilities — —Futures415 Equity securities 5 (5)Subtotal non-hedging679 Subtotal non-hedging 9 (6)Total derivatives$1,879 Total derivatives 16 (17) Amounts netted (14) 14 Net derivatives $2 $(3)-98-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Fair Value HedgesWe have entered into various interest rate swap contracts to convert a portion of our interest rate exposure on our long-term debt from fixed rates to floatingrates. The floating rates payable on all of our fair value hedges are benchmarked to the London Interbank Offered Rate, or LIBOR. A summary of our outstandingfair value hedges at December 31, 2019 and 2018 is as follows:Type of Fair Value Hedges YearEnteredInto Outstanding Notional Amount Interest RateReceived Expiration Date 2019 2018 Interest rate swap 2018 $50 $50 4.101% September 1, 2027Interest rate swap 2018 450 450 3.300 January 15, 2023Interest rate swap 2018 90 90 4.350 August 15, 2020Interest rate swap 2017 50 50 4.350 August 15, 2020Interest rate swap 2015 200 200 4.350 August 15, 2020Interest rate swap 2014 150 150 4.350 August 15, 2020Interest rate swap 2013 10 10 4.350 August 15, 2020Interest rate swap 2012 200 200 4.350 August 15, 2020Total notional amount outstanding $1,200 $1,200 The following amounts were recorded on our consolidated balance sheets related to cumulative basis adjustments for fair value hedges at December 31, 2019and 2018:Balance Sheet Classification in Which HedgedItem is Included Carrying Amount of Hedged Liability Cumulative Amount of Fair Value Hedging AdjustmentIncluded in the Carrying Amount of the Hedged Liability 2019 2018 2019 2018Current portion of long term-debt $1,598 $849 $22 $7Long-term debt 17,787 17,217 (1) (11)Cash Flow HedgesWe have entered into a series of forward starting pay fixed interest rate swaps with the objective of eliminating the variability of cash flows in the interestpayments on anticipated future financings. During 2019, swaps in the notional amount of $425 were terminated. We paid an aggregate of $35 to the swap counterparties upon termination.The unrecognized loss for all expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $262 and $246 atDecember 31, 2019 and 2018, respectively. As of December 31, 2019, the total amount of amortization over the next twelve months for all cash flow hedges isestimated to increase interest expense by approximately $15. No amounts were excluded from effectiveness testing.-99-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A summary of the effect of cash flow hedges in accumulated other comprehensive loss for the years ended December 31, 2019, 2018 and 2017 is as follows: HedgeLoss Recognizedin OtherComprehensiveIncome (Loss) Income StatementLocation ofLossReclassificationfrom AccumulatedOtherComprehensive Loss Hedge LossReclassified fromAccumulatedOtherComprehensiveLossType of Cash Flow Hedge Year ended December 31, 2019 Forward starting pay fixed swaps $(35) Interest expense $(15)Year ended December 31, 2018 Forward starting pay fixed swaps (33) Interest expense (14)Year ended December 31, 2017 Forward starting pay fixed swaps (112) Interest expense (7)Forward starting pay fixed swaps Net realized gains (losses) on financialinstruments (7)Income Statement Relationship of Fair Value and Cash Flow HedgingA summary of the relationship between the effects of fair value and cash flow hedges on the total amount of income and expense presented in our consolidatedstatements of income for the years ended December 31, 2019, 2018 and 2017 is as follows: Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow HedgingRelationships 2019 2018 2017 Net RealizedGains (Losses) onFinancialInstruments InterestExpense Net RealizedGains (Losses) onFinancialInstruments InterestExpense Net RealizedGains (Losses) onFinancialInstruments InterestExpenseTotal amount of income or expense in the incomestatement in which the effects of fair value or cash flowhedges are recorded$114 $(746) $(180) $(753) $145 $(739) Gain (loss) on fair value hedging relationships: Interest rate swaps: Hedged items— 2 — — — —Derivatives designated as hedging instruments— (2) — — — — Loss on cash flow hedging relationships: Forward starting pay fixed swaps: Amount of loss reclassified from accumulated othercomprehensive loss into net income— (15) — (14) — (7)Amount of loss reclassified from accumulated othercomprehensive loss into net income due toineffectiveness and missed forecasted transactions— — — — (7) —-100-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Non-Hedging DerivativesA summary of the effect of non-hedging derivatives on our consolidated statements of income for the years ended December 31, 2019, 2018 and 2017 is asfollows:Type of Non-hedging Derivatives Income Statement Location ofGain (Loss) Recognized DerivativeGain (Loss)RecognizedYear ended December 31, 2019 Interest rate swaps Net realized gains (losses) on financial instruments $1Options Net realized gains (losses) on financial instruments (8)Futures Net realized gains (losses) on financial instruments (10)Total $(17)Year ended December 31, 2018 Interest rate swaps Net realized gains (losses) on financial instruments $14Options Net realized gains (losses) on financial instruments 1Futures Net realized gains (losses) on financial instruments 8Total $23Year ended December 31, 2017 Interest rate swaps Net realized gains (losses) on financial instruments $(9)Options Net realized gains (losses) on financial instruments (36)Futures Net realized gains (losses) on financial instruments (3)Total $(48)6. Fair ValueAssets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs usedto measure their fair value. Level inputs, as defined by FASB guidance for fair value measurements and disclosures, are as follows:Level Input: Input Definition:Level I Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.Level II Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data atthe measurement date.Level III Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at themeasurement date.The following methods, assumptions and inputs were used to determine the fair value of each class of the following assets and liabilities recorded at fair valuein the consolidated balance sheets:Cash equivalents: Cash equivalents primarily consist of highly rated money market funds with maturities of three months or less, and are purchased daily atpar value with specified yield rates. Due to the high ratings and short-term nature of the funds, we designate all cash equivalents as Level I.Fixed maturity securities, available-for-sale: Fair values of available-for-sale fixed maturity securities are based on quoted market prices, where available.These fair values are obtained primarily from third-party pricing services, which generally use Level I or Level II inputs for the determination of fair value tofacilitate fair value measurements and disclosures. Level II securities primarily include corporate securities, securities from states, municipalities and politicalsubdivisions, mortgage-backed securities, United States Government securities and certain other asset-backed securities. For securities not actively traded, thepricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable inthe markets for similar securities. We have controls-101-Anthem, Inc.Notes to Consolidated Financial Statements (continued)in place to review the pricing services’ qualifications and procedures used to determine fair values. In addition, we periodically review the pricing services’ pricingmethodologies, data sources and pricing inputs to ensure the fair values obtained are reasonable. Inputs that are often used in the valuation methodologies include,but are not limited to, broker quotes, benchmark yields, credit spreads, default rates and prepayment speeds. We also have certain fixed maturity securities,primarily corporate debt securities, that are designated Level III securities. For these securities, the valuation methodologies may incorporate broker quotes ordiscounted cash flow analyses using assumptions for inputs such as expected cash flows, benchmark yields, credit spreads, default rates and prepayment speeds thatare not observable in the markets.Equity securities: Fair values of equity securities are generally designated as Level I and are based on quoted market prices. For certain equity securities,quoted market prices for the identical security are not always available, and the fair value is estimated by reference to similar securities for which quoted prices areavailable. These securities are designated Level II. We also have certain equity securities, including private equity securities, for which the fair value is estimatedbased on each security’s current condition and future cash flow projections. Such securities are designated Level III. The fair values of these private equitysecurities are generally based on either broker quotes or discounted cash flow projections using assumptions for inputs such as the weighted-average cost of capital,long-term revenue growth rates and earnings before interest, taxes, depreciation and amortization, and/or revenue multiples that are not observable in the markets.Other invested assets, current: Other invested assets, current include securities held in rabbi trusts that are classified as trading. These securities are designatedLevel I securities, as fair values are based on quoted market prices.Securities lending collateral: Fair values of securities lending collateral are based on quoted market prices, where available. These fair values are obtainedprimarily from third-party pricing services, which generally use Level I or Level II inputs for the determination of fair value, to facilitate fair value measurementsand disclosures.Derivatives: Fair values are based on the quoted market prices by the financial institution that is the counterparty to the derivative transaction. Weindependently verify prices provided by the counterparties using valuation models that incorporate market observable inputs for similar derivative transactions.Derivatives are designated as Level II securities.In addition, the following methods and assumptions were used to determine the fair value of each class of pension benefit plan assets and other benefit planassets not defined above (see Note 10, “Retirement Benefits,” for fair values of benefit plan assets):Mutual funds: Fair values are based on quoted market prices, which represent the net asset value, or NAV, of the shares held.Common and collective trusts: Fair values of common/collective trusts that replicate traded money market funds are based on cost, which approximates fairvalue. Fair values of common/collective trusts that invest in securities are valued at the NAV of the shares held, where the trust applies fair value measurements tothe underlying investments to determine the NAV.Alternative investments: Fair values are estimated based on the plan’s proportionate share of the undistributed partners’ capital as reported in audited financialstatements of the partnership.Contract with insurance company: Fair value of the contract in the insurance company general investment account is determined by the insurance companybased on the fair value of the underlying investments of the account.Investment in DOL 103-12 trust: Fair value is based on the plan’s proportionate share of the fair value of investments held by the trust, qualified as aDepartment of Labor Regulation 2520.103-12 entity, or DOL 103-12 trust, as reported in the audited financial statements of the trust, where the trustee applies fairvalue measurements to the underlying investments of the trust.Life insurance contracts: Fair value is based on the cash surrender value of the policies as reported by the insurer.-102-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A summary of fair value measurements by level for assets and liabilities measured at fair value on a recurring basis at December 31, 2019 and 2018 is asfollows: Level I Level II Level III TotalDecember 31, 2019 Assets: Cash equivalents$2,015 $— $— $2,015Fixed maturity securities, available-for-sale: United States Government securities— 525 — 525Government sponsored securities— 141 — 141States, municipalities and political subdivisions, tax-exempt— 4,851 — 4,851Corporate securities— 8,882 303 9,185Residential mortgage-backed securities— 3,730 2 3,732Commercial mortgage-backed securities— 86 — 86Other securities— 1,654 7 1,661Total fixed maturity securities, available-for-sale— 19,869 312 20,181Equity securities: Exchange traded funds44 — — 44Fixed maturity mutual funds— 643 — 643Common equity securities236 31 — 267Private equity securities— — 85 85Total equity securities280 674 85 1,039Other invested assets, current13 — — 13Securities lending collateral— 353 — 353Derivatives— 23 — 23Total assets$2,308 $20,919 $397 $23,624Liabilities: Derivatives$—$(1)$—$(1)Total liabilities$— $(1) $— $(1) December 31, 2018 Assets: Cash equivalents$1,815 $— $— $1,815Fixed maturity securities, available-for-sale: United States Government securities— 416 — 416Government sponsored securities— 108 — 108States, municipalities and political subdivisions, tax-exempt— 4,785 — 4,785Corporate securities2 7,648 287 7,937Residential mortgage-backed securities— 2,744 6 2,750Commercial mortgage-backed securities— 67 — 67Other securities— 1,099 17 1,116Total fixed maturity securities, available-for-sale2 16,867 310 17,179Equity securities: Exchange traded funds2 — — 2Fixed maturity mutual funds— 557 — 557Common equity securities601 53 — 654Private equity securities— — 313 313Total equity securities603610313 1,526Other invested assets, current21 — — 21Securities lending collateral314 290 — 604Derivatives— 16 — 16Total assets$2,755 $17,783 $623 $21,161Liabilities: Derivatives$— $(17) $— $(17)Total liabilities$— $(17) $— $(17)-103-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level III inputs for the years endedDecember 31, 2019, 2018 and 2017 is as follows: CorporateSecurities ResidentialMortgage-backedSecurities OtherSecurities EquitySecurities TotalYear ended December 31, 2019 Beginning balance at January 1, 2019$287 $6 $17 $313 $623Total gains (losses): Recognized in net income(7) — — (6) (13)Recognized in accumulated other comprehensive loss3 — — — 3Purchases122 — 2 65 189Sales(22) — — (79) (101)Settlements(71) (2) (6) — (79)Transfers into Level III— — 3 2 5Transfers out of Level III(9) (2) (9) (210) (230)Ending balance at December 31, 2019$303 $2 $7 $85 $397Change in unrealized losses included in net income related to assets still heldat December 31, 2019$— $— $— $6 $6 Year ended December 31, 2018 Beginning balance at January 1, 2018$229 $5 $16 $287 $537Total (losses) gains: Recognized in net income1 — — (229) (228)Recognized in accumulated other comprehensive loss(5) — — — (5)Purchases120 2 18 290 430Sales(33) — (1) (35) (69)Settlements(88) (1) (10) — (99)Transfers into Level III65 — 9 — 74Transfers out of Level III(2) — (15) — (17)Ending balance at December 31, 2018$287 $6 $17 $313 $623Change in unrealized losses included in net income related to assets still heldat December 31, 2018$— $— $— $30 $30 Year ended December 31, 2017 Beginning balance at January 1, 2017$239 $11 $43 $188 $481Total (losses) gains: Recognized in net income(1) — — — (1)Recognized in accumulated other comprehensive loss3 — — 11 14Purchases88 4 36 89 217Sales(48) (5) (1) (1) (55)Settlements(64) (2) (7) — (73)Transfers into Level III15315— 33Transfers out of Level III(3) (6) (70) — (79)Ending balance at December 31, 2017$229 $5 $16 $287 $537Change in unrealized losses included in net income related to assets still heldat December 31, 2017$(3) $— $— $— $(3)There were no individually material transfers into or out of Level III during the years ended December 31, 2019, 2018 or 2017.Our valuation policy is determined by members of our treasury and accounting departments. Whenever possible, our policy is to obtain quoted market pricesin active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values areestimated using discounted cash flow analyses, broker quotes or other valuation techniques. These techniques are significantly affected by our assumptions,-104-Anthem, Inc.Notes to Consolidated Financial Statements (continued)including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. Our valuationpolicy is generally to obtain quoted prices for each security from third-party pricing services, which are derived through recently reported trades for identical orsimilar securities making adjustments through the reporting date based upon available market observable information. As we are responsible for the determinationof fair value, we perform analysis on the prices received from the pricing services to determine whether the prices are reasonable estimates of fair value. Thisanalysis is performed by our internal treasury personnel who are familiar with our investment portfolios, the pricing services engaged and the valuation techniquesand inputs used. Our analysis includes procedures such as a review of month-to-month price fluctuations and price comparisons to secondary pricing services.There were no adjustments to quoted market prices obtained from the pricing services during the years ended December 31, 2019, 2018 or 2017.Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis butare subject to fair value adjustments only in certain circumstances. As disclosed in Note 3, “Business Acquisitions,” we completed our acquisition of America’s 1stChoice on February 15, 2018. The net assets acquired in our acquisition of America’s 1st Choice and resulting goodwill and other intangible assets were recordedat fair value primarily using Level III inputs. The majority of America’s 1st Choice assets acquired and liabilities assumed were recorded at their carrying values asof the respective date of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and otherintangible assets acquired in our acquisition of America’s 1st Choice were internally estimated based on the income approach. The income approach estimates fairvalue based on the present value of the cash flows that the assets could be expected to generate in the future. We developed internal estimates for the expected cashflows and discount rate in the present value calculation. Other than the assets acquired and liabilities assumed in our acquisition of America’s 1st Choice describedabove, there were no other material assets or liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2019 or 2018.In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fairvalues for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the consolidated balancesheets.Non-financial instruments such as real estate, property and equipment, other current assets, deferred income taxes, intangible assets and certain financialinstruments, such as policy liabilities, are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine ourunderlying economic value.The carrying amounts reported in the consolidated balance sheets for cash, accrued investment income, premium receivables, self-funded receivables, otherreceivables, income taxes receivable, unearned income, accounts payable and accrued expenses, security trades pending payable, securities lending payable andcertain other current liabilities approximate fair value because of the short-term nature of these items. These assets and liabilities are not listed in the table below.The following methods and assumptions were used to estimate the fair value of each class of financial instrument that is recorded at its carrying value on theconsolidated balance sheets:Other invested assets, long-term: Other invested assets, long-term primarily include our investments in limited partnerships, joint ventures and other non-controlled corporations, as well as the cash surrender value of corporate-owned life insurance policies. Investments in limited partnerships, joint ventures and othernon-controlled corporations are carried at our share in the entities’ undistributed earnings, which approximates fair value. The carrying value of corporate-ownedlife insurance policies represents the cash surrender value as reported by the respective insurer, which approximates fair value.Short-term borrowings: The fair value of our short-term borrowings is based on quoted market prices for the same or similar debt, or if no quoted marketprices were available, on the current market interest rates estimated to be available to us for debt of similar terms and remaining maturities.Long-term debt - commercial paper: The carrying amount for commercial paper approximates fair value, as the underlying instruments have variable interestrates at market value.Long-term debt - senior unsecured notes and surplus notes: The fair values of our notes are based on quoted market prices in active markets for the same orsimilar debt, or, if no quoted market prices are available, on the current market observable rates estimated to be available to us for debt of similar terms andremaining maturities.-105-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Long-term debt—convertible debentures: The fair value of our convertible debentures is based on the quoted market price in the active private market in whichthe convertible debentures trade.A summary of the estimated fair values by level of each class of financial instrument that is recorded at its carrying value on our consolidated balance sheetsat December 31, 2019 and 2018 is as follows: CarryingValue Estimated Fair Value Level I Level II Level III TotalDecember 31, 2019 Assets: Other invested assets, long-term$4,228 $— $— $4,228 $4,228Liabilities: Debt: Short-term borrowings700 — 700 — 700Commercial paper400 — 400 — 400Notes18,840 — 20,470 — 20,470Convertible debentures145 — 904 — 904 December 31, 2018 Assets: Other invested assets, long-term$3,726 $— $— $3,726 $3,726Liabilities: Debt: Short-term borrowings1,145 — 1,145 — 1,145Commercial paper697 — 697 — 697Notes17,178 — 17,145 — 17,145Convertible debentures191 — 1,030 — 1,030-106-Anthem, Inc.Notes to Consolidated Financial Statements (continued)7. Income TaxesThe components of deferred income taxes at December 31, 2019 and 2018 are as follows: 2019 2018Deferred tax assets relating to: Retirement benefits$211 $226Accrued expenses280 301Insurance reserves114 96Net operating loss carryforwards4 7Bad debt reserves82 104State income tax11 32Deferred compensation22 20Unrealized losses on securities— 41Other77 72Total deferred tax assets801 899Deferred tax liabilities relating to: Investment basis difference78 52Unrealized gains on securities153 —Intangible assets: Trademarks and state Medicaid licenses1,529 1,529Customer, provider and hospital relationships239 290Internally developed software and other amortization differences528 461Retirement benefits194 183Debt discount19 27State deferred tax77 105Depreciation and amortization48 47Other163 165Total deferred tax liabilities3,028 2,859Net deferred tax liability$2,227 $1,960Included as a component of the state deferred tax liabilities above is a net valuation allowance for states net operating losses of $45 and $95, respectively, atDecember 31, 2019 and 2018.Significant components of the provision for income taxes for the years ended December 31, 2019, 2018 and 2017 consist of the following: 2019 2018 2017Current tax expense: Federal$1,019 $1,128 $1,356State and local84 78 39Total current tax expense1,103 1,206 1,395Deferred tax expense (benefit)75 112 (1,274)Total income tax expense$1,178 $1,318 $121-107-Anthem, Inc.Notes to Consolidated Financial Statements (continued)State and local current tax expense is reported gross of federal benefit, and includes amounts related to audit settlements, uncertain tax positions, state taxcredits and true up of prior years’ tax. Such items are included in multiple lines in the following rate reconciliation table on a net of federal tax basis.A reconciliation of income tax expense recorded in the consolidated statements of income and amounts computed at the statutory federal income tax rate forthe years ended December 31, 2019, 2018 and 2017 is as follows: 2019 2018 2017 Amount Percent Amount Percent Amount PercentAmount at statutory rate$1,257 21.0 % $1,064 21.0 % $1,387 35.0 %State and local income taxes net of federal tax expense/benefit138 2.3 63 1.2 (2) (0.1)Tax exempt interest and dividends received deduction(24) (0.4) (27) (0.5) (58) (1.4)HIP Fee— — 324 6.4 — —Tax Cuts and Jobs Act— — (28) (0.6) (1,108) (27.9)Other, net(193) (3.2) (78) (1.5) (98) (2.5)Total income tax expense$1,178 19.7 % $1,318 26.0 % $121 3.1 %During the year ended December 31, 2018, we recognized income tax expense of $324, or $1.23 per diluted share, as a result of the non-tax deductibility ofthe HIP Fee payment. On December 22, 2017, the federal government enacted the Tax Cuts and Jobs Act, which contains significant changes to corporate taxation,including, but not limited to, reducing the U.S. federal corporate income tax rate from 35% to 21% and modifying or limiting many business deductions. AtDecember 31, 2018, we completed our accounting for the tax effects of enactment of the Tax Cuts and Jobs Act and there was no material change to our 2017provisional amount. In addition we reclassified, for our interim and annual reporting periods beginning on January 1, 2018, $91 of stranded tax effects fromaccumulated other comprehensive loss to retained earnings on our consolidated balance sheets.During the year ended December 31, 2017, we recognized an income tax benefit of $1,108, or $4.14 per diluted share, as a result of the provisional amountrecorded related to the remeasurement of our deferred tax balance as a result of the enactment of the Tax Cuts and Jobs Act. The HIP Fee payment was suspendedfor 2017.The change in the carrying amount of gross unrecognized tax benefits from uncertain tax positions for the years ended December 31, 2019 and 2018 is asfollows: 2019 2018Balance at January 1$241 $190Additions based on: Tax positions related to current year1 35Tax positions related to prior years— 50Reductions based on: Tax positions related to prior years(63) (31)Settlements with taxing authorities(33) (3)Balance at December 31$146 $241The table above excludes interest, net of related tax benefits, which is treated as income tax expense (benefit) under our accounting policy. The interest isincluded in the amounts described in the following paragraph.The amount of unrecognized tax benefits that would impact our effective tax rate in future periods, if recognized, was $140 and $237 at December 31, 2019and 2018, respectively. Also included in the table above, at December 31, 2019, is $2 that would be recognized as an adjustment to additional paid-in capital,which would not affect our effective tax rate. In-108-Anthem, Inc.Notes to Consolidated Financial Statements (continued)addition to the contingent liabilities included in the table above, during 2017 we filed protective state income tax refund claims of approximately $310. There wereno equivalent protective state income tax refund claims filed in 2019 or 2018.For the year ended December 31, 2019, tax loss contingencies recorded in a prior year were released; therefore, we recognized a net interest benefit of $11. Forthe years ended December 31, 2018 and 2017, we recognized a net interest expense of $15 and $3, respectively. We had accrued approximately $26 and $37 forthe payment of interest at December 31, 2019 and 2018, respectively.As of December 31, 2019, as further described below, certain tax years remain open to examination by the Internal Revenue Service, or IRS, and various stateand local authorities. In addition, we continue to discuss certain industry issues with the IRS. As a result of these examinations and discussions, we have recordedamounts for uncertain tax positions. It is anticipated that the amount of unrecognized tax benefits will change in the next twelve months due to possible settlementsof audits and changes in temporary items. However, the ultimate resolution of these items is dependent on the completion of negotiations with various taxingauthorities. While it is difficult to determine when other tax settlements will actually occur, it is reasonably possible that one could occur in the next twelve monthsand our unrecognized tax benefits could change within a range of approximately $(9) to $(102). We are a member of the IRS Compliance Assurance Process, or CAP. The objective of CAP is to reduce taxpayer burden and uncertainty while assuring theIRS of the accuracy of tax returns prior to filing, thereby reducing or eliminating the need for post-filing examinations.As of December 31, 2019, the IRS examination of our 2019 and 2017 tax years continues to be in process.In certain states, we pay premium taxes in lieu of state income taxes. Premium taxes are reported in selling, general and administrative expense.At December 31, 2019, we had unused federal tax net operating loss carryforwards of approximately $8 to offset future taxable income. The loss carryforwardsexpire in the years 2032 through 2037. During 2019, 2018 and 2017, federal income taxes paid totaled $1,403, $738 and $1,503, respectively.8. Property and EquipmentA summary of property and equipment at December 31, 2019 and 2018 is as follows: 2019 2018Computer software, purchased and internally developed$4,314 $3,532Computer equipment, furniture and other equipment1,264 1,266Leasehold improvements715 563Building and improvements169 169Land and improvements17 18Property and equipment, gross6,479 5,548Accumulated depreciation and amortization(3,346) (2,813)Property and equipment, net$3,133 $2,735Depreciation expense for 2019, 2018 and 2017 was $147, $124 and $111, respectively. Amortization expense on computer software and leaseholdimprovements for 2019, 2018 and 2017 was $528, $528 and $490, respectively, which includes amortization expense on computer software, both purchased andinternally developed, for 2019, 2018 and 2017 of $450, $465 and $435, respectively. Capitalized costs related to the internal development of software of $3,939and $3,226 at December 31, 2019 and 2018, respectively, are reported with computer software.-109-Anthem, Inc.Notes to Consolidated Financial Statements (continued)9. Goodwill and Other Intangible AssetsA summary of the change in the carrying amount of goodwill for our segments (see Note 19, “Segment Information”) for 2019 and 2018 is as follows: Commercialand SpecialtyBusiness GovernmentBusiness Other TotalBalance as of January 1, 2018$11,818 $7,402 $11 $19,231Acquisitions— 1,285 — 1,285Adjustments(267) 266 (11) (12)Balance as of December 31, 201811,551 8,953 — 20,504Adjustments— (674) 670 (4)Balance as of December 31, 2019$11,551 $8,279 $670 $20,500Accumulated impairment as of December 31, 2019$(41) $— $— $(41)The increase in goodwill in 2018 was primarily due to the acquisition of America’s 1st Choice in February 2018. For additional information regarding thisacquisition, see Note 3, “Business Acquisitions”.Goodwill adjustments in 2019 include certain reclassifications made for changes in segment reporting. The adjustments in 2018 include measurement periodadjustments for HealthSun as well as certain reclassifications made for changes in segment reporting. For additional information, see Note 19, “SegmentInformation”.As required by FASB guidance, we completed annual impairment tests of existing goodwill and other intangible assets with indefinite lives during 2019, 2018and 2017. We perform these annual impairment tests during the fourth quarter. FASB guidance also requires interim impairment testing to be performed whenpotential impairment indicators exist. These tests involve the use of estimates related to the fair value of goodwill and intangible assets with indefinite lives andrequire a significant degree of management judgment and the use of subjective assumptions. Qualitative testing procedures include assessing our financialperformance, macroeconomic conditions, industry and market considerations, various asset specific factors and entity specific events. For quantitative testing, thefair values are estimated using the projected income and market valuation approaches, incorporating Level III internal estimates for inputs, including, but notlimited to, revenue projections, income projections, cash flows and discount rates. We did not incur any impairment losses in 2019, 2018 or 2017, as the estimatedfair values of our reporting units were substantially in excess of their carrying values.The components of other intangible assets as of December 31, 2019 and 2018 are as follows: 2019 2018GrossCarryingAmount AccumulatedAmortization NetCarryingAmount GrossCarryingAmount AccumulatedAmortization NetCarryingAmountIntangible assets with finite lives: Customer relationships$4,500 $(3,469) $1,031 $4,495 $(3,185) $1,310Provider and hospital relationships228 (98) 130 228 (85) 143Other352 (129) 223 352 (88) 264Total5,080 (3,696) 1,384 5,075 (3,358) 1,717Intangible assets with indefinite lives: Blue Cross and Blue Shield and other trademarks6,299 — 6,299 6,299 — 6,299State Medicaid licenses991 — 991 991 — 991Total7,290 — 7,290 7,290 — 7,290Other intangible assets$12,370 $(3,696) $8,674 $12,365 $(3,358) $9,007-110-Anthem, Inc.Notes to Consolidated Financial Statements (continued)As of December 31, 2019, the estimated amortization expense for each of the five succeeding years is as follows: 2020, $290; 2021, $244; 2022, $195; 2023,$162; and 2024, $85.10. Retirement Benefits We sponsor various non-contributory employee defined benefit plans through certain subsidiaries. The Anthem Cash Balance Plan A and the Anthem Cash Balance Plan B are cash balance pension plans covering certain eligible employees of the affiliatedcompanies that participate in these plans. Effective January 1, 2006, benefits were curtailed, with the result that most participants stopped accruing benefits butcontinue to earn interest on benefits accrued prior to the curtailment. Certain participants subject to collective bargaining and certain other participants who metgrandfathering rules continued to accrue benefits. Participants who did not receive credits and/or benefit accruals were included in the Anthem Cash Balance PlanA, while employees who were still receiving credits and/or benefits participated in the Anthem Cash Balance Plan B. Effective January 1, 2019, benefits under theAnthem Cash Balance Plan B were curtailed. All grandfathered participants no longer have pay credits added to their accounts but continue to earn interest onexisting account balances. Participants continue to earn years of pension service for vesting purposes. Several pension plans acquired through various corporatemergers and acquisitions were merged into these plans in prior years.The Employees’ Retirement Plan of Blue Cross of California, or the BCC Plan, is a defined benefit pension plan that covers eligible employees of Blue Crossof California who are covered by a collective bargaining agreement. Effective January 1, 2007, benefits were curtailed under the BCC Plan with the result that noBlue Cross of California employees hired or rehired after December 31, 2006 are eligible to participate in the BCC Plan.All of the plans’ assets consist primarily of equity securities, fixed maturity securities, investment funds and cash. The funding policies for all plans are tocontribute amounts at least sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, as amended,or ERISA, as amended by the Pension Protection Act of 2006, and in accordance with income tax regulations, plus such additional amounts as are necessary toprovide assets sufficient to meet the benefits to be paid to plan participants.We use a December 31 measurement date for determining benefit obligations and the fair value of plan assets. The following tables disclose consolidated “pension benefits,” which include the defined benefit pension plans described above, and consolidated “otherbenefits,” which include postretirement health and welfare benefits including medical, vision and dental benefits offered to certain employees. Calculations werecomputed using assumptions at the December 31 measurement dates.The reconciliation of the benefit obligation is as follows: Pension Benefits Other Benefits 2019 2018 2019 2018Benefit obligation at beginning of year$1,743 $1,872 $431 $524Service cost— 8 1 1Interest cost62 55 15 15Actuarial loss (gain)200 (70) 5 (57)Benefits paid(125) (122) (29) (52)Benefit obligation at end of year$1,880 $1,743 $423 $431-111-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The changes in the fair value of plan assets are as follows: Pension Benefits Other Benefits 2019 2018 2019 2018Fair value of plan assets at beginning of year$1,818 $2,012 $336 $356Actual return on plan assets329 (76) 55 (17)Employer contributions4 4 5 49Benefits paid(125) (122) (29) (52)Fair value of plan assets at end of year$2,026 $1,818 $367 $336 The net amount included in the consolidated balance sheets is as follows: Pension Benefits Other Benefits 2019 2018 2019 2018Noncurrent assets$212 $134 $— $—Current liabilities(6) (6) — —Noncurrent liabilities(60) (53) (56) (95)Net amount at December 31$146 $75 $(56) $(95) The net amounts included in accumulated other comprehensive loss that have not been recognized as components of net periodic benefit costs are as follows: Pension Benefits Other Benefits 2019 2018 2019 2018Net actuarial loss$734 $751 $25 $58Prior service cost (credit)1 1 (19) (34)Net amount before tax at December 31$735 $752 $6 $24The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be reclassified from accumulated other comprehensiveloss into net periodic benefit costs over the next year are $22 and $0, respectively. The estimated net actuarial loss and prior service credit for postretirementbenefit plans that will be reclassified from accumulated other comprehensive loss into net periodic benefit costs over the next year are $0 and $7, respectively. The accumulated benefit obligation for the defined benefit pension plans was $1,878 and $1,742 at December 31, 2019 and 2018, respectively. As of December 31, 2019, certain pension plans had accumulated benefit obligations in excess of plan assets. For those same plans, the projected benefitobligation was also in excess of plan assets. Such plans had a combined projected benefit obligation, accumulated benefit obligation and fair value of plan assets of$104, $102 and $39, respectively. The weighted-average assumptions used in calculating the benefit obligations for all plans are as follows: Pension Benefits Other Benefits 2019 2018 2019 2018Discount rate3.11% 4.15% 2.93% 4.04%Rate of compensation increase3.00% 3.00% 3.00% 3.00%Expected rate of return on plan assets7.33% 7.44% 7.00% 7.00%-112-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The components of net periodic benefit credit included in the consolidated statements of income are as follows: 2019 2018 2017Pension Benefits Service cost$— $8 $10Interest cost62 55 66Expected return on assets(138) (147) (147)Recognized actuarial loss17 22 22Settlement loss9 5 7Net periodic benefit credit$(50) $(57) $(42) Other Benefits Service cost$1 $1 $1Interest cost15 15 21Expected return on assets(22) (24) (23)Recognized actuarial loss2 3 11Amortization of prior service credit(12) (12) (13)Net periodic benefit credit$(16) $(17) $(3)During the years ended December 31, 2019, 2018 and 2017, we incurred total settlement losses of $9, $5 and $7, respectively, as lump-sum paymentsexceeded the service cost and interest cost components of net periodic benefit cost for certain of our plans. The weighted-average assumptions used in calculating the net periodic benefit cost for all plans are as follows: 2019 2018 2017Pension Benefits Discount rate4.15% 3.44% 3.77%Rate of compensation increase3.00% 3.00% 3.00%Expected rate of return on plan assets7.44% 7.83% 7.95% Other Benefits Discount rate4.04% 3.42% 3.82%Rate of compensation increase3.00% 3.00% 3.00%Expected rate of return on plan assets7.00% 7.00% 7.00%The assumed healthcare cost trend rates used to measure the expected cost of pre-Medicare (those who are not currently eligible for Medicare benefits) otherbenefits at our December 31, 2019 measurement date was 7.00% for 2020 with a gradual decline to 4.50% by the year 2028. The assumed healthcare cost trendrates used to measure the expected cost of post-Medicare (those who are currently eligible for Medicare benefits) other benefits at our December 31, 2019measurement date was 6.00% for 2020 with a gradual decline to 4.50% by the year 2028. These estimated trend rates are subject to change in the future. Thehealthcare cost trend rate assumption affects the amounts reported. For example, an increase in the assumed healthcare cost trend rate of one percentage pointwould increase the postretirement benefit obligation as of December 31, 2019 by $23 and would increase service and interest costs by $1. Conversely, a decrease inthe assumed healthcare cost trend rate of one percentage point would decrease the postretirement benefit obligation as of December 31, 2019 by $20 and woulddecrease service and interest costs by $1. Plan assets include a diversified mix of equity securities, investment grade fixed maturity securities and other types of investments across a range of sectorsand levels of capitalization to maximize long-term return for a prudent level of risk. The-113-Anthem, Inc.Notes to Consolidated Financial Statements (continued)weighted-average target allocation for pension benefit plan assets is 44% equity securities, 48% fixed maturity securities, and 8% to all other types ofinvestments. Equity securities primarily include a mix of domestic securities, foreign securities and mutual funds invested in equities. Fixed maturity securitiesprimarily include treasury securities, corporate bonds and asset-backed investments issued by corporations and the U.S. government. Other types of investmentsprimarily include insurance contracts designed specifically for employee benefit plans and partnership interests, collective trusts that replicate money market fundsand insurance contracts designed specifically for employee benefit plans. As of December 31, 2019, there were no significant concentrations of investments in thepension benefit assets or other benefit assets. No plan assets were invested in Anthem common stock.Pension benefit assets and other benefit assets recorded at fair value are categorized based upon the level of judgment associated with the inputs used tomeasure their fair value. The fair values of our pension benefit assets and other benefit assets by asset category and level inputs at December 31, 2019, excluding cash, investmentincome receivable and amounts due to/from brokers, resulting in a net asset of $64, are as follows (see Note 6, “Fair Value,” for additional information regardingthe definition of level inputs): Level I Level II Level III TotalDecember 31, 2019 Pension Benefit Assets: Equity securities: U.S. securities$626 $— $— $626Foreign securities197 — — 197Mutual funds38 — — 38Fixed maturity securities: Government securities— 252 — 252Corporate securities— 339 — 339Asset-backed securities— 163 — 163Other types of investments: Alternative investments— 136 52 188Insurance company contracts— — 175 175Total pension benefit assets$861 $890 $227 $1,978 Other Benefit Assets: Equity securities: U.S. securities$8 $— $— $8Foreign securities2 — — 2Mutual funds25 — — 25Fixed maturity securities: Government securities— 2 — 2Corporate securities— 4 — 4Asset-backed securities— 3 — 3Other types of investments: Alternative investments— 1 — 1Life insurance contracts— — 294 294Investment in DOL 103-12 trust— 12 — 12Total other benefit assets$35 $22 $294 $351-114-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The fair values of our pension benefit assets and other benefit assets by asset category and level inputs at December 31, 2018, excluding cash, investmentincome receivable and amounts due to/from brokers, resulting in a net asset of $69, are as follows: Level I Level II Level III TotalDecember 31, 2018 Pension Benefit Assets: Equity securities: U.S. securities$488 $— $— $488Foreign securities147 — — 147Mutual funds36 — — 36Fixed maturity securities: Government securities— 248 — 248Corporate securities— 347 — 347Asset-backed securities— 153 — 153Other types of investments: Alternative investments— — 187 187Insurance company contracts— — 166 166Total pension benefit assets$671 $748 $353 $1,772 Other Benefit Assets: Equity securities: U.S. securities$9 $— $— $9Foreign securities3 — — 3Mutual funds27 — — 27Fixed maturity securities: Government securities— 3 — 3Corporate securities— 5 — 5Asset-backed securities— 5 — 5Other types of investments: Alternative investments— — 2 2Life insurance contracts— — 249 249Investment in DOL 103-12 trust— 10 — 10Total other benefit assets$39 $23 $251 $313-115-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A reconciliation of the beginning and ending balances of plan assets measured at fair value using Level III inputs for the years ended December 31, 2019,2018 and 2017 is as follows: AlternativeInvestments InsuranceCompanyContracts LifeInsuranceContracts TotalYear ended December 31, 2019 Beginning balance at January 1, 2019$189 $166 $249 $604Actual return on plan assets relating to assets still held at the reporting date28 12 45 85Purchases24 6 — 30Sales(52) (9) — (61)Transfers out of Level III(137) — — (137)Ending balance at December 31, 2019$52 $175 $294 $521 Year ended December 31, 2018 Beginning balance at January 1, 2018$221 $173 $269 $663Actual return on plan assets relating to assets still held at the reporting date(10) (7) (15) (32)Purchases— 8 — 8Sales(22) (8) (5) (35)Ending balance at December 31, 2018$189 $166 $249 $604 Year ended December 31, 2017 Beginning balance at January 1, 2017$114 $173 $238 $525Actual return on plan assets relating to assets still held at the reporting date20 (1) 31 50Purchases126 10 — 136Sales(39) (9) — (48)Ending balance at December 31, 2017$221 $173 $269 $663During 2019, we transferred one of our alternative investments from Level III to Level II based on the inputs used to measure fair value. There were no othertransfers into or out of Level III during the years ended December 31, 2019, 2018 or 2017.Our current funding strategy is to fund an amount at least equal to the minimum required funding as determined under ERISA with consideration of maximumtax deductible amounts. We may elect to make discretionary contributions up to the maximum amount deductible for income tax purposes. For the years endedDecember 31, 2019, 2018 and 2017, no material contributions were necessary to meet ERISA required funding levels. However, during each of the years endedDecember 31, 2019, 2018 and 2017, we made tax deductible discretionary contributions to the pension benefit plans of $4. Employer contributions to other benefitplans represent discretionary contributions and do not include payments to retirees for current benefits.-116-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Our estimated future payments for pension benefits and postretirement benefits, which reflect expected future service, as appropriate, are as follows: PensionBenefits OtherBenefits2020$126 $372021126 362022127 352023124 342024120 332025 - 2029567 140In addition to the defined benefit plans, we maintain the Anthem 401(k) Plan, which is a qualified defined contribution plan covering substantially allemployees. Voluntary employee contributions are matched by us subject to certain limitations. Contributions made by us totaled $201, $211 and $142 during2019, 2018 and 2017, respectively. Contributions in 2018 include approximately $58 for a one time contribution made to employees following the enactment of theTax Cuts and Jobs Act.11. Medical Claims PayableA reconciliation of the beginning and ending balances for medical claims payable, by segment (see Note 19, “Segment Information”), for the year endedDecember 31, 2019 is as follows: Commercial& SpecialtyBusiness GovernmentBusiness TotalGross medical claims payable, beginning of year$2,586 $4,680 $7,266Ceded medical claims payable, beginning of year(10) (24) (34)Net medical claims payable, beginning of year2,576 4,656 7,232Net incurred medical claims: Current year25,942 52,753 78,695Prior years redundancies(190) (310) (500)Total net incurred medical claims25,752 52,443 78,195Net payments attributable to: Current year medical claims23,026 47,268 70,294Prior years medical claims2,277 4,242 6,519Total net payments25,303 51,510 76,813Net medical claims payable, end of year3,025 5,589 8,614Ceded medical claims payable, end of year14 19 33Gross medical claims payable, end of year$3,039 $5,608 $8,647-117-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A reconciliation of the beginning and ending balances for medical claims payable, by segment, for the year ended December 31, 2018 is as follows: Commercial& SpecialtyBusiness GovernmentBusiness TotalGross medical claims payable, beginning of year$3,383 $4,431 $7,814Ceded medical claims payable, beginning of year(78) (27) (105)Net medical claims payable, beginning of year3,305 4,404 7,709Business combinations and purchase adjustments— 199 199Net incurred medical claims: Current year24,094 45,487 69,581Prior years redundancies(456) (474) (930)Total net incurred medical claims23,638 45,013 68,651Net payments attributable to: Current year medical claims21,633 41,115 62,748Prior years medical claims2,734 3,845 6,579Total net payments24,367 44,960 69,327Net medical claims payable, end of year2,576 4,656 7,232Ceded medical claims payable, end of year10 24 34Gross medical claims payable, end of year$2,586 $4,680 $7,266A reconciliation of the beginning and ending balances for medical claims payable, by segment, for the year ended December 31, 2017 is as follows: Commercial& SpecialtyBusiness GovernmentBusiness TotalGross medical claims payable, beginning of year$3,247 $4,409 $7,656Ceded medical claims payable, beginning of year(521) (18) (539)Net medical claims payable, beginning of year2,726 4,391 7,117Business combinations and purchase adjustments— 76 76Net incurred medical claims: Current year29,467 40,910 70,377Prior years redundancies(462) (671) (1,133)Total net incurred medical claims29,005 40,239 69,244Net payments attributable to: Current year medical claims26,250 36,673 62,923Prior years medical claims2,176 3,629 5,805Total net payments28,426 40,302 68,728Net medical claims payable, end of year3,305 4,404 7,709Ceded medical claims payable, end of year78 27 105Gross medical claims payable, end of year$3,383 $4,431 $7,814Amounts incurred related to prior years vary from previously estimated liabilities as the claims are ultimately settled. Liabilities at any period-end arecontinually reviewed and re-estimated as information regarding actual claims payments, or runout, becomes known. This information is compared to theoriginally established year end liability. Negative amounts reported for incurred medical claims related to prior years result from claims being settled for amountsless than originally-118-Anthem, Inc.Notes to Consolidated Financial Statements (continued)estimated. The prior year redundancy of $500 shown above for the year ended December 31, 2019 represents an estimate based on paid claim activity fromJanuary 1, 2019 to December 31, 2019. Medical claim liabilities are usually described as having a “short tail,” which means that they are generally paid withintwelve months of the member receiving service from the provider. Accordingly, the majority of the $500 redundancy relates to claims incurred in calendar year2018.The following table provides a summary of the two key assumptions having the most significant impact on our incurred but not paid liability estimates for theyears ended December 31, 2019, 2018 and 2017, which are the completion and trend factors. These two key assumptions can be influenced by utilization levels,unit costs, mix of business, benefit plan designs, provider reimbursement levels, processing system conversions and changes, claim inventory levels, claimprocessing patterns, claim submission patterns and operational changes resulting from business combinations. Favorable Developmentsby Changes in Key Assumptions 2019 2018 2017Assumed trend factors$(325) $(515) $(631)Assumed completion factors(175) (415) (502)Total$(500) $(930) $(1,133)The favorable development recognized in 2019 resulted primarily from trend factors in late 2018 developing more favorably than originally expected as wellas a smaller but significant contribution from completion factor development.The favorable development recognized in 2018 and 2017 resulted from trend and completion factors developing more favorably than originally expected. The reconciliation of net incurred medical claims to benefit expense included in the consolidated statements of income is as follows: Years Ended December 31 2019 2018 2017Net incurred medical claims: Commercial & Specialty Business $25,752 $23,638 $29,005Government Business 52,443 45,013 40,239Total net incurred medical claims 78,195 68,651 69,244Quality improvement and other claims expense 3,591 3,244 2,992Benefit expense $81,786 $71,895 $72,236Incurred claims development, net of reinsurance, for the Commercial & Specialty Business for the years ended December 31, 2019, 2018 and 2017 is asfollows:Commercial & Specialty Business Cumulative Incurred Claims and Allocated Claim AdjustmentExpenses, Net of Reinsurance 2017 2018 Claim Years (Unaudited) (Unaudited) 20192017 & Prior $31,731 $31,275 $31,2412018 24,094 23,9382019 25,942Total $81,121-119-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Paid claims development, net of reinsurance, for the Commercial & Specialty Business for the years ended December 31, 2019, 2018 and 2017 is as follows:Commercial & Specialty Business Cumulative Paid Claims and Allocated Claim AdjustmentExpenses, Net of Reinsurance 2017 2018 Claim Years (Unaudited) (Unaudited) 20192017 & Prior $28,426 $31,160 $31,2102018 21,633 23,8602019 23,026Total $78,096At December 31, 2019, the total of incurred but not reported liabilities plus expected development on reported claims for the Commercial & SpecialtyBusiness was $31, $78 and $2,916 for the claim years 2017 and prior, 2018 and 2019, respectively.At December 31, 2019, the cumulative number of reported claims for the Commercial & Specialty Business was 121, 89 and 84 for the claim years 2017 andprior, 2018 and 2019, respectively.Incurred claims development, net of reinsurance, for the Government Business as of and for the years ended December 31, 2019, 2018 and 2017 is as follows:Government Business Cumulative Incurred Claims and Allocated Claim AdjustmentExpenses, Net of Reinsurance 2017 2018 Claim Years (Unaudited) (Unaudited) 20192017 & Prior $44,706 $44,232 $44,1202018 45,686 45,4882019 52,753Total $142,361Paid claims development, net of reinsurance, for the Government Business as of and for the years ended December 31, 2019, 2018 and 2017 is as follows:Government Business Cumulative Paid Claims and Allocated Claim AdjustmentExpenses, Net of Reinsurance 2017 2018 Claim Years (Unaudited) (Unaudited) 20192017 & Prior $40,302 $44,147 $44,1042018 41,115 45,4002019 47,268Total $136,772At December 31, 2019, the total of incurred but not reported liabilities plus expected development on reported claims for the Government Business was $16,$89 and $5,484 for the claim years 2017 and prior, 2018 and 2019, respectively.At December 31, 2019, the cumulative number of reported claims for the Government Business was 221, 216 and 230 for the claim years 2017 and prior, 2018and 2019, respectively.The information about incurred claims development, paid claims development and cumulative number of reported claims for the years ended December 31,2017 and 2018, for both the Commercial & Specialty Business and Government Business, is unaudited and presented as supplementary information.-120-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The cumulative number of reported claims for each claim year, for both the Commercial & Specialty Business and Government Business, have beendeveloped using historical data captured by our claim payment systems. The provided claim amounts are not a precise tool for understanding utilization of medicalservices. They could be impacted by a variety of factors including changes in provider billing practices, provider reimbursement arrangements, mix of services,benefit design or processing systems. The cumulative number of reported claims has been provided to comply with FASB accounting standards and is not used bymanagement in its claims analysis. Our cumulative number of reported claims may not be comparable to similar measures reported by other health benefitscompanies.The reconciliation of the Commercial & Specialty Business and Government Business incurred and paid claims development information for the three yearsended December 31, 2019, reflected in the tables above, to the consolidated ending balance for medical claims payable included in the consolidated balance sheet,as of December 31, 2019, is as follows: Commercial& SpecialtyBusiness GovernmentBusiness TotalCumulative incurred claims and allocated claim adjustment expenses, net of reinsurance$81,121 $142,361 $223,482Less: Cumulative paid claims and allocated claim adjustment expenses, net of reinsurance78,096 136,772 214,868Net medical claims payable, end of year3,025 5,589 8,614Ceded medical claims payable, end of year14 19 33Insurance lines other than short duration— 195 195Gross medical claims payable, end of year$3,039 $5,803 $8,84212. DebtShort-term BorrowingsWe are a member, through certain subsidiaries, of the Federal Home Loan Bank of Indianapolis, the Federal Home Loan Bank of Cincinnati and the FederalHome Loan Bank of Atlanta, or collectively, the FHLBs. As a member we have the ability to obtain short-term cash advances, subject to certain minimumcollateral requirements. At December 31, 2019 and 2018, $650 and $645, respectively, were outstanding under our short-term FHLB borrowings. Theseoutstanding short-term FHLB borrowings at December 31, 2019 and 2018 had fixed interest rates of 1.664% and 2.458%, respectively.Through certain subsidiaries, we have entered into multiple 364-day lines of credit, or the Subsidiary Credit Facilities, with separate lenders for generalcorporate purposes. The Subsidiary Credit Facilities provide combined credit of up to $600. The interest rate on each line of credit is based on the LIBOR rate plusa predetermined rate. Our ability to borrow under the lines of credit is subject to compliance with certain covenants. At December 31, 2019 and 2018, $50 and$500, respectively, were outstanding under our Subsidiary Credit Facilities.-121-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Long-term DebtThe carrying value of long-term debt at December 31, 2019 and 2018 consists of the following: 2019 2018Senior unsecured notes: 2.250%, due 2019$— $8492.500%, due 2020899 8974.350%, due 2020699 6883.700%, due 2021699 6982.950%, due 2022747 7473.125%, due 2022847 8463.300%, due 20231,013 1,0003.350%, due 2024846 8463.500%, due 2024795 7942.375%, due 2025845 —3.650%, due 20271,590 1,5894.101%, due 20281,253 1,2502.875%, due 2029819 —5.950%, due 2034334 3345.850%, due 2036396 3966.375%, due 2037366 3665.800%, due 2040124 1244.625%, due 2042888 8874.650%, due 2043987 9864.650%, due 2044792 7915.100%, due 2044594 5944.375%, due 20471,386 1,3864.550%, due 2048838 8383.700%, due 2049811 —4.850%, due 2054247 247Surplus note: 9.000%, due 202725 25Senior convertible debentures: 2.750%, due 2042145 191Variable rate debt: Commercial paper program400 697Total long-term debt19,385 18,066Current portion of long-term debt(1,598) (849)Long-term debt, less current portion$17,787 $17,217All debt is a direct obligation of Anthem, Inc., except for the surplus note, the FHLB borrowings and the Subsidiary Credit Facilities.We generally issue senior unsecured notes, or Notes, for long-term borrowing purposes. Certain of these Notes may have a call feature that allows us toredeem the Notes at any time at our option and/or a put feature that allows a Note holder to-122-Anthem, Inc.Notes to Consolidated Financial Statements (continued)redeem the Notes upon the occurrence of both a change in control event and a downgrade of the Notes below an investment grade rating.On September 9, 2019, we issued $850 aggregate principal amount of 2.375% Notes due 2025, or the 2025 Notes, $825 aggregate principal amount of2.875% Notes due 2029, or the 2029 Notes, and $825 aggregate principal amount of 3.700% Notes due 2049, or the 2049 Notes, under our shelf registrationstatement. Interest on the 2025 Notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing January 15, 2020. Interest on the2029 Notes and the 2049 Notes is payable semi-annually in arrears on March 15 and September 15 each year, commencing March 15, 2020. The proceeds wereused for working capital and general corporate purposes, including, but not limited to, the repurchase of our common stock pursuant to our share repurchaseprogram, repayment of short-term and long-term debt and to fund acquisitions.On August 15, 2019, we repaid, at maturity, the $850 outstanding balance of our 2.250% senior unsecured notes.On July 16, 2018, we repaid, at maturity, the $650 outstanding balance of our 2.300% senior unsecured notes. On January 15, 2018, we repaid, at maturity,the $625 outstanding balance of our 1.875% senior unsecured notes.On May 1, 2018, we settled our Equity Units stock purchase contracts at a settlement rate of 0.2412 shares of our common stock, using a market valueformula set forth in the Equity Units purchase contracts. This resulted in the issuance of approximately 6 shares. We had issued 25 Equity Units on May 12, 2015,pursuant to an underwriting agreement dated May 6, 2015, in an aggregate principal amount of $1,250. Each Equity Unit had a stated amount of $50 (wholedollars) and consisted of a purchase contract obligating the holder to purchase a certain number of shares of our common stock on May 1, 2018, subject to earliertermination or settlement, for a price in cash of $50 (whole dollars); and a 5% undivided beneficial ownership interest in $1,000 (whole dollars) principal amount ofour 1.900% remarketable subordinated notes, or RSNs, due 2028. On March 2, 2018, we remarketed the RSNs and used the proceeds to purchase U.S. Treasurysecurities that were pledged to secure the stock purchase obligations of the holders of the Equity Units. The purchasers of the RSNs transferred the RSNs to us inexchange for $1,250 principal amount of our 4.101% senior notes due 2028, or the 2028 Notes, and a cash payment of $4. We canceled the RSNs upon receipt andrecognized a loss on extinguishment of debt of $18. At the remarketing, we also issued $850 aggregate principal amount of 4.550% notes due 2048, or the 2048Notes, under our shelf registration statement. We used the proceeds from the 2048 Notes for working capital and general corporate purposes. Interest on the 2028Notes and the 2048 Notes is payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2018.On November 21, 2017, we issued $900 aggregate principal amount of 2.500% Notes due 2020, or the 2020 Notes, $750 aggregate principal amount of2.950% Notes due 2022, or the 2022 Notes, $850 aggregate principal amount of 3.350% Notes due 2024, or the 2024 Notes, $1,600 aggregate principal amount of3.650% Notes due 2027, or the 2027 Notes and $1,400 aggregate principal amount of 4.375% Notes due 2047, or the 2047 Notes, under our shelf registrationstatement. Interest on the 2020 Notes is payable semi-annually in arrears on May 21 and November 21 of each year, commencing on May 21, 2018. Interest on the2022 Notes, the 2024 Notes, the 2027 Notes and the 2047 Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing onJune 1, 2018. The net proceeds were used to fund the acquisitions of HealthSun and America’s 1st Choice; and redemption of the Tender Notes, discussed below.On November 14, 2017, we initiated a cash tender offer to purchase any and all of our 7.000% Notes due 2019, or the Any and All Notes, and certain of our5.950% Notes due 2034, 5.850% Notes due 2036, 6.375% Notes due 2037, 5.800% Notes due 2040 and 5.100% Notes due 2044, or the Maximum Tender OfferNotes, and collectively with the Any and All Notes, the Tender Notes. On November 21, 2017, we repurchased $185 aggregate principal amount of the Any andAll Notes, plus applicable premium and accrued and unpaid interest, for cash totaling $199. On November 30, 2017, we repurchased $836 aggregate principalamount of the Maximum Tender Offer Notes, plus applicable premium and accrued and unpaid interest, for cash totaling $1,095. We recognized a loss onextinguishment of debt of $266 for the repurchase of the Tender Notes.On December 14, 2017, we redeemed the $255 remaining outstanding principal balance of our 7.000% Notes due 2019, plus applicable premium for earlyredemption and accrued and unpaid interest to the redemption date, for cash totaling $275. We recognized a loss on extinguishment of debt of $14 for therepurchase of these Notes.-123-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The surplus note is an unsecured obligation of Anthem Insurance Companies, Inc., or Anthem Insurance, a wholly owned subsidiary, and is subordinate inright of payment to all of Anthem Insurance’s existing and future indebtedness. Any payment of interest or principal on the surplus note may be made only with theprior approval of the Indiana Department of Insurance, or IDOI, and only out of capital and surplus funds of Anthem Insurance that the IDOI determines to beavailable for the payment under Indiana insurance laws.We have a senior revolving credit facility, or the 5-Year Facility, with a group of lenders for general corporate purposes. In June 2019, we amended andrestated the credit agreement for the 5-Year Facility to, among other things, extend the maturity date from August 2020 to June 2024 and decrease the amount ofcredit available from $3,500 to $2,500. In June 2019, we also entered into a 364-day senior revolving credit facility, or 364-Day Facility, with a group of lendersfor general corporate purposes, which provides for credit in the amount of $1,000 and matures in June 2020. There were no amounts outstanding under the 5-YearFacility or the 364-Day Facility at any time during the years ended December 31, 2019 or 2018.We have an authorized commercial paper program of up to $3,500, the proceeds of which may be used for general corporate purposes. In August 2019, weincreased the amount available under the commercial paper program from $2,500 to $3,500. At December 31, 2019, we had $400 outstanding under ourcommercial paper program with a weighted-average interest rate of 1.8528%. At December 31, 2018, we had $697 outstanding under our commercial paperprogram with a weighted-average interest rate of 2.8270%. Commercial paper borrowings have been classified as long-term debt at December 31, 2019 and 2018,as our general practice and intent is to replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for anuninterrupted period extending for more than one year, and we have the ability to redeem our commercial paper with borrowings under the senior revolving creditfacilities described above.During the year ended December 31, 2015, we entered into a bridge facility commitment letter and a joinder agreement, and a term loan facility, to finance aportion of the consideration under the now terminated Cigna Merger Agreement. In January 2017, we reduced the size of the bridge facility from $22,500 to$19,500 and extended the termination date under the Cigna Merger Agreement, as well as the availability of commitments under the bridge facility and term loanfacility, to April 30, 2017. We recorded $108 of interest expense related to the amortization of the bridge loan facility and other related fees during the year endedDecember 31, 2017. The commitment of the lenders to provide the bridge facility and term loan facility expired on April 30, 2017.Convertible DebenturesOn October 9, 2012, we issued $1,500 of senior convertible debentures, or the Debentures, in a private offering to qualified institutional buyers pursuant toRule 144A under the Securities Act of 1933, as amended, or the Securities Act. The Debentures are governed by an indenture dated as of October 9, 2012 betweenus and The Bank of New York Mellon Trust Company, N.A., as trustee, or the Indenture. The Debentures bear interest at a rate of 2.750% per year, payable semi-annually in arrears in cash on April 15 and October 15 of each year, and mature on October 15, 2042, unless earlier redeemed, repurchased or converted into sharesof common stock at the applicable conversion rate. The Debentures also have a contingent interest feature that will require us to pay additional interest based oncertain thresholds and for certain events, as defined in the Indenture, beginning on October 15, 2022.Holders may convert their Debentures at their option prior to the close of business on the business day immediately preceding April 15, 2042, only under thefollowing circumstances: (1) during any fiscal quarter if the last reported sale price of our common stock for at least 20 trading days during a period of 30consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on eachapplicable trading day; (2) during the five business day period after any 10 consecutive trading day period, or the measurement period, in which the trading priceper $1,000 (whole dollars) principal amount of Debentures for each trading day of that measurement period was less than 98% of the product of the last reportedsale price of our common stock and the applicable conversion rate on each such day; (3) if we call any or all of the Debentures for redemption, at any time prior tothe close of business on the third scheduled trading day prior to the redemption date; or (4) upon the occurrence of specified corporate events, as defined in theIndenture. On and after April 15, 2042 and until the close of business on the third scheduled trading day immediately preceding the Debentures’ maturity date ofOctober 15, 2042, holders may convert their Debentures into common stock at any time irrespective of the preceding circumstances. The Debentures areredeemable at our option at any time on or after October 20, 2022, upon the occurrence of certain events, as defined in the Indenture.-124-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Upon conversion of the Debentures, we will deliver cash up to the aggregate principal amount of the Debentures converted. With respect to any conversionobligation in excess of the aggregate principal amount of the Debentures converted, we have the option to settle the excess with cash, shares of our common stockor a combination thereof based on a daily conversion value, determined in accordance with the Indenture. The initial conversion rate for the Debentures was13.2319 shares of our common stock per Debenture, which represented a 25% conversion premium based on the closing price of $60.46 per share of our commonstock on October 2, 2012 (the date the Debentures’ terms were finalized) and is equivalent to an initial conversion price of $75.575 per share of our common stock.During the year ended December 31, 2019, we repurchased $15 of the aggregate principal balance of the Debentures. In addition, $57 aggregate principalamount of the Debentures was surrendered for conversion by certain holders in accordance with the terms and provisions of the Indenture. We elected to settle theexcess of the principal amount of the repurchases and conversions with cash for total payments of $273. We recognized a loss on the extinguishment of debt relatedto the Debentures of $2, based on the fair values of the debt on the repurchase and conversion settlement dates. During the year ended December 31, 2018, $109aggregate principal amount of the Debentures was surrendered for conversion. We elected to settle the excess of the principal amount of the conversions with cashfor total payments of $402. We recognized a gain on the extinguishment of debt related to the debentures of $7. During the year ended December 31, 2017, $117aggregate principal amount of the Debentures was surrendered for conversion. We elected to settle the excess of the principal amount of the conversions with cashfor total payments of $345 and recognized a loss on the extinguishment of debt related to the debentures of $2.As of December 31, 2019, our common stock was last traded at a price of $302.03 per share. If the remaining Debentures had been converted or matured atDecember 31, 2019, we would have been obligated to pay the principal of the Debentures plus an amount in cash or shares equal to $691. The Debentures andunderlying shares of our common stock have not been and will not be registered under the Securities Act, or any state securities laws, and may not be offered orsold in the United States absent registration or an applicable exemption from registration requirements.We have accounted for the Debentures in accordance with the cash conversion guidance in FASB guidance for debt with conversion and other options. As aresult, the value of the embedded conversion option, net of deferred taxes and equity issuance costs, has been bifurcated from its debt host and recorded as acomponent of additional paid-in capital in our consolidated balance sheets.The following table summarizes, at December 31, 2019, the related balances, conversion rate and conversion price of the Debentures:Outstanding principal amount$215Unamortized debt discount$68Net debt carrying amount$145Equity component carrying amount$78Conversion rate (shares of common stock per $1,000 of principal amount)13.9500Effective conversion price (per $1,000 of principal amount)$71.6843The remaining amortization period of the unamortized debt discount as of December 31, 2019 is approximately 23 years. The unamortized discount will beamortized into interest expense using the effective interest method based on an effective interest rate of 5.130%, which represents the market interest rate for acomparable debt instrument that does not have a conversion feature. During the years ended December 31, 2019, 2018 and 2017, we recognized $9, $12 and $17,respectively, of interest expense related to the Debentures, of which $7, $10 and $14, respectively, represented interest expense recognized at the stated interestrate of 2.750% and $2, $2 and $3, respectively, represented interest expense resulting from amortization of the debt discount.Total interest paid during 2019, 2018 and 2017 was $755, $728, and $778, respectively. We were in compliance with all applicable covenants under all of our outstanding debt agreements at December 31, 2019 and 2018.-125-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Future maturities of all long-term debt outstanding at December 31, 2019 are as follows: 2020, $1,998; 2021, $699; 2022, $1,594; 2023, $1,013; 2024, $1,641and thereafter, $12,440.13. Commitments and ContingenciesLitigation and Regulatory ProceedingsIn the ordinary course of business, we are defendants in, or parties to, a number of pending or threatened legal actions or proceedings. To the extent a plaintiffor plaintiffs in the following cases have specified in their complaint or in other court filings the amount of damages being sought, we have noted those allegeddamages in the descriptions below. With respect to the cases described below, we contest liability and/or the amount of damages in each matter and believe wehave meritorious defenses.Where available information indicates that it is probable that a loss has been incurred as of the date of the consolidated financial statements and we canreasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many proceedings, however, it is difficult to determine whetherany loss is probable or reasonably possible. In addition, even where loss is possible or an exposure to loss exists in excess of the liability already accrued withrespect to a previously identified loss contingency, it is not always possible to reasonably estimate the amount of the possible loss or range of loss.With respect to many of the proceedings to which we are a party, we cannot provide an estimate of the possible losses, or the range of possible losses in excessof the amount, if any, accrued, for various reasons, including but not limited to some or all of the following: (i) there are novel or unsettled legal issues presented,(ii) the proceedings are in early stages, (iii) there is uncertainty as to the likelihood of a class being certified or decertified or the ultimate size and scope of theclass, (iv) there is uncertainty as to the outcome of pending appeals or motions, (v) there are significant factual issues to be resolved, and/or (vi) in many cases, theplaintiffs have not specified damages in their complaint or in court filings. For those legal proceedings where a loss is probable, or reasonably possible, and forwhich it is possible to reasonably estimate the amount of the possible loss or range of losses, we currently believe that the range of possible losses, in excess ofestablished reserves is, in the aggregate, from $0 to approximately $750 at December 31, 2019. This estimated aggregate range of reasonably possible losses isbased upon currently available information taking into account our best estimate of such losses for which such an estimate can be made.Blue Cross Blue Shield Antitrust LitigationWe are a defendant in multiple lawsuits that were initially filed in 2012 against the BCBSA and Blue Cross and/or Blue Shield licensees, or Blue plans, acrossthe country. The cases were consolidated into a single, multi-district proceeding captioned In re Blue Cross Blue Shield Antitrust Litigation that is pending in theUnited States District Court for the Northern District of Alabama, or the Court. Generally, the suits allege that the BCBSA and the Blue plans have conspired tohorizontally allocate geographic markets through license agreements, best efforts rules that limit the percentage of non-Blue revenue of each plan, restrictions onacquisitions rules governing the BlueCard and National Accounts programs and other arrangements in violation of the Sherman Antitrust Act, or Sherman Act, andrelated state laws. The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers, and actions filed in twenty-eightstates have been consolidated into the multi-district proceeding.In response to cross motions for partial summary judgment by plaintiffs and defendants, the Court issued an order in April 2018 determining that thedefendants’ aggregation of geographic market allocations and output restrictions are to be analyzed under a per se standard of review, and the BlueCard programand other alleged Section 1 Sherman Act violations are to be analyzed under the rule of reason standard of review. The Court also found that there remain genuineissues of material fact as to whether defendants operate as a single entity with regard to the enforcement of the Blue Cross Blue Shield trademarks. No dates havebeen set for either the final pretrial conferences or trials in these actions. In March 2019, the Court issued a Fourth Amended Scheduling Order requiring thatbriefing on motions for class certification and related expert reports, merits and damages expert reports, and certain dispositive motions occur in 2019. In April2019, plaintiffs filed their motions for class certification in conjunction with their supporting expert reports. Defendants filed their motions to exclude plaintiffs’experts, as well as their opposition to plaintiffs’ motions for class certification, in July 2019. The case has been stayed until further notice from the Court.-126-Anthem, Inc.Notes to Consolidated Financial Statements (continued)We intend to vigorously defend these suits; however, their ultimate outcome cannot be presently determined.Blue Cross of California Taxation LitigationIn July 2013, our California affiliate Blue Cross of California (doing business as Anthem Blue Cross), or BCC, was named as a defendant in a Californiataxpayer action filed in Los Angeles County Superior Court, captioned Michael D. Myers v. State Board of Equalization, et al. This action was brought under aCalifornia statute that permits an individual taxpayer to sue a governmental agency when the taxpayer believes the agency has failed to enforce governing law.Plaintiff contends that BCC, a licensed Health Care Service Plan, or HCSP, is an “insurer” for purposes of taxation despite acknowledging it is not an “insurer”under regulatory law. At the time, under California law, “insurers” were required to pay a gross premiums tax, or GPT, calculated as 2.35% on gross premiums. Asa licensed HCSP, BCC has paid the California Corporate Franchise Tax, or CFT, the tax paid by California businesses generally. Plaintiff contends that BCC mustpay the GPT rather than the CFT, and seeks a writ of mandate directing the taxing agencies to collect the GPT and an order requiring BCC to pay GPT back taxes,interest, and penalties for the eight-year period prior to the filing of the complaint.In March 2018, the Superior Court denied BCC’s motion for judgment on the pleadings and similar motions brought by other entities. We filed a writ ofmandate in the California Court of Appeal. Although the California Court of Appeal initially accepted our writ, it later indicated that it will not hear the issuesraised by our writ until the case concludes in the Superior Court. The Superior Court has postponed the March 2020 trial date to July 2020. The parties arecurrently engaged in discovery and are in the process of retaining experts. Because GPT is constitutionally imposed in lieu of certain other taxes, BCC has filedprotective tax refund claims with the City of Los Angeles, the California Department of Health Care Services and the Franchise Tax Board to protect its rights torecover certain taxes previously paid should BCC eventually be determined to be subject to the GPT for the tax periods at issue in the litigation. BCC intends tovigorously defend this suit; however, its ultimate outcome cannot be presently determined.Express Scripts, Inc. Pharmacy Benefit Management LitigationIn March 2016, we filed a lawsuit against Express Scripts, Inc., or Express Scripts, our vendor for PBM services, captioned Anthem, Inc. v. Express Scripts,Inc., in the U.S. District Court for the Southern District of New York. The lawsuit seeks to recover over $14,800 in damages for pharmacy pricing that is higherthan competitive benchmark pricing under the agreement between the parties, or the ESI PBM Agreement, over $158 in damages related to operational breaches,as well as various declarations under the ESI PBM Agreement between the parties, including that Express Scripts: (i) breached its obligation to negotiate in goodfaith and to agree in writing to new pricing terms; (ii) was required to provide competitive benchmark pricing to us through the term of the ESI PBM Agreement;(iii) has breached the ESI PBM Agreement; and (iv) is required under the ESI PBM Agreement to provide post-termination services, at competitive benchmarkpricing, for one year following any termination.Express Scripts has disputed our contractual claims and is seeking declaratory judgments: (i) regarding the timing of the periodic pricing review under the ESIPBM Agreement; and (ii) that it has no obligation to ensure that we receive any specific level of pricing, that we have no contractual right to any change in pricingunder the ESI PBM Agreement and that its sole obligation is to negotiate proposed pricing terms in good faith. In the alternative, Express Scripts claims that wehave been unjustly enriched by its payment of $4,675 at the time we entered into the ESI PBM Agreement. In March 2017, the court granted our motion to dismissExpress Scripts’ counterclaims for (i) breach of the implied covenant of good faith and fair dealing, and (ii) unjust enrichment with prejudice. The only remainingclaims are for breach of contract and declaratory relief. Fact discovery has been completed. We intend to vigorously pursue our claims and defend against anycounterclaims, which we believe are without merit; however, the ultimate outcome cannot be presently determined.In re Express Scripts/Anthem ERISA LitigationWe are a defendant in a class action lawsuit that was initially filed in June 2016 against Anthem, Inc. and Express Scripts, which has been consolidated into asingle multi-district lawsuit captioned In Re Express Scripts/Anthem ERISA Litigation, in the U.S. District Court for the Southern District of New York. Theconsolidated complaint was filed by plaintiffs against Express Scripts and us on behalf of all persons who are participants in or beneficiaries of any ERISA or non-ERISA healthcare plan from December 1, 2009 to December 31, 2019 in which we provided prescription drug benefits through the ESI PBM Agreement and paida percentage based co-insurance payment in the course of using that prescription drug benefit. The plaintiffs allege that we breached our duties, either underERISA or with respect to the implied covenant of-127-Anthem, Inc.Notes to Consolidated Financial Statements (continued)good faith and fair dealing implied in the health plans, (i) by failing to adequately monitor Express Scripts’ pricing under the ESI PBM Agreement and (ii) byplacing our own pecuniary interest above the best interests of our insureds by allegedly agreeing to higher pricing in the ESI PBM Agreement in exchange for thepurchase price for our NextRx PBM business, and (iii) with respect to the non-ERISA members, by negotiating and entering into the ESI PBM Agreement thatwas allegedly detrimental to the interests of such non-ERISA members. Plaintiffs seek to hold us and Express Scripts jointly and severally liable and to recover alllosses suffered by the proposed class, equitable relief, disgorgement of alleged ill-gotten gains, injunctive relief, attorney’s fees and costs and interest.In April 2017, we filed a motion to dismiss the claims brought against us, and it was granted, without prejudice, in January 2018. Plaintiffs filed a notice ofappeal with the United States Court of Appeals for the Second Circuit, which was heard in October 2018 but has not yet been decided. We intend to vigorouslydefend this suit; however, its ultimate outcome cannot be presently determined.Cigna Corporation Merger LitigationIn July 2015, we and Cigna announced that we entered into the Cigna Merger Agreement, pursuant to which we would acquire all outstanding shares of Cigna.In July 2016, the U.S. Department of Justice, or DOJ, along with certain state attorneys general, filed a civil antitrust lawsuit in the U.S. District Court for theDistrict of Columbia, or District Court, seeking to block the merger. In February 2017, Cigna purported to terminate the Cigna Merger Agreement and commencedlitigation against us in the Delaware Court of Chancery, or Delaware Court, seeking damages, including the $1,850 termination fee pursuant to the terms of theCigna Merger Agreement, and a declaratory judgment that its purported termination of the Cigna Merger Agreement was lawful, among other claims, which iscaptioned Cigna Corp. v. Anthem Inc.Also in February 2017, we initiated our own litigation against Cigna in the Delaware Court seeking a temporary restraining order to enjoin Cigna fromterminating the Cigna Merger Agreement, specific performance compelling Cigna to comply with the Cigna Merger Agreement and damages, which is captionedAnthem Inc. v. Cigna Corp. In April 2017, the U.S. Circuit Court of Appeals for the District of Columbia affirmed the ruling of the District Court, which blockedthe merger. In May 2017, after the Delaware Court denied our motion to enjoin Cigna from terminating the Cigna Merger Agreement, we delivered to Cigna anotice terminating the Cigna Merger Agreement.In the Delaware Court litigation, trial commenced in late February 2019 and concluded in March 2019. The Delaware Court held closing argument inNovember 2019 and took the matter under consideration. In February 2020, the Delaware Court requested supplemental briefing. The parties have been instructedto negotiate a schedule for the supplemental submissions. We believe Cigna’s allegations are without merit, and we intend to vigorously pursue our claims anddefend against Cigna’s allegations; however, the ultimate outcome of our litigation with Cigna cannot be presently determined.In October 2018, a shareholder filed a derivative lawsuit in the State of Indiana Marion County Superior Court, captioned Henry Bittmann, Derivatively, et al.v. Joseph R Swedish, et al., purportedly on behalf of us and our shareholders against certain current and former directors and officers alleging breaches of fiduciaryduties, unjust enrichment and corporate waste associated with the Cigna Merger Agreement. This case has been stayed at the request of the parties pending theoutcome of our litigation with Cigna in the Delaware Court. This lawsuit’s ultimate outcome cannot be presently determined.U.S. Department of Justice (DOJ) Civil Investigative DemandsBeginning in December 2016, the DOJ has issued civil investigative demands to us to discover information about our chart review and risk adjustmentprograms under Parts C and D of the Medicare program. We understand the DOJ is investigating the programs of other Medicare Advantage health plans, alongwith providers and vendors. We continue to cooperate with the DOJ’s investigation, and the ultimate outcome cannot presently be determined.Cyber Attack Regulatory Proceedings and LitigationIn February 2015, we reported that we were the target of a sophisticated external cyber attack, during which the attackers gained unauthorized access to certainof our information technology systems and obtained personal information related to many individuals and employees. To date, there is no evidence that credit cardor medical information was accessed or-128-Anthem, Inc.Notes to Consolidated Financial Statements (continued)obtained. Upon discovery of the cyber attack, we took immediate action to remediate the security vulnerability and have continued to implement securityenhancements since this incident.Federal and state agencies are investigating, or have investigated, events related to the cyber attack, including how it occurred, its consequences and ourresponses. The investigations have all been resolved with the exception of an ongoing investigation by a multi-state group of attorneys general, which remainsoutstanding. Although we are cooperating in this investigation, we may be subject to additional fines or other obligations. We intend to vigorously defend theremaining regulatory investigation; however, its ultimate outcome cannot be presently determined.We have contingency plans and insurance coverage for certain expenses and potential liabilities of this nature and will pursue coverage for all applicablelosses; however, the ultimate outcome of our pursuit of insurance coverage cannot be presently determined.Other ContingenciesFrom time to time, we and certain of our subsidiaries are parties to various legal proceedings, many of which involve claims for coverage encountered in theordinary course of business. We, like HMOs and health insurers generally, exclude certain healthcare and other services from coverage under our HMO, PPO andother plans. We are, in the ordinary course of business, subject to the claims of our enrollees arising out of decisions to restrict or deny reimbursement foruncovered services. The loss of even one such claim, if it results in a significant punitive damage award, could have a material adverse effect on us. In addition, therisk of potential liability under punitive damage theories may increase significantly the difficulty of obtaining reasonable reimbursement of coverage claims.In addition to the lawsuits described above, we are also involved in other pending and threatened litigation of the character incidental to our business, and arefrom time to time involved as a party in various governmental investigations, audits, reviews and administrative proceedings. These investigations, audits, reviewsand administrative proceedings include routine and special inquiries by state insurance departments, state attorneys general, the U.S. Attorney General andsubcommittees of the U.S. Congress. Such investigations, audits, reviews and administrative proceedings could result in the imposition of civil or criminal fines,penalties, other sanctions and additional rules, regulations or other restrictions on our business operations. Any liability that may result from any one of theseactions, or in the aggregate, could have a material adverse effect on our consolidated financial position or results of operations.Contractual Obligations and CommitmentsIn the second quarter of 2019, we began using our new pharmacy benefits manager called IngenioRx to market and sell a PBM product to fully-insured andself-funded Anthem health plan customers throughout the country, as well as to customers outside of the health plans we own. This comprehensive productportfolio includes features such as drug formularies, a pharmacy network, prescription drug database, member services and mail order capabilities. Also beginningin the second quarter of 2019, we began delegating certain PBM administrative functions, such as claims processing and prescription fulfillment, to CaremarkPCSHealth, L.L.C., or CVS Health, which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement with CVS Health, or the CVS PBMAgreement. We intend to retain the responsibilities for IngenioRx’s clinical and formulary strategy and development, member and employer experiences,operations, sales, marketing, account management and retail network strategy. From December 2009 through December 2019, we delegated certain PBMfunctions and administrative services to Express Scripts pursuant to the ESI PBM Agreement. In January 2019, we exercised our contractual right to terminate theESI PBM Agreement earlier than the original expiration date of December 31, 2019, due to the acquisition of Express Scripts by Cigna. We began transitioningexisting members from Express Scripts to IngenioRx in the second quarter of 2019, and completed the transition of all of our members on January 1, 2020. Prior tothe termination of the ESI PBM Agreement, Express Scripts managed the network of pharmacy providers, operated mail order pharmacies and processedprescription drug claims on our behalf, while we sold and supported the product for our members, made formulary decisions, sold drug benefit design strategy andprovided front line member support. Express Scripts continues to provide certain audit and run out transition services related to our PBM business.Notwithstanding our termination of the ESI PBM Agreement, the litigation between us and Express Scripts regarding the ESI PBM Agreement continues. Foradditional information regarding this lawsuit, refer to the Litigation and Regulatory Proceedings–Express Scripts, Inc. Pharmacy Benefit Management Litigationsection above. We believe we have appropriately recognized all rights and obligations under the ESI PBM Agreement as of December 31, 2019.-129-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Vulnerability from ConcentrationsFinancial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investment securities, premiumreceivables and instruments held through hedging activities. All investment securities are managed by professional investment managers within policies authorizedby our Board of Directors. Such policies limit the amounts that may be invested in any one issuer and prescribe certain investee company criteria. Concentrationsof credit risk with respect to premium receivables are limited due to the large number of employer groups that constitute our customer base in the states in whichwe conduct business. As of December 31, 2019, there were no significant concentrations of financial instruments in a single investee, industry or geographiclocation.14. Capital Stock Stock Incentive PlansOur Board of Directors has adopted the 2017 Anthem Incentive Compensation Plan, or 2017 Incentive Plan, which has been approved by our shareholders.The term of the 2017 Incentive Plan is such that no awards may be granted on or after May 18, 2027. The 2017 Incentive Plan gives authority to the CompensationCommittee of the Board of Directors to make incentive awards to our non-employee directors, employees and consultants, consisting of stock options, stock,restricted stock, restricted stock units, cash-based awards, stock appreciation rights, performance shares and performance units. The 2017 Incentive Plan limits thenumber of available shares for issuance to 37.5 shares, subject to adjustment as set forth in the 2017 Incentive Plan.Stock options are granted for a fixed number of shares with an exercise price at least equal to the fair value of the shares at the grant date. Historically, stockoptions have vested over three years in equal semi-annual installments and generally have a term of ten years from the grant date. Amendments to the 2017Incentive Plan, effective July 1, 2018, require future grants of stock options to vest in three equal annual installments.Certain option grants contain provisions whereby the employee continues to vest in the award subsequent to termination due to retirement. Our attributionmethod for newly granted awards considers all vesting and other provisions, including retirement eligibility, in determining the requisite service period over whichthe fair value of the awards will be recognized.Awards of restricted stock or restricted stock units are issued at the fair value of the stock on the grant date and may also include one or more performancemeasures that must be met for the award to vest. For restricted stock or restricted stock units without performance measures, the restrictions lapse in three equalannual installments. Restricted stock or restricted stock units with performance measures vest in three year installments. Performance units issued in 2019 will vestin 2022, based on earnings targets over the three year period of 2019 to 2021. Performance units issued in 2018 will vest in 2021, based on earnings targets overthe three year period of 2018 to 2020. Performance units issued in 2017 will vest in 2020, based on earnings targets over the three year period of 2017 to 2019.For the years ended December 31, 2019, 2018 and 2017, we recognized share-based compensation expense of $294, $226 and $170, respectively, as well asrelated tax benefits of $78, $61 and $68, respectively.A summary of stock option activity for the year ended December 31, 2019 is as follows: Number ofShares Weighted-AverageOption Price perShare Weighted-AverageRemainingContractual Life(Years) AggregateIntrinsicValueOutstanding at January 1, 20193.7 $149.65 Granted0.7 306.61 Exercised(1.2) 126.10 Forfeited or expired(0.1) 241.26 Outstanding at December 31, 20193.1 190.31 6.18 $355Exercisable at December 31, 20192.0 145.37 4.93 $312-130-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 amounted to $188, $172 and $192, respectively. Werecognized tax benefits of $52, $47 and $76 during the years ended December 31, 2019, 2018 and 2017, respectively, from option exercises and disqualifyingdispositions. During the years ended December 31, 2019, 2018 and 2017, we received cash of $143, $141 and $200, respectively, from exercises of stock options.The total fair value of restricted stock awards that vested during the years ended December 31, 2019, 2018 and 2017 was $245, $237 and $127, respectively.A summary of the status of nonvested restricted stock activity, including restricted stock units, for the year ended December 31, 2019 is as follows: RestrictedStock Sharesand Units Weighted-AverageGrant DateFair Valueper ShareNonvested at January 1, 20191.7 $183.32Granted0.6 305.88Vested(0.8) 153.79Forfeited(0.1) 242.38Nonvested at December 31, 20191.4 242.47During the year ended December 31, 2019, we granted approximately 0.2 restricted stock units that are contingent upon us achieving earning targets over thethree year period of 2019 to 2021. These grants have been included in the activity shown above, but will be subject to adjustment at the end of 2021, based onresults in the three year period.As of December 31, 2019, the total remaining unrecognized compensation expense related to nonvested stock options and restricted stock, including restrictedstock units, amounted to $25 and $139, respectively, which will be amortized over the weighted-average remaining requisite service periods of 11 months and 12months, respectively.As of December 31, 2019, there were approximately 20.5 shares of common stock available for future grants under the 2017 Incentive Plan. Fair ValueWe use a binomial lattice valuation model to estimate the fair value of all stock options granted. Expected volatility assumptions used in the binomial latticemodel are based on an analysis of implied volatilities of publicly traded options on our stock and historical volatility of our stock price. The risk-free interest rate isderived from the U.S. Treasury strip rates at the time of the grant. The expected term of the options was derived from the outputs of the binomial lattice model,which incorporates post-vesting forfeiture assumptions based on an analysis of historical data. The dividend yield was based on our estimate of future dividendyields. Similar groups of employees that have dissimilar exercise behavior are considered separately for valuation purposes. We utilize the multiple-grantapproach for recognizing compensation expense associated with each separately vesting portion of the share-based award.-131-Anthem, Inc.Notes to Consolidated Financial Statements (continued)The following weighted-average assumptions were used to estimate the fair values of options granted during the years ended December 31, 2019, 2018 and2017: 2019 2018 2017Risk-free interest rate2.69% 2.90% 2.31%Volatility factor25.00% 30.00% 32.00%Dividend yield (annual)1.00% 1.30% 1.60%Weighted-average expected life (years)4.40 3.70 4.00The following weighted-average fair values were determined for the years ending December 31, 2019, 2018 and 2017: 2019 2018 2017Options granted during the year$68.66 $55.48 $40.88Restricted stock awards granted during the year305.88 233.73 174.44The binomial lattice option-pricing model requires the input of highly subjective assumptions including the expected stock price volatility. Because our stockoption grants have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materiallyaffect the fair value estimate, in our opinion, existing models do not necessarily provide a reliable single measure of the fair value of our stock option grants.Employee Stock Purchase PlanWe have registered 14.0 shares of common stock for the Employee Stock Purchase Plan, or the Stock Purchase Plan, which is intended to provide a means toencourage and assist employees in acquiring a stock ownership interest in Anthem. Pursuant to the terms of the Stock Purchase Plan, an eligible employee ispermitted to purchase no more than $25,000 (actual dollars) worth of stock in any calendar year, based on the fair value of the stock at the end of each plan quarter.Employees become participants by electing payroll deductions from 1% to 15% of gross compensation. Once purchased, the stock is accumulated in theemployee’s investment account. The Stock Purchase Plan allows participants to purchase shares of our common stock at a discounted price per share of 90% of thefair value of a share of common stock on the lower of the first or last trading day of the plan quarter purchase period. The Stock Purchase Plan discount wasrecognized as compensation expense for the year ended December 31, 2019, based on GAAP guidance. There were 0.2 shares issued during the year endedDecember 31, 2019. As of December 31, 2019, 4.9 shares were available for issuance under the Stock Purchase Plan.Use of Capital and Stock Repurchase ProgramWe regularly review the appropriate use of capital, including acquisitions, common stock and debt security repurchases and dividends to shareholders. Thedeclaration and payment of any dividends or repurchases of our common stock or debt is at the discretion of our Board of Directors and depends upon ourfinancial condition, results of operations, future liquidity needs, regulatory and capital requirements and other factors deemed relevant by our Board of Directors.-132-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A summary of the cash dividend activity for the years ended December 31, 2019 and 2018 is as follows: Declaration Date Record Date Payment Date Cash Dividend perShare TotalYear ended December 31, 2019 January 29, 2019 March 18, 2019 March 29, 2019 $0.80 $206April 23, 2019 June 10, 2019 June 25, 2019 0.80 206July 23, 2019September 10, 2019September 25, 2019 0.80 204October 22, 2019 December 5, 2019 December 20, 2019 0.80 202 Year ended December 31, 2018 January 30, 2018 March 9, 2018 March 23, 2018 $0.75 $192April 24, 2018 June 8, 2018 June 25, 2018 0.75 196July 24, 2018 September 10, 2018 September 25, 2018 0.75 195October 30, 2018 December 5, 2018 December 21, 2018 0.75 193On January 28, 2020, our Audit Committee declared a quarterly cash dividend to shareholders of $0.95 per share on the outstanding shares of our commonstock. This quarterly dividend is payable on March 27, 2020 to the shareholders of record as of March 16, 2020.Under our Board of Directors’ authorization, we maintain a common stock repurchase program. On December 7, 2017, the Board of Directors authorized a$5,000 increase to the common stock repurchase program. Repurchases may be made from time to time at prevailing market prices, subject to certain restrictionson volume, pricing and timing. The repurchases are effected from time to time in the open market, through negotiated transactions, including accelerated sharerepurchase agreements, and through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. Our stock repurchaseprogram is discretionary, as we are under no obligation to repurchase shares. We repurchase shares under the program when we believe it is a prudent use ofcapital. The excess cost of the repurchased shares over par value is charged on a pro rata basis to additional paid-in capital and retained earnings.A summary of common stock repurchases for the years ended December 31, 2019 and 2018 is as follows: Years Ended December 31 2019 2018Shares repurchased6.3 6.8Average price per share$268.65 $248.34Aggregate cost$1,701 $1,685Authorization remaining at end of year$3,792 $5,493We expect to utilize the remaining authorized amount over a multi-year period, subject to market and industry conditions.For additional information regarding the use of capital for debt security repurchases, see Note 12, “Debt.”-133-Anthem, Inc.Notes to Consolidated Financial Statements (continued)15. Accumulated Other Comprehensive LossA reconciliation of the components of accumulated other comprehensive loss at December 31, 2019 and 2018 is as follows: 2019 2018Investments: Gross unrealized gains$720 $173Gross unrealized losses(44) (371)Net pretax unrealized gains (losses)676 (198)Deferred tax (liability) asset(155) 39Net unrealized gains (losses) on investments521 (159)Non-credit components of OTTI on investments: Gross unrealized losses(3) (3)Deferred tax asset1 1Net unrealized non-credit component of OTTI on investments(2) (2)Cash flow hedges: Gross unrealized losses(331) (311)Deferred tax asset69 65Net unrealized losses on cash flow hedges(262) (246)Defined benefit pension plans: Deferred net actuarial loss(734) (751)Deferred prior service cost(1) (1)Deferred tax asset188 193Net unrecognized periodic benefit costs for defined benefit pension plans(547) (559)Postretirement benefit plans: Deferred net actuarial loss(25) (58)Deferred prior service credits19 34Deferred tax asset2 6Net unrecognized periodic benefit costs for postretirement benefit plans(4) (18)Foreign currency translation adjustments: Gross unrealized losses(3) (3)Deferred tax asset1 1Net unrealized losses on foreign currency translation adjustments(2) (2)Accumulated other comprehensive loss$(296) $(986)-134-Anthem, Inc.Notes to Consolidated Financial Statements (continued)Other comprehensive income (loss) reclassification adjustments for the years ended December 31, 2019, 2018 and 2017 are as follows: 2019 2018 2017Investments: Net holding gain (loss) on investment securities arising during the period, net of tax (expense)benefit of $(198), $133, and ($153), respectively$695 $(465) $280Reclassification adjustment for net realized (gain) loss on investment securities, net of tax expense(benefit) of $4, $(13), and $58, respectively(15) 47 (107)Total reclassification adjustment on investments680 (418) 173Non-credit component of OTTI on investments: Non-credit component of OTTI on investments, net of tax benefit (expense) of $0, $1, and ($3),respectively— (2) 4Cash flow hedges: Holding (loss) gain, net of tax benefit (expense) of $4, $(10), and $35, respectively(16) 37 (65)Other: Net change in unrecognized periodic benefit costs for defined benefit pension and postretirementbenefit plans, net of tax (expense) benefit of $(9), $29, and $(35), respectively26 (90) 51Foreign currency translation adjustment, net of tax expense of $0, $0, and ($1), respectively— (1) 3Net gain (loss) recognized in other comprehensive loss, net of tax (expense) benefit of $(199), $140, and($99), respectively$690 $(474) $16616. ReinsuranceWe reinsure certain risks with other companies and assume risk from other companies. We remain primarily liable to policyholders under ceded insurancecontracts and are contingently liable for amounts recoverable from reinsurers in the event that such reinsurers do not meet their contractual obligations.A summary of direct, assumed and ceded premiums written and earned for the years ended December 31, 2019, 2018 and 2017 is as follows: 2019 2018 2017Written Earned Written Earned Written EarnedDirect$93,953 $93,505 $84,835 $85,213 $83,974 $83,418Assumed822 713 264 259 275 275Ceded(45) (45) (51) (51) (44) (45)Net premiums$94,730 $94,173 $85,048 $85,421 $84,205 $83,648Percentage—assumed to net premiums0.9% 0.8% 0.3% 0.3% 0.3% 0.3%-135-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A summary of net premiums written and earned by segment (see Note 19, “Segment Information”) for the years ended December 31, 2019, 2018 and 2017 isas follows: 2019 2018 2017Written Earned Written Earned Written EarnedReportable segments: Commercial & Specialty Business$32,113 $31,944 $30,661 $30,532 $35,382 $35,503Government Business62,617 62,229 54,387 54,889 48,823 48,145Net premiums$94,730 $94,173 $85,048 $85,421 $84,205 $83,648The effect of reinsurance on benefit expense for the years ended December 31, 2019, 2018 and 2017 is as follows: 2019 2018 2017Direct$81,254 $71,749 $72,135Assumed589 219 217Ceded(57) (73) (116)Net benefit expense$81,786 $71,895 $72,236 The effect of reinsurance on certain assets and liabilities at December 31, 2019 and 2018 is as follows: 2019 2018Policy liabilities, assumed$213 $50Unearned income, assumed114 6Premiums payable, ceded11 17Premiums receivable, assumed35 37-136-Anthem, Inc.Notes to Consolidated Financial Statements (continued)17. LeasesWe lease office space and certain computer and related equipment using noncancelable operating leases. Our leases have remaining lease terms of 1 year to 15years.The information related to our leases is as follows: Balance Sheet Location December 31, 2019Operating Leases Right-of-use assetsOther noncurrent assets $575Lease liabilities, currentOther current liabilities 158Lease liabilities, noncurrentOther noncurrent liabilities 482 Year Ended December 31,2019Lease Expense Operating lease expense $198Short-term lease expense 46Sublease income (16)Total lease expense $228 Other information Operating cash paid for amounts included in the measurement of lease liabilities, operating leases $176Right-of-use assets obtained in exchange for new lease liabilities, operating leases $112Weighted average remaining lease term, operating leases 6 yearsWeighted average discount rate, operating leases 4.09%Lease expense for 2018 and 2017 was $207 and $205, respectively.At December 31, 2019, future lease payments for noncancelable operating leases with initial or remaining terms of one year or more are as follows:2020$172202114920221362023116202487Thereafter135Total future minimum payments$795Less imputed interest(155)Total lease liabilities$640As of December 31, 2019, we have additional operating leases for building spaces that have not yet commenced, and some building spaces are beingconstructed by the lessors and their agents. These leases have terms of up to 12 years and are expected to commence on various dates during 2020 and 2021 whenthe construction is complete and we take possession of the buildings. The undiscounted lease payments for these leases, which are not included in the tables above,aggregate $394.-137-Anthem, Inc.Notes to Consolidated Financial Statements (continued)18. Earnings per ShareThe denominator for basic and diluted earnings per share at December 31, 2019, 2018 and 2017 is as follows: 2019 2018 2017Denominator for basic earnings per share—weighted-average shares255.5 258.1 261.5Effect of dilutive securities—employee stock options, non-vested restricted stock awards, convertible debenturesand equity units4.8 6.1 6.3Denominator for diluted earnings per share260.3 264.2 267.8During the years ended December 31, 2019, 2018 and 2017, weighted-average shares related to certain stock options of 0.6, 0.3 and 0.4, respectively, wereexcluded from the denominator for diluted earnings per share because the stock options were anti-dilutive. The Equity Unit purchase contracts were settled in May2018, and approximately 6.0 shares of our common stock were issued and included in the basic earnings per share calculation.During the years ended December 31, 2019, 2018 and 2017, we issued approximately 0.2, 0.3 and 0.4 restricted stock units, respectively, of which vesting wascontingent upon us meeting certain earnings targets. Contingent restricted stock units are excluded from the denominator for diluted earnings per share and areincluded only if and when the contingency is met. The 2019 contingent restricted stock units are being measured over the three year period of 2019 through 2021,the 2018 contingent restricted stock units are being measured over the three year period of 2018 through 2020 and the 2017 contingent restricted stock units arebeing measured over the three year period of 2017 through 2019. Contingent restricted stock units generally vest in March of the year following each measurementperiod.19. Segment InformationOur organizational structure is comprised of three reportable segments: Commercial & Specialty Business; Government Business; and Other.Our Commercial & Specialty Business segment includes our Local Group, National Accounts, Individual and Specialty businesses. Business units in theCommercial & Specialty Business segment offer fully-insured health products; provide a broad array of managed care services to self-funded customers includingclaims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellnessprograms and other administrative services; and provide an array of specialty and other insurance products and services such as dental, vision, life and disabilityinsurance benefits.Our Government Business segment includes our Medicare and Medicaid businesses, National Government Services, or NGS, and services provided to thefederal government in connection with the FEHB program. Our Medicare business includes services such as Medicare Supplement plans; Medicare Advantage,including Special Needs Plans; Medicare Part D; and dual-eligible programs through Medicare-Medicaid Plans. Our Medicaid business includes our managed carealternatives through publicly funded healthcare programs, including Medicaid, ACA-related Medicaid expansion programs, Temporary Assistance for NeedyFamilies programs, programs for seniors and people with disabilities, Children’s Health Insurance Programs, and specialty programs such as those focused onlong-term services and support, HIV/AIDS, foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities or developmentaldisabilities. NGS acts as a Medicare contractor for the federal government in several regions across the nation.Prior to the second quarter of 2019, our Other segment included certain eliminations and corporate expenses not allocated to either of our other reportablesegments. Beginning with the second quarter of 2019, our Other segment also includes IngenioRx, our PBM, which began operations during the second quarter of2019. In addition, during the second quarter, we reclassified our integrated health services business, our Diversified Business Group, or DBG, from ourGovernment Business segment to the Other segment to reflect changes in how our segments are being managed. Amounts for prior years have been reclassified toconform to the current year presentation for comparability. Based on the FASB guidance, as of December 31, 2019, IngenioRx and DBG did not collectively meetthe quantitative thresholds for a reportable segment.-138-Anthem, Inc.Notes to Consolidated Financial Statements (continued)We define operating revenues to include premium income and administrative fees and other revenues. Operating revenues are derived from premiums and feesreceived, primarily from the sale and administration of health benefit products. Operating gain is calculated as total operating revenue less benefit expense, cost ofproducts sold and selling, general and administrative expense.Through our participation in various federal government programs, we generated approximately 20.7%, 19.8% and 17.8% of our total consolidated revenuesfrom agencies of the U.S. government for the years ended December 31, 2019, 2018, and 2017, respectively. These revenues are contained in the GovernmentBusiness segment.The accounting policies of the segments are consistent with those described in the summary of significant accounting policies in Note 2, “Basis of Presentationand Significant Accounting Policies,” except that certain shared administrative expenses for each segment are recognized on a pro rata allocated basis, which in theaggregate approximates the consolidated expense. Any difference between the allocated expenses and actual consolidated expense is included in other expensesnot allocated to reportable segments. Affiliated revenues represent revenues or cost for services provided by IngenioRx and DBG to our subsidiaries, are recordedat cost or management’s estimate of fair market value, and are eliminated in consolidation. We evaluate performance of the reportable segments based on operatinggain or loss as defined above. We evaluate net investment income, net realized gains on financial instruments, OTTI losses recognized in income, interest expense,amortization expense, gain or loss on extinguishment of debt, income taxes and assets and liabilities on a consolidated basis, as these items are managed in acorporate shared service environment and are not the responsibility of segment operating management.For our segment reporting, operating gains (losses) generated from IngenioRx and DBG affiliated activity have been included in our Commercial & SpecialtyBusiness and Government Business based upon their utilization of services from IngenioRx and DBG.Financial data by reportable segment for the years ended December 31, 2019, 2018 and 2017 is as follows: Commercial &SpecialtyBusiness GovernmentBusiness Other Eliminations TotalYear ended December 31, 2019 Operating revenue - unaffiliated$37,421 $62,632 $3,088 $— $103,141Operating revenue - affiliated— — 4,607 (4,607) —Operating gain (loss)4,046 2,054 (101) — 5,999Depreciation and amortization of property and equipment— — 675 — 675Year ended December 31, 2018 Operating revenue - unaffiliated$35,782 $55,348 $211 $— $91,341Operating revenue - affiliated— — 1,308 (1,308) —Operating gain (loss)3,600 1,928 (102) — 5,426Depreciation and amortization of property and equipment— — 652 — 652Year ended December 31, 2017 Operating revenue - unaffiliated$40,363 $48,587 $111 $— $89,061Operating revenue - affiliated— — 16 (16) —Operating gain (loss)2,847 1,442 (114) — 4,175Depreciation and amortization of property and equipment— — 601 — 601-139-Anthem, Inc.Notes to Consolidated Financial Statements (continued) The major product revenues for each of the reportable segments for the years ended December 31, 2019, 2018 and 2017 are as follows: 2019 2018 2017Commercial & Specialty Business Managed care products$30,311 $29,012 $33,971Managed care services5,451 5,218 4,732Dental/Vision products and services1,302 1,220 1,218Other357 332 442Total Commercial & Specialty Business37,421 35,782 40,363Government Business Managed care products62,229 54,889 48,144Managed care services403 459 443Total Government Business62,632 55,348 48,587Other Other7,695 1,519 127Eliminations Eliminations(4,607) (1,308) (16)Total product revenues$103,141 $91,341 $89,061The classification between managed care products and managed care services in the above table primarily distinguishes between the levels of risk assumed.Managed care products represent insurance products where we bear the insurance risk, whereas managed care services represent product offerings where weprovide claims adjudication and other administrative services to the customer, but the customer principally bears the insurance risk. Asset, liability and equity details by reportable segment have not been disclosed, as we do not internally report such information. A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the yearsended December 31, 2019, 2018 and 2017 is as follows: 2019 2018 2017Reportable segments operating revenues$103,141 $91,341 $89,061Net investment income1,005 970 867Net realized gains (losses) on financial instruments114 (180) 145Other-than-temporary impairment losses recognized in income(47) (26) (33)Total revenues$104,213 $92,105 $90,040-140-Anthem, Inc.Notes to Consolidated Financial Statements (continued)A reconciliation of reportable segments’ operating gain to income before income tax expense included in our consolidated statements of income for the yearsended December 31, 2019, 2018 and 2017 is as follows: 2019 2018 2017Reportable segments operating gain$5,999 $5,426 $4,175Net investment income1,005 970 867Net realized gains (losses) on financial instruments114 (180) 145Other-than-temporary impairment losses recognized in income(47) (26) (33)Interest expense(746) (753) (739)Amortization of other intangible assets(338) (358) (169)Loss on extinguishment of debt(2) (11) (282)Income before income tax expense$5,985 $5,068 $3,96420. Related Party TransactionsWe have a 19.50% equity investment in National Accounts Service Company, LLC, or NASCO, which processes National Accounts claims and providesother administrative services for us and certain other BCBS plans. Administrative expenses incurred related to NASCO services totaled $78, $79 and $73, for theyears ended December 31, 2019, 2018 and 2017, respectively. Amounts due to NASCO were $4 and $5 at December 31, 2019 and 2018, respectively.We have an equity investment in APC Passe, LLC, which offers Medicaid products in Arkansas. During the year ended December 31, 2019, in the normalcourse of business, we assumed premiums of $408 from APC Passe, LLC, which is included in our total assumed premiums (see Note 16, “Reinsurance”).21. Statutory InformationThe majority of our insurance and HMO subsidiaries report their accounts in conformity with accounting practices prescribed or permitted by state insuranceregulatory authorities, commonly referred to as statutory accounting, which vary in certain respects from GAAP. However, certain of our insurance and HMOsubsidiaries, including BCC, Blue Cross of California Partnership Plan, Inc., Golden West Health Plan, Inc. and CareMore Health Plan are regulated by theCalifornia Department of Managed Health Care, or DMHC, and report their accounts in conformity with GAAP (these entities are collectively referred to as the“DMHC regulated entities”). Typical differences of GAAP reporting as compared to statutory reporting are the recognition of all assets including those that arenon-admitted for statutory purposes and recognition of all deferred tax assets without regard to statutory limits. The National Association of InsuranceCommissioners, or NAIC, developed a codified version of the statutory accounting principles, designed to foster more consistency among the states for accountingguidelines and reporting. Prescribed statutory accounting practices are set forth in a variety of publications of the NAIC as well as state laws, regulations andgeneral administrative rules.Our ability to pay dividends and credit obligations is significantly dependent on receipt of dividends from our subsidiaries. The payment of dividends to us byour insurance and HMO subsidiaries without prior approval of the insurance departments of each subsidiary’s domiciliary jurisdiction is limited by formula.Dividends in excess of these amounts are subject to prior approval by the respective state insurance departments or the DMHC.Our statutory basis insurance and HMO subsidiaries are subject to risk-based capital, or RBC, requirements. RBC is a method developed by the NAIC todetermine the minimum amount of statutory capital appropriate for an insurance company or HMO to support its overall business operations in consideration of itssize and risk profile. The formula for determining the amount of RBC specifies various factors, weighted based on the perceived degree of risk, which are appliedto certain financial balances and financial activity. Below minimum RBC requirements are classified within certain levels, each of which requires specifiedcorrective action. Additionally, the DMHC regulated entities are subject to capital and solvency requirements as prescribed by the DMHC. As of December 31,2019 and 2018, all of our regulated subsidiaries exceeded the minimum applicable mandatory RBC requirements and/or capital and solvency requirements of theirapplicable governmental regulator. The statutory RBC necessary to satisfy regulatory requirements of our statutory basis insurance and HMO subsidiaries wasapproximately $5,500 and $4,800 as of December 31, 2019 and 2018, respectively. The tangible net-141-Anthem, Inc.Notes to Consolidated Financial Statements (continued)equity required for the DMHC regulated entities was approximately $610 and $570 as of December 31, 2019 and 2018, respectively.Statutory-basis capital and surplus of our insurance and HMO subsidiaries and capital and surplus of our other regulated subsidiaries, excluding the DMHCregulated entities, was $13,044 and $12,038 at December 31, 2019 and 2018, respectively. Statutory-basis net income of our insurance and HMO subsidiaries andnet income of our other regulated subsidiaries, excluding the DMHC regulated entities, was $3,840, $3,412 and $2,674 for 2019, 2018 and 2017, respectively.GAAP equity of the DMHC regulated entities was $3,359 and $3,125 at December 31, 2019 and 2018, respectively. GAAP net income of the DMHC regulatedentities was $878, $789 and $1,047 for the years ended December 31, 2019, 2018 and 2017, respectively.22. Selected Quarterly Financial Data (Unaudited)Selected quarterly financial data is as follows: For the Quarter Ended March 31 June 30 September 30 December 312019 Total revenues$24,666 $25,466 $26,674 $27,407Income before income tax expense1,945 1,453 1,489 1,098Net income1,551 1,139 1,183 934 Basic net income per share$6.03 $4.44 $4.64 $3.69Diluted net income per share5.91 4.36 4.55 3.62 2018 Total revenues$22,537 $22,944 $23,251 $23,373Income before income tax expense1,780 1,504 1,242 542Net income1,312 1,054 960 424 Basic net income per share$5.13 $4.07 $3.70 $1.64Diluted net income per share4.99 3.98 3.62 1.61ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.There have been no changes in or disagreements with our independent registered public accounting firm on accounting or financial disclosures.ITEM 9A. CONTROLS AND PROCEDURES.Evaluation of Disclosure Controls and ProceduresWe carried out an evaluation as of December 31, 2019, under the supervision and with the participation of our management, including our Chief ExecutiveOfficer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of theExchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures areeffective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be disclosed in our reports under theExchange Act. In addition, based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulatedand communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regardingrequired disclosures.-142-Management’s Report on Internal Control Over Financial Reporting Management, under the supervision and with the participation of the principal executive officer and principal financial officer, of Anthem, Inc., or theCompany, is responsible for establishing and maintaining effective internal control over financial reporting, or Internal Control, as such term is defined in theExchange Act. The Company’s Internal Control is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and thepreparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles, or GAAP. The Company’sInternal Control includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use ordisposition of the Company’s assets that could have a material effect on the financial statements.Because of inherent limitations in any Internal Control, no matter how well designed, misstatements due to error or fraud may occur and not be detected.Accordingly, even effective Internal Control can provide only reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with GAAP.Management, under the supervision and with the participation of the principal executive officer and principal financial officer, assessed the effectiveness of theCompany’s Internal Control as of December 31, 2019. Management’s assessment was based on criteria established in Internal Control—Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on management’s assessment, management has concluded that the Company’s Internal Control was effective as of December 31, 2019 to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance withGAAP.Ernst & Young LLP, the Company’s independent registered public accounting firm, has audited the consolidated financial statements of the Company for theyear ended December 31, 2019, and has also issued an audit report dated February 19, 2020, on the effectiveness of the Company’s Internal Control as ofDecember 31, 2019, which is included in this Annual Report on Form 10-K./S/ GAIL K. BOUDREAUX /S/ JOHN E. GALLINAPresident and Chief Executive Officer Executive Vice President and Chief Financial OfficerChanges in Internal Control Over Financial ReportingDuring the three months ended December 31, 2019, we implemented certain additional internal controls associated with our new IngenioRx PBM business.Other than these new controls, there have been no changes in our internal control over financial reporting that occurred during the three months endedDecember 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.-143-Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of Anthem, Inc.Opinion on Internal Control Over Financial ReportingWe have audited Anthem, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control–IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Anthem,Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balancesheets of Anthem, Inc. as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cashflows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(c) andour report dated February 19, 2020 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to expressan opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate./s/ ERNST & YOUNG LLPIndianapolis, IndianaFebruary 19, 2020-144-ITEM 9B. OTHER INFORMATION.None.PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.The information required by this Item concerning our Executive Officers, Directors and nominees for Director, Audit Committee members and financialexpert(s) and concerning disclosure of any delinquent filers under Section 16(a) of the Exchange Act and our Code of Conduct is incorporated herein by referencefrom our definitive Proxy Statement for our 2020 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A within 120 daysafter the end of our last fiscal year.ITEM 11. EXECUTIVE COMPENSATION.The information required by this Item concerning remuneration of our Executive Officers and Directors, material transactions involving such ExecutiveOfficers and Directors and Compensation Committee interlocks, as well as the Compensation Committee Report and CEO Pay Ratio disclosure are incorporatedherein by reference from our definitive Proxy Statement for our 2020 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation14A within 120 days after the end of our last fiscal year.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.Securities Authorized for Issuance under Equity Compensation PlansSecurities authorized for issuance under the our equity compensation plans as of December 31, 2019 are as follows:PlanCategory1Number of securities to beissued upon exercise ofoutstanding options, warrants andrights2 (a)Weighted-averageexercise price ofoutstanding options, warrants andrights3(b)Number of securitiesremaining available forfuture issuance under equitycompensation plans (excludingsecurities reflected in column (a))4(c)Equity compensation plans approved by shareholders as of December 31,20196,011,131$190.3125,381,110 1We have no equity compensation plans pursuant to which awards may be granted in the future that have not been approved by shareholders.2Includes shares that may be issued under the Anthem Incentive Compensation Plan and the Anthem 2017 Incentive Compensation Plan pursuant to the followingoutstanding awards: 3,143,948 stock options, 575,389 unvested restricted stock units, and 2,291,794 performance stock units (assuming that the outstanding performancestock units are earned at the maximum award level).3Represents the weighted average exercise price of outstanding stock options. Does not take into consideration outstanding restricted stock units or performance stock units,which, once vested, may be converted into shares of our common stock on a one-for-one basis upon distribution at no additional cost.4Excludes securities reflected in the first column, “Number of securities to be issued upon exercise of outstanding options, warrants and rights”. Includes 20,528,003 sharesof common stock available for issuance as stock options, restricted stock awards, performance stock awards, performance awards and stock appreciation rights under theAnthem 2017 Incentive Compensation Plan at December 31, 2019. Includes 4,853,107 shares of common stock available for issuance under the Stock Purchase Plan atDecember 31, 2019. The information required by this Item concerning the stock ownership of management and five percent beneficial owners is incorporated herein by referencefrom our definitive Proxy Statement for our 2020 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A within 120 daysafter the end of our last fiscal year.-145-ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.The information required by this Item concerning certain relationships and related person transactions and director independence is incorporated herein byreference from our definitive Proxy Statement for our 2020 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A within120 days after the end of our last fiscal year.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.The information required by this Item concerning principal accountant fees and services is incorporated herein by reference from our definitive ProxyStatement for our 2020 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our lastfiscal year.-146-PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.(a) 1. Financial Statements:The following consolidated financial statements of the Company are set forth in Part II, Item 8:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2019 and 2018Consolidated Statements of Income for the years ended December 31, 2019, 2018, and 2017Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017Notes to Consolidated Financial Statements2. Financial Statement Schedule:The following financial statement schedule of the Company is included in Item 15(c):Schedule II—Condensed Financial Information of Registrant (Parent Company Only).All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions,are inapplicable, or the required information is included in the consolidated financial statements, and therefore, have been omitted.3. Exhibits required to be filed as part of this report:ExhibitNumber Exhibit 2.1 Agreement and Plan of Merger, dated as of July 23, 2015 among Anthem, Inc., Anthem Merger Sub. Corp. and Cigna Corporation, incorporatedby reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 27, 2015. 3.1 Amended and Restated Articles of Incorporation of the Company, as amended and restated effective May 15, 2019, incorporated by reference toExhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 15, 2019. 3.2 Bylaws of the Company, as amended effective May 15, 2019, incorporated by reference to Exhibit 3.2 to the Company’s Current Report onForm 8-K/A filed on June 5, 2019. 4.1 Form of Specimen Certificate of the Company’s common stock, $0.01 par value per share, incorporated by reference to Exhibit 4.3 to theCompany’s Post-Effective Amendment No.1 to Form S-8 Registration Statement filed on May 23, 2017. 4.2 Indenture, dated as of December 9, 2004, between the Company and The Bank of New York Trust Company, N.A., as trustee, including theForm of the Company’s 5.950% Notes due 2034, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filedon December 15, 2004. 4.3 Indenture, dated as of January 10, 2006, between the Company and The Bank of New York Mellon Trust Company, N.A. (formerly known asThe Bank of New York Trust Company, N.A.), as trustee, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 11, 2006. (a)Form of 5.85% Notes due 2036, incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on January11, 2006. (b)Form of 6.375% Notes due 2037, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 8,2007. -147-ExhibitNumber Exhibit (c)Form of 4.350% Notes due 2020, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed onAugust 12, 2010. (d)Form of 5.800% Notes due 2040, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed onAugust 12, 2010. (e)Form of 3.700% Notes due 2021, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed onAugust 15, 2011. (f)Form of 3.125% Notes due 2022, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 7,2012. (g)Form of 4.625% Notes due 2042, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on May 7,2012. (h)Form of 3.300% Notes due 2023, incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed onSeptember 10, 2012. (i)Form of 4.650% Notes due 2043, incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed onSeptember 10, 2012. (j)Form of 5.100% Notes due 2044, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on July31, 2013. (k)Form of 3.500% Notes due 2024, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on August12, 2014. (l)Form of 4.650% Notes due 2044, incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on August12, 2014. (m)Form of 4.850% Notes due 2054, incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on August12, 2014. 4.4 Indenture dated as of October 9, 2012 between the Company and The Bank of New York Mellon Trust Company, N.A. as trustee, including theForm of the 2.750% Senior Convertible Debentures due 2042, incorporated by reference to Exhibit 4.1 to the Company’s Current Report onForm 8-K filed on October 9, 2012. 4.5 Subordinated Indenture, dated as of May 12, 2015, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee,incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 12, 2015. 4.6 Indenture dated as of November 21, 2017 between the Company and The Bank of New York Mellon Trust Company, N.A. as trustee,incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 21, 2017. (a)Form of 2.500% Notes due 2020, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed onNovember 21, 2017. (b)Form of 2.950% Notes due 2022, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed onNovember 21, 2017. (c)Form of 3.350% Notes due 2024, incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed onNovember 21, 2017. (d)Form of 3.650% Notes due 2027, incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed onNovember 21, 2017. (e)Form of 4.375% Notes due 2047, incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed onNovember 21, 2017. (f)Form of 4.101% Notes due 2028, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March2, 2018. (g)Form of 4.550% Notes due 2048, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March2, 2018. (h)Form of 2.375% Notes due 2025, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed onSeptember 9, 2019. -148-ExhibitNumber Exhibit (i)Form of 2.875% Notes due 2029, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed onSeptember 9, 2019. (j)Form of 3.700% Notes due 2049, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed onSeptember 9, 2019. 4.7 Upon the request of the Securities and Exchange Commission, the Company will furnish copies of any other instruments defining the rights ofholders of long-term debt of the Company or its subsidiaries. 4.8 Description of the Company’s Securities Registered Pursuant to Section 12 of the Exchange Act. 10.1* Anthem Incentive Compensation Plan, as amended and restated effective December 2, 2014, incorporated by reference to Exhibit 10.2 to theCompany’s Current Report on Form 8-K filed on December 2, 2014. (a)Form of Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2014, incorporated by reference to Exhibit10.2(p) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014. (b)Form of Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2015, incorporated by reference to Exhibit10.2(n) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. (c)Form of Amendment, dated March 9, 2016, to Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2014,incorporated by reference to Exhibit 10.2(m) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. (d)Form of Amendment, dated March 9, 2016, to Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2015,incorporated by reference to Exhibit 10.2(p) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. (e)Form of Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2016 and 2017, incorporated by reference toExhibit 10.2(s) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. (f)Form of Incentive Compensation Plan Restricted Stock Unit Award Agreement for 2017, incorporated by reference to Exhibit 10.2(t) tothe Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. 10.2*2017 Anthem Incentive Compensation Plan, as amended and restated effective October 1, 2019, incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. (a)Form of Incentive Compensation Plan Performance Stock Unit Award Agreement for 2017, incorporated by reference to Exhibit 10.1(r)to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. (b)Form of Incentive Compensation Plan Performance Stock Unit Award Agreement for the Chief Executive Officer for 2017, incorporatedby reference to Exhibit 10.2(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. (c)Form of Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2018, incorporated by reference to Exhibit10.2(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. (d)Form of Incentive Compensation Plan Restricted Stock Unit Award Agreement for 2018, incorporated by reference to Exhibit 10.2(e) tothe Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. (e)Form of Incentive Compensation Plan Performance Stock Unit Award Agreement for 2018, incorporated by reference to Exhibit 10.2(f)to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. (f)Form of Incentive Compensation Plan Nonqualified Stock Option Award Agreement commencing July 2018, incorporated by reference toExhibit 10.2(h) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. (g)Form of Incentive Compensation Plan Restricted Stock Unit Award Agreement commencing July 2018, incorporated by reference toExhibit 10.2(i) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.-149-ExhibitNumber Exhibit (h)Form of Incentive Compensation Plan Performance Stock Unit Award Agreement commencing July 2018, incorporated by reference toExhibit 10.2(j) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. (i)Form of Incentive Compensation Plan Nonqualified Stock Option Award Agreement for 2019, incorporated by reference to Exhibit10.2(l) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. (j)Form of Incentive Compensation Plan Restricted Stock Unit Award Agreement for 2019, incorporated by reference to Exhibit 10.2(m) tothe Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. (k)Form of Incentive Compensation Plan Performance Stock Unit Award Agreement for 2019, incorporated by reference to Exhibit 10.2(n)to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. 10.3*Anthem, Inc. Comprehensive Nonqualified Deferred Compensation Plan, as amended and restated effective October 1, 2019, incorporated byreference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. 10.4*Anthem, Inc. Executive Agreement Plan, as amended and restated effective December 2, 2014, incorporated by reference to Exhibit 10.4 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2014. (a)First Amendment, dated March 9, 2016, to Executive Agreement Plan, incorporated by reference to Exhibit 10.4(a) to the Company’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2016. (b)Second Amendment, dated January 6, 2017, to Executive Agreement Plan, incorporated by reference to Exhibit 10.3(b) to the Company’sAnnual Report on Form 10-K for the year ended December 31, 2016. (c)Third Amendment, dated August 27, 2018, to Executive Agreement Plan, incorporated by reference to Exhibit 10.4(c) to the Company’sQuarterly Report on Form 10-Q for the quarter ended September 30, 2018. 10.5*Anthem, Inc. Executive Salary Continuation Plan, as amended and restated effective December 2, 2014, incorporated by reference to Exhibit10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. 10.6*Anthem, Inc. Directed Executive Compensation Plan amended effective January 1, 2020. 10.7*Anthem, Inc. Board of Directors Compensation Program, as amended effective May 15, 2019, incorporated by reference to Exhibit 10.7 to theCompany’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019. 10.8*Anthem Board of Directors’ Deferred Compensation Plan, as amended and restated effective December 2, 2014, incorporated by reference toExhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. 10.9* (a)Form of Employment Agreement between the Company and each of the following: John E. Gallina, Peter D. Haytaian, Gloria McCarthyand Thomas C. Zielinski, incorporated by reference to Exhibit A to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q forthe quarter ended September 30, 2007. (b)Form of Employment Agreement between the Company and Gail Boudreaux, incorporated by reference to Exhibit A to Exhibit 10.1 tothe Company’s Current Report on Form 8-K filed on November 6, 2017. (c)Form of Employment Agreement between the Company and each of the following: Felicia F. Norwood, Prakash Patel and Leah Starkincorporated by reference to Exhibit 10.9(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. 10.10*Offer Letter, by and between the Company and Gail Boudreaux, dated as of November 5, 2017, incorporated by reference to Exhibit 10.1 to theCompany’s Current Report on Form 8-K filed on November 6, 2017. 10.11 Blue Cross License Agreement by and between Blue Cross Blue Shield Association and the Company, including revisions, if any, adopted bythe Member Plans through November 21, 2019. 10.12 Blue Shield License Agreement by and between Blue Cross Blue Shield Association and the Company, including revisions, if any, adopted bythe Member Plans through November 21, 2019. -150-ExhibitNumber Exhibit 21 Subsidiaries of the Company. 23 Consent of Independent Registered Public Accounting Firm. 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act Rules, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act Rules, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. 101 The following materials from Anthem, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL(Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) theConsolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements ofShareholders’ Equity; (vi) the Notes to Consolidated Financial Statements and (vii) Financial Statement Schedule II. The instance documentdoes not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 104 Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101. * Indicates management contracts or compensatory plans or arrangements.(b) ExhibitsThe response to this portion of Item 15 is set forth in paragraph (a) 3 above.(c) Financial Statement ScheduleSchedule II—Condensed Financial Information of Registrant (Parent Company Only).ITEM 16. FORM 10-K SUMMARY.None.-151-Schedule II—Condensed Financial Information of RegistrantAnthem, Inc. (Parent Company Only)Balance Sheets(In millions, except share data)December 31, 2019 December 31, 2018Assets Current assets: Cash and cash equivalents$1,818 $1,290Fixed maturity securities, current (amortized cost of $592 and $589)602 573Equity securities, current253 86Other invested assets, current4 10Other receivables92 131Income taxes receivable170 —Net due from subsidiaries602 170Securities lending collateral17 35Other current assets462 320Total current assets4,020 2,615Long-term investments: Equity securities6 6Other invested assets, long-term651 616Property and equipment, net170 186Deferred tax assets, net216 209Investments in subsidiaries47,423 44,877Other noncurrent assets263 225Total assets$52,749 $48,734Liabilities and shareholders’ equity Liabilities Current liabilities: Accounts payable and accrued expenses$887 $1,429Security trades pending payable9 —Securities lending payable17 35Income taxes payable— 112Current portion of long-term debt1,598 849Other current liabilities237 235Total current liabilities2,748 2,660Long-term debt, less current portion17,762 17,192Other noncurrent liabilities511 341Total liabilities21,021 20,193Commitments and contingencies—Note 5 Shareholders’ equity Preferred stock, without par value, shares authorized - 100,000,000; shares issued and outstanding - none— —Common stock, par value $0.01, shares authorized - 900,000,000; shares issued and outstanding - 252,922,161 and 257,395,5773 3Additional paid-in capital9,448 9,536Retained earnings22,573 19,988Accumulated other comprehensive loss(296) (986)Total shareholders’ equity31,728 28,541Total liabilities and shareholders’ equity$52,749 $48,734 See accompanying notes.-152-Anthem, Inc. (Parent Company Only)Statements of Income Years ended December 31(In millions)2019 2018 2017Revenues Net investment income$81 $39 $64Net realized losses on financial instruments(65) (46) (18)Other-than-temporary impairment losses on investments: Total other-than-temporary impairment losses on investments(23) (15) (7)Portion of other-than-temporary impairment losses recognized in other comprehensive income(loss)3 — —Other-than-temporary impairment losses recognized in income(20) (15) (7)Administrative fees and other revenue22 2 —Total revenues (losses)18 (20) 39Expenses General and administrative expense88 86 437Interest expense723 723 727Loss on extinguishment of debt2 11 283Total expenses813 820 1,447Loss before income tax credits and equity in net income of subsidiaries(795) (840) (1,408)Income tax credits(251) (238) (216)Equity in net income of subsidiaries5,351 4,352 5,035Net income$4,807 $3,750 $3,843 See accompanying notes.-153-Anthem, Inc. (Parent Company Only)Statements of Comprehensive Income Years ended December 31(in millions)2019 2018 2017Net income$4,807 $3,750 $3,843Other comprehensive income, net of tax: Change in net unrealized gains/losses on investments680 (418) 173Change in non-credit component of other-than-temporary impairment losses on investments— (2) 4Change in net unrealized gains/losses on cash flow hedges(16) 37 (65)Change in net periodic pension and postretirement costs26 (90) 51Foreign currency translation adjustments— (1) 3Other comprehensive income (loss)690 (474) 166Total comprehensive income$5,497 $3,276 $4,009 See accompanying notes.-154-Anthem, Inc. (Parent Company Only)Statements of Cash Flows Years ended December 31(In millions)2019 2018 2017Operating activities Net income$4,807 $3,750 $3,843Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of subsidiaries(1,561) (744) (2,437)Net realized losses on financial instruments65 46 18Other-than-temporary impairment losses recognized in income20 15 7Loss on extinguishment of debt2 11 283Deferred income taxes2 (43) (33)Amortization, net of accretion37 43 25Depreciation expense69 70 69Share-based compensation294 226 170Changes in operating assets and liabilities: Receivables, net41 (73) (17)Other invested assets, current6 (5) (1)Other assets(235) (225) (102)Amounts due (from)/ to subsidiaries(432) 2,259 (1,034)Accounts payable and accrued expenses(608) 303 491Other liabilities186 154 (61)Income taxes(282) 187 (6)Other, net— 1 (2)Net cash provided by operating activities2,411 5,975 1,213Investing activities Purchases of investments(9,682) (800) (3,814)Proceeds from sales, maturities, calls and redemptions of investments9,457 1,865 2,595Changes in collateral and settlement of non-hedging derivatives— — 65Capitalization of subsidiaries(232) (4,379) (124)Changes in securities lending collateral18 (21) 25Purchases of property and equipment, net of sales(54) (137) (44)Other, net— 4 18Net cash used in investing activities(493) (3,468) (1,279)Financing activities Net (repayments of) proceeds from commercial paper borrowings(297) (107) 175Proceeds from long-term borrowings2,473 835 5,458Repayments of long-term borrowings(1,123) (1,684) (2,815)Changes in securities lending payable(18) 21 (25)Changes in bank overdrafts64 (107) 51Premiums paid on equity call options(1) — —Proceeds from sale of put options— 1 1Proceeds from issuance of common stock under Equity Units stock purchase contracts— 1,250 —Repurchase and retirement of common stock(1,701) (1,685) (1,998)Change in collateral and settlements of debt-related derivatives(34) 23 (149)Cash dividends(856) (812) (737)Proceeds from issuance of common stock under employee stock plans187 173 225Taxes paid through withholding of common stock under employee stock plans(84) (81) (47)Net cash (used in) provided by financing activities(1,390) (2,173) 139Change in cash and cash equivalents528 334 73Cash and cash equivalents at beginning of year1,290 956 883Cash and cash equivalents at end of year$1,818 $1,290 $956 See accompanying notes.-155-Anthem, Inc.(Parent Company Only)Notes to Condensed Financial StatementsDecember 31, 2019(In Millions, Except Per Share Data)1. Basis of Presentation and Significant Accounting PoliciesIn the parent company only financial statements of Anthem, Inc., or Anthem, Anthem’s investment in subsidiaries is stated at cost plus equity in undistributedearnings of the subsidiaries. Anthem’s share of net income of its unconsolidated subsidiaries is included in income using the equity method of accounting.Certain amounts presented in the parent company only financial statements are eliminated in the consolidated financial statements of Anthem.Anthem’s parent company only financial statements should be read in conjunction with Anthem’s audited consolidated financial statements and theaccompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K.2. Subsidiary TransactionsDividends from SubsidiariesAnthem received cash dividends from subsidiaries of $3,790, $3,606 and $2,268 during 2019, 2018 and 2017, respectively.Dividends to SubsidiariesCertain subsidiaries of Anthem own shares of Anthem common stock. Anthem paid cash dividends to subsidiaries related to these shares of common stock inthe amount of $38, $36 and $32 during 2019, 2018 and 2017, respectively.Investments in SubsidiariesCapital contributions to subsidiaries were $232, $4,379 and $124 during 2019, 2018 and 2017, respectively.Amounts Due to and From SubsidiariesAt December 31, 2019 and 2018, Anthem reported amounts due from subsidiaries of $602 and $170, respectively. The amounts due from subsidiariesprimarily include amounts for allocated administrative expenses or daily cash management activities. These items are routinely settled, and as such, are classified ascurrent assets or liabilities.Guarantees on Behalf of SubsidiariesAnthem guarantees contractual or financial obligations or solvency requirements for certain of its subsidiaries. These guarantees approximated $569 atDecember 31, 2019. There were no payments made on these guarantees in 2019.3. Derivative Financial InstrumentsThe information regarding derivative financial instruments contained in Note 5, “Derivative Financial Instruments,” of the Notes to Consolidated FinancialStatements of Anthem and its subsidiaries, included in Part II, Item 8 of this Annual Report on Form 10-K, is incorporated herein by reference.4. Long-Term DebtThe information regarding long-term debt contained in Note 12, “Debt,” of the Notes to Consolidated Financial Statements of Anthem and its subsidiaries,included in Part II, Item 8 of this Annual Report on Form 10-K, is incorporated herein by reference.-156-5. Commitments and ContingenciesThe information regarding commitments and contingencies contained in Note 13, “Commitments and Contingencies,” of the Notes to Consolidated FinancialStatements of Anthem and its subsidiaries, included in Part II, Item 8 of this Annual Report on Form 10-K, is incorporated herein by reference.6. Capital StockThe information regarding capital stock contained in Note 14, “Capital Stock,” of the Notes to Consolidated Financial Statements of Anthem and itssubsidiaries, included in Part II, Item 8 of this Annual Report on Form 10-K, is incorporated herein by reference.7. LeasesBeginning in 2019, certain of our leases, including the lease for our principal executive offices located at 220 Virginia Avenue, Indianapolis, Indiana, areobligations of Anthem, Inc. (Parent Company). At December 31, 2019, these leases had an aggregate right-of-use asset of $99, a lease liability balance of $83,operating lease expense of $7 and future lease payments as follows: 2020, $11; 2021, $11; 2022, $11; 2023, $12; 2024, $11; and thereafter $70. All otherinformation regarding leases is contained in Note 17, “Leases,” of the Notes to Consolidated Financial Statements of Anthem and its subsidiaries, included in PartII, Item 8 of this Annual Report on Form 10-K.-157-SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. ANTHEM, INC. By:/s/ GAIL K. BOUDREAUX Gail K. BoudreauxPresident and Chief Executive OfficerDated: February 19, 2020Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities and on the dates indicated. Signature TitleDate/s/ GAIL K. BOUDREAUX President and Chief Executive Officer, Director(Principal Executive Officer)February 19, 2020Gail K. Boudreaux /s/ JOHN E. GALLINA Executive Vice President and Chief Financial Officer (Principal FinancialOfficer)February 19, 2020John E. Gallina /s/ RONALD W. PENCZEK Senior Vice President and Chief Accounting Officer (PrincipalAccounting Officer)February 19, 2020Ronald W. Penczek /s/ ELIZABETH E. TALLETT Chair of the BoardFebruary 19, 2020Elizabeth E. Tallett /s/ R. KERRY CLARK DirectorFebruary 19, 2020R. Kerry Clark /s/ ROBERT L. DIXON, JR. DirectorFebruary 19, 2020Robert L. Dixon, Jr. /s/ LEWIS HAY III DirectorFebruary 19, 2020Lewis Hay III /s/ JULIE A. HILL DirectorFebruary 19, 2020Julie A. Hill /s/ BAHIJA JALLAL DirectorFebruary 19, 2020Bahija Jallal /s/ ANTONIO F. NERI DirectorFebruary 19, 2020Antonio F. Neri /s/ RAMIRO G. PERU DirectorFebruary 19, 2020Ramiro G. Peru /s/ RYAN M. SCHNEIDER DirectorFebruary 19, 2020Ryan M. Schneider -158-Exhibit 4.81DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACTOF 1934The common stock of Anthem, Inc. (“Anthem,” “we,” “our,” or “us”) is the only class of securities registered under Section 12 of the Securities Exchange Act of1934, as amended.The following is a summary of the general terms and provisions of our common stock. This summary does not purport to be complete and is subject to andqualified by reference to our amended and restated articles of incorporation, as amended (our “articles of incorporation”) and our bylaws, as amended (our“bylaws”), both of which are filed as exhibits to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).For additional information, please read our articles of incorporation, our bylaws and the applicable provisions of the Indiana Business Corporation Law, asamended (the “IBCL”).GeneralWe are authorized to issue up to 900,000,000 shares of common stock, par value $0.01 per share, as well as up to 100,000,000 shares of preferred stock,without par value. We have no shares of preferred stock issued or outstanding.Each holder of our common stock is entitled to one vote per share of record on all matters to be voted upon by the shareholders. Holders do not havecumulative voting rights in the election of directors or any other matter.Subject to the preferential rights of the holders of any preferred stock that may at the time be outstanding, each share of common stock will entitle the holderof that share to an equal and ratable right to receive dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by us) ifdeclared from time to time by our board of directors and if there are sufficient funds to legally pay a dividend.In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of common stock will be entitled to share ratably inall assets remaining after payments to creditors and after satisfaction of the liquidation preference, if any, of the holders of any preferred stock that may at the timebe outstanding.Holders of common stock have no preemptive or redemption rights and will not be subject to further calls or assessments by us.Our common stock trades on the New York Stock Exchange under the symbol “ANTM.” Computershare Trust Company, N.A. is the registrar, transferagent, conversion agent and dividend disbursing agent for the common stock. Authorized But Unissued SharesIndiana law does not require shareholder approval for any issuance of authorized shares. Authorized but unissued shares may be used for a variety ofcorporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existenceof authorized but unissued shares may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could rendermore difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity ofcurrent management and possibly deprive the shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Inaddition, depending on the rights prescribed for any series of preferred stock that may be issued, the issuance of preferred stock could have an adverse effect on thevoting power of the holders of common stock or could impose restrictions upon the payment of dividends and other distributions to the holders of common stock.Limitations on Ownership of Our Common Stock in Articles of IncorporationAs required under our licenses with the Blue Cross and Blue Shield Association (“BCBSA”), our articles of incorporation contain certain limitations on theownership of our common stock. Our articles of incorporation provide that no person may beneficially own shares of voting capital stock in excess of specifiedownership limits, except with the prior approval of a majority of the “continuing directors.” The ownership limits, which may not be exceeded without the priorapproval of the BCBSA, are the following:for any institutional investor (as defined in our articles of incorporation), one share less than 10% of our outstanding voting securities;for any non-institutional investor (as defined in our articles of incorporation), one share less than 5% of our outstanding voting securities; andfor any person, one share less than the number of shares of our common stock or other equity securities (or a combination thereof)representing a 20% ownership interest in us.Any transfer of stock that would result in any person beneficially owning shares of capital stock in excess of any ownership limit will result in the intendedtransferee acquiring no rights in the shares exceeding such ownership limit (with certain exceptions) and the person’s excess shares will be deemed transferred toan escrow agent to be held until the shares are transferred to a person whose ownership of the shares will not violate the ownership limit.Certain Other Provisions of Our Articles of Incorporation and BylawsCertain other provisions of our articles of incorporation and bylaws may delay or make more difficult unsolicited acquisitions or changes of control of us.These provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change in control of us,although these proposals, if made, might be considered desirable by a majority of our shareholders. These provisions may also have the effect of making it moredifficult for third parties to cause the replacement of the current management without the concurrence of the board of directors. These provisions include:the division of the board of directors into three classes serving staggered terms of office of three years;provisions limiting the maximum number of directors to 19;provisions requiring that, except in certain limited circumstances, the filling of any vacancy on the board of directors must be approved by amajority of continuing directors; andrequirements for advance notice for raising business or making nominations at shareholders’ meetings.Our bylaws establish an advance notice procedure with regard to business to be brought before an annual or special meeting of shareholders and advancenotice and proxy access procedures with regard to the nomination of candidates for election as directors, other than by or at the direction of the board of directors.Although our bylaws do not give the board of directors any power to approve or disapprove shareholder nominations for the election of directors or proposals foraction, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the established procedures arenot followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its proposalwithout regard to whether consideration of those nominees or proposals might be harmful or beneficial to us and our shareholders.In addition, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivativeaction or proceeding brought on our behalf, (b) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees oragents to us or certain specified constituents of ours, (c) any action asserting a claim arising pursuant to any provision of the IBCL or our articles of incorporationor bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, will be, to the fullest extent permitted by law, the Marion Superior Court inMarion County, Indiana or, if the Marion Superior Court lacks jurisdiction, the United States District Court for the Southern District of Indiana.Amendment and Repeal of BylawsOur articles of incorporation and bylaws provide that the bylaws may be altered, amended or repealed by either (1) the affirmative vote of a majority of theentire number of directors, or (2) except for certain provisions of the bylaws, the affirmative vote, at a shareholder meeting, of at least a majority of the votesentitled to be cast by the holders of the outstanding shares of all classes of our stock entitled to vote generally in the election of directors, considered for thispurpose as a single voting group.Certain Provisions of the Indiana Business Corporation LawAs an Indiana corporation, we are governed by the IBCL. The following are some of the more significant provisions of the IBCL that may delay, prevent ormake more difficult certain unsolicited acquisitions or changes of control of us. These provisions also may have the effect of preventing changes in ourmanagement. It is possible that these provisions could make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their bestinterest.Control Share Acquisitions. Under Chapter 42 of the IBCL, an acquiring person or group who acquires, directly or indirectly, ownership of, or the power todirect the exercise of voting power with respect to, issued and outstanding “control shares” in an “issuing public corporation” may not exercise voting rights onany control shares unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meetingof those shareholders held upon the request and at the expense of the acquiring person. If the acquiring person has acquired control shares with a majority of thevoting power and the control shares are accorded full voting rights by the disinterested shareholders, the disinterested shareholders of the issuing public corporationhave dissenters’ rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL. We are an “issuing public corporation” as defined under Chapter42.Under Chapter 42, “control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by thatperson or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of theissuing public corporation in the election of directors within any of the following ranges: (i) one-fifth or more but less than one-third; (ii) one-third or more but lessthan a majority; or (iii) a majority or more.Chapter 42 does not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or bylaws, including a bylaw adopted bythe corporation’s board of directors, provide that they do not apply. Our bylaws provide that we are not subject to Chapter 42; however, our board of directorscould amend our bylaws to rescind our election to opt out of Chapter 42.Certain Business Combinations. Chapter 43 of the IBCL restricts the ability of an Indiana corporation that has 100 or more shareholders to engage in anycombinations with an “interested shareholder” for five years after the date the shareholder became an “interested shareholder” (such date, the “share acquisitiondate”), unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s share acquisition date is approved by theboard of directors of the corporation before the share acquisition date. If such prior approval is not obtained, the interested shareholder may effect a combinationafter the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified fair price criteria.For purposes of Chapter 43, “interested shareholder” means any person, other than the corporation or its subsidiaries, who is (1) the beneficial owner,directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation or (2) an affiliate or associate of the corporation,which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the votingpower of the then outstanding shares of the corporation.Chapter 43 does not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majorityof the disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitionsoccurring after its effective date. Our articles of incorporation do not exclude us from Chapter 43.Mandatory Classified Board of Directors. Under Chapter 33 of the IBCL, a corporation with a class of voting shares registered with the SEC underSection 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a bylaw expressly electing not to be governed by thisprovision. Although our articles of incorporation and bylaws provide for a classified board of directors so long as we are required to do so under our licenses withthe BCBSA, we adopted an amendment to our bylaws electing not to be subject to this mandatory requirement effective July 29, 2009.Unanimous Written Consent of Shareholders. Under Chapter 29 of the IBCL, as well as our articles of incorporation and our bylaws, any action required orpermitted to be taken by the holders of common stock may be effected only at an annual meeting or special meeting of such holders, and shareholders may act inlieu of such meetings only by unanimous written consent.DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACTOF 1934The common stock of Anthem, Inc. (“Anthem,” “we,” “our,” or “us”) is the only class of securities registered under Section 12 of the Securities Exchange Act of1934, as amended.The following is a summary of the general terms and provisions of our common stock. This summary does not purport to be complete and is subject to andqualified by reference to our amended and restated articles of incorporation, as amended (our “articles of incorporation”) and our bylaws, as amended (our“bylaws”), both of which are filed as exhibits to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).For additional information, please read our articles of incorporation, our bylaws and the applicable provisions of the Indiana Business Corporation Law, asamended (the “IBCL”).GeneralWe are authorized to issue up to 900,000,000 shares of common stock, par value $0.01 per share, as well as up to 100,000,000 shares of preferred stock,without par value. We have no shares of preferred stock issued or outstanding.Each holder of our common stock is entitled to one vote per share of record on all matters to be voted upon by the shareholders. Holders do not havecumulative voting rights in the election of directors or any other matter.Subject to the preferential rights of the holders of any preferred stock that may at the time be outstanding, each share of common stock will entitle the holderof that share to an equal and ratable right to receive dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by us) ifdeclared from time to time by our board of directors and if there are sufficient funds to legally pay a dividend.In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of common stock will be entitled to share ratably inall assets remaining after payments to creditors and after satisfaction of the liquidation preference, if any, of the holders of any preferred stock that may at the timebe outstanding.Holders of common stock have no preemptive or redemption rights and will not be subject to further calls or assessments by us.Our common stock trades on the New York Stock Exchange under the symbol “ANTM.” Computershare Trust Company, N.A. is the registrar, transferagent, conversion agent and dividend disbursing agent for the common stock. Authorized But Unissued SharesIndiana law does not require shareholder approval for any issuance of authorized shares. Authorized but unissued shares may be used for a variety ofcorporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existenceof authorized but unissued shares may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could rendermore difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity ofcurrent management and possibly deprive the shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Inaddition, depending on the rights prescribed for any series of preferred stock that may be issued, the issuance of preferred stock could have an adverse effect on thevoting power of the holders of common stock or could impose restrictions upon the payment of dividends and other distributions to the holders of common stock.Limitations on Ownership of Our Common Stock in Articles of IncorporationAs required under our licenses with the Blue Cross and Blue Shield Association (“BCBSA”), our articles of incorporation contain certain limitations on theownership of our common stock. Our articles of incorporation provide that no person may beneficially own shares of voting capital stock in excess of specifiedownership limits, except with the prior approval of a majority of the “continuing directors.” The ownership limits, which may not be exceeded without the priorapproval of the BCBSA, are the following:for any institutional investor (as defined in our articles of incorporation), one share less than 10% of our outstanding voting securities; 1Exhibit 4.81DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACTOF 1934The common stock of Anthem, Inc. (“Anthem,” “we,” “our,” or “us”) is the only class of securities registered under Section 12 of the Securities Exchange Act of1934, as amended.The following is a summary of the general terms and provisions of our common stock. This summary does not purport to be complete and is subject to andqualified by reference to our amended and restated articles of incorporation, as amended (our “articles of incorporation”) and our bylaws, as amended (our“bylaws”), both of which are filed as exhibits to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).For additional information, please read our articles of incorporation, our bylaws and the applicable provisions of the Indiana Business Corporation Law, asamended (the “IBCL”).GeneralWe are authorized to issue up to 900,000,000 shares of common stock, par value $0.01 per share, as well as up to 100,000,000 shares of preferred stock,without par value. We have no shares of preferred stock issued or outstanding.Each holder of our common stock is entitled to one vote per share of record on all matters to be voted upon by the shareholders. Holders do not havecumulative voting rights in the election of directors or any other matter.Subject to the preferential rights of the holders of any preferred stock that may at the time be outstanding, each share of common stock will entitle the holderof that share to an equal and ratable right to receive dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by us) ifdeclared from time to time by our board of directors and if there are sufficient funds to legally pay a dividend.In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of common stock will be entitled to share ratably inall assets remaining after payments to creditors and after satisfaction of the liquidation preference, if any, of the holders of any preferred stock that may at the timebe outstanding.Holders of common stock have no preemptive or redemption rights and will not be subject to further calls or assessments by us.Our common stock trades on the New York Stock Exchange under the symbol “ANTM.” Computershare Trust Company, N.A. is the registrar, transferagent, conversion agent and dividend disbursing agent for the common stock. Authorized But Unissued SharesIndiana law does not require shareholder approval for any issuance of authorized shares. Authorized but unissued shares may be used for a variety ofcorporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existenceof authorized but unissued shares may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could rendermore difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity ofcurrent management and possibly deprive the shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Inaddition, depending on the rights prescribed for any series of preferred stock that may be issued, the issuance of preferred stock could have an adverse effect on thevoting power of the holders of common stock or could impose restrictions upon the payment of dividends and other distributions to the holders of common stock.Limitations on Ownership of Our Common Stock in Articles of IncorporationAs required under our licenses with the Blue Cross and Blue Shield Association (“BCBSA”), our articles of incorporation contain certain limitations on theownership of our common stock. Our articles of incorporation provide that no person may beneficially own shares of voting capital stock in excess of specifiedownership limits, except with the prior approval of a majority of the “continuing directors.” The ownership limits, which may not be exceeded without the priorapproval of the BCBSA, are the following:for any institutional investor (as defined in our articles of incorporation), one share less than 10% of our outstanding voting securities;for any non-institutional investor (as defined in our articles of incorporation), one share less than 5% of our outstanding voting securities; andfor any person, one share less than the number of shares of our common stock or other equity securities (or a combination thereof)representing a 20% ownership interest in us.Any transfer of stock that would result in any person beneficially owning shares of capital stock in excess of any ownership limit will result in the intendedtransferee acquiring no rights in the shares exceeding such ownership limit (with certain exceptions) and the person’s excess shares will be deemed transferred toan escrow agent to be held until the shares are transferred to a person whose ownership of the shares will not violate the ownership limit.Certain Other Provisions of Our Articles of Incorporation and BylawsCertain other provisions of our articles of incorporation and bylaws may delay or make more difficult unsolicited acquisitions or changes of control of us.These provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change in control of us,although these proposals, if made, might be considered desirable by a majority of our shareholders. These provisions may also have the effect of making it moredifficult for third parties to cause the replacement of the current management without the concurrence of the board of directors. These provisions include:the division of the board of directors into three classes serving staggered terms of office of three years;provisions limiting the maximum number of directors to 19;provisions requiring that, except in certain limited circumstances, the filling of any vacancy on the board of directors must be approved by amajority of continuing directors; andrequirements for advance notice for raising business or making nominations at shareholders’ meetings.Our bylaws establish an advance notice procedure with regard to business to be brought before an annual or special meeting of shareholders and advancenotice and proxy access procedures with regard to the nomination of candidates for election as directors, other than by or at the direction of the board of directors.Although our bylaws do not give the board of directors any power to approve or disapprove shareholder nominations for the election of directors or proposals foraction, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the established procedures arenot followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its proposalwithout regard to whether consideration of those nominees or proposals might be harmful or beneficial to us and our shareholders.In addition, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivativeaction or proceeding brought on our behalf, (b) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees oragents to us or certain specified constituents of ours, (c) any action asserting a claim arising pursuant to any provision of the IBCL or our articles of incorporationor bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, will be, to the fullest extent permitted by law, the Marion Superior Court inMarion County, Indiana or, if the Marion Superior Court lacks jurisdiction, the United States District Court for the Southern District of Indiana.Amendment and Repeal of BylawsOur articles of incorporation and bylaws provide that the bylaws may be altered, amended or repealed by either (1) the affirmative vote of a majority of theentire number of directors, or (2) except for certain provisions of the bylaws, the affirmative vote, at a shareholder meeting, of at least a majority of the votesentitled to be cast by the holders of the outstanding shares of all classes of our stock entitled to vote generally in the election of directors, considered for thispurpose as a single voting group.Certain Provisions of the Indiana Business Corporation LawAs an Indiana corporation, we are governed by the IBCL. The following are some of the more significant provisions of the IBCL that may delay, prevent ormake more difficult certain unsolicited acquisitions or changes of control of us. These provisions also may have the effect of preventing changes in ourmanagement. It is possible that these provisions could make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their bestinterest.Control Share Acquisitions. Under Chapter 42 of the IBCL, an acquiring person or group who acquires, directly or indirectly, ownership of, or the power todirect the exercise of voting power with respect to, issued and outstanding “control shares” in an “issuing public corporation” may not exercise voting rights onany control shares unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meetingof those shareholders held upon the request and at the expense of the acquiring person. If the acquiring person has acquired control shares with a majority of thevoting power and the control shares are accorded full voting rights by the disinterested shareholders, the disinterested shareholders of the issuing public corporationhave dissenters’ rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL. We are an “issuing public corporation” as defined under Chapter42.Under Chapter 42, “control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by thatperson or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of theissuing public corporation in the election of directors within any of the following ranges: (i) one-fifth or more but less than one-third; (ii) one-third or more but lessthan a majority; or (iii) a majority or more.Chapter 42 does not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or bylaws, including a bylaw adopted bythe corporation’s board of directors, provide that they do not apply. Our bylaws provide that we are not subject to Chapter 42; however, our board of directorscould amend our bylaws to rescind our election to opt out of Chapter 42.Certain Business Combinations. Chapter 43 of the IBCL restricts the ability of an Indiana corporation that has 100 or more shareholders to engage in anycombinations with an “interested shareholder” for five years after the date the shareholder became an “interested shareholder” (such date, the “share acquisitiondate”), unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s share acquisition date is approved by theboard of directors of the corporation before the share acquisition date. If such prior approval is not obtained, the interested shareholder may effect a combinationafter the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified fair price criteria.For purposes of Chapter 43, “interested shareholder” means any person, other than the corporation or its subsidiaries, who is (1) the beneficial owner,directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation or (2) an affiliate or associate of the corporation,which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the votingpower of the then outstanding shares of the corporation.Chapter 43 does not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majorityof the disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitionsoccurring after its effective date. Our articles of incorporation do not exclude us from Chapter 43.Mandatory Classified Board of Directors. Under Chapter 33 of the IBCL, a corporation with a class of voting shares registered with the SEC underSection 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a bylaw expressly electing not to be governed by thisprovision. Although our articles of incorporation and bylaws provide for a classified board of directors so long as we are required to do so under our licenses withthe BCBSA, we adopted an amendment to our bylaws electing not to be subject to this mandatory requirement effective July 29, 2009.Unanimous Written Consent of Shareholders. Under Chapter 29 of the IBCL, as well as our articles of incorporation and our bylaws, any action required orpermitted to be taken by the holders of common stock may be effected only at an annual meeting or special meeting of such holders, and shareholders may act inlieu of such meetings only by unanimous written consent.for any non-institutional investor (as defined in our articles of incorporation), one share less than 5% of our outstanding voting securities; andfor any person, one share less than the number of shares of our common stock or other equity securities (or a combination thereof)representing a 20% ownership interest in us.Any transfer of stock that would result in any person beneficially owning shares of capital stock in excess of any ownership limit will result in the intendedtransferee acquiring no rights in the shares exceeding such ownership limit (with certain exceptions) and the person’s excess shares will be deemed transferred toan escrow agent to be held until the shares are transferred to a person whose ownership of the shares will not violate the ownership limit.Certain Other Provisions of Our Articles of Incorporation and BylawsCertain other provisions of our articles of incorporation and bylaws may delay or make more difficult unsolicited acquisitions or changes of control of us.These provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change in control of us,although these proposals, if made, might be considered desirable by a majority of our shareholders. These provisions may also have the effect of making it moredifficult for third parties to cause the replacement of the current management without the concurrence of the board of directors. These provisions include:the division of the board of directors into three classes serving staggered terms of office of three years;provisions limiting the maximum number of directors to 19;provisions requiring that, except in certain limited circumstances, the filling of any vacancy on the board of directors must be approved by amajority of continuing directors; and•requirements for advance notice for raising business or making nominations at shareholders’meetings.Our bylaws establish an advance notice procedure with regard to business to be brought before an annual or special meeting of shareholders and advancenotice and proxy access procedures with regard to the nomination of candidates for election as directors, other than by or at the direction of the board of directors.Although our bylaws do not give the board of directors any power to approve or disapprove shareholder nominations for the election of directors or proposals foraction, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the established procedures arenot followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its proposalwithout regard to whether consideration of those nominees or proposals might be harmful or beneficial to us and our shareholders.In addition, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivativeaction or proceeding brought on our behalf, (b) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees oragents to us or certain specified constituents of ours, (c) any action asserting a claim arising pursuant to any provision of the IBCL or our articles of incorporationor bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, will be, to the fullest extent permitted by law, the Marion Superior Court inMarion County, Indiana or, if the Marion Superior Court lacks jurisdiction, the United States District Court for the Southern District of Indiana.Amendment and Repeal of BylawsOur articles of incorporation and bylaws provide that the bylaws may be altered, amended or repealed by either (1) the affirmative vote of a majority of theentire number of directors, or (2) except for certain provisions of the bylaws, the affirmative vote, at a shareholder meeting, of at least a majority of the votesentitled to be cast by the holders of the outstanding shares of all classes of our stock entitled to vote generally in the election of directors, considered for thispurpose as a single voting group. 2Exhibit 4.81DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACTOF 1934The common stock of Anthem, Inc. (“Anthem,” “we,” “our,” or “us”) is the only class of securities registered under Section 12 of the Securities Exchange Act of1934, as amended.The following is a summary of the general terms and provisions of our common stock. This summary does not purport to be complete and is subject to andqualified by reference to our amended and restated articles of incorporation, as amended (our “articles of incorporation”) and our bylaws, as amended (our“bylaws”), both of which are filed as exhibits to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).For additional information, please read our articles of incorporation, our bylaws and the applicable provisions of the Indiana Business Corporation Law, asamended (the “IBCL”).GeneralWe are authorized to issue up to 900,000,000 shares of common stock, par value $0.01 per share, as well as up to 100,000,000 shares of preferred stock,without par value. We have no shares of preferred stock issued or outstanding.Each holder of our common stock is entitled to one vote per share of record on all matters to be voted upon by the shareholders. Holders do not havecumulative voting rights in the election of directors or any other matter.Subject to the preferential rights of the holders of any preferred stock that may at the time be outstanding, each share of common stock will entitle the holderof that share to an equal and ratable right to receive dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by us) ifdeclared from time to time by our board of directors and if there are sufficient funds to legally pay a dividend.In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of common stock will be entitled to share ratably inall assets remaining after payments to creditors and after satisfaction of the liquidation preference, if any, of the holders of any preferred stock that may at the timebe outstanding.Holders of common stock have no preemptive or redemption rights and will not be subject to further calls or assessments by us.Our common stock trades on the New York Stock Exchange under the symbol “ANTM.” Computershare Trust Company, N.A. is the registrar, transferagent, conversion agent and dividend disbursing agent for the common stock. Authorized But Unissued SharesIndiana law does not require shareholder approval for any issuance of authorized shares. Authorized but unissued shares may be used for a variety ofcorporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existenceof authorized but unissued shares may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could rendermore difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity ofcurrent management and possibly deprive the shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Inaddition, depending on the rights prescribed for any series of preferred stock that may be issued, the issuance of preferred stock could have an adverse effect on thevoting power of the holders of common stock or could impose restrictions upon the payment of dividends and other distributions to the holders of common stock.Limitations on Ownership of Our Common Stock in Articles of IncorporationAs required under our licenses with the Blue Cross and Blue Shield Association (“BCBSA”), our articles of incorporation contain certain limitations on theownership of our common stock. Our articles of incorporation provide that no person may beneficially own shares of voting capital stock in excess of specifiedownership limits, except with the prior approval of a majority of the “continuing directors.” The ownership limits, which may not be exceeded without the priorapproval of the BCBSA, are the following:for any institutional investor (as defined in our articles of incorporation), one share less than 10% of our outstanding voting securities;for any non-institutional investor (as defined in our articles of incorporation), one share less than 5% of our outstanding voting securities; andfor any person, one share less than the number of shares of our common stock or other equity securities (or a combination thereof)representing a 20% ownership interest in us.Any transfer of stock that would result in any person beneficially owning shares of capital stock in excess of any ownership limit will result in the intendedtransferee acquiring no rights in the shares exceeding such ownership limit (with certain exceptions) and the person’s excess shares will be deemed transferred toan escrow agent to be held until the shares are transferred to a person whose ownership of the shares will not violate the ownership limit.Certain Other Provisions of Our Articles of Incorporation and BylawsCertain other provisions of our articles of incorporation and bylaws may delay or make more difficult unsolicited acquisitions or changes of control of us.These provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change in control of us,although these proposals, if made, might be considered desirable by a majority of our shareholders. These provisions may also have the effect of making it moredifficult for third parties to cause the replacement of the current management without the concurrence of the board of directors. These provisions include:the division of the board of directors into three classes serving staggered terms of office of three years;provisions limiting the maximum number of directors to 19;provisions requiring that, except in certain limited circumstances, the filling of any vacancy on the board of directors must be approved by amajority of continuing directors; andrequirements for advance notice for raising business or making nominations at shareholders’ meetings.Our bylaws establish an advance notice procedure with regard to business to be brought before an annual or special meeting of shareholders and advancenotice and proxy access procedures with regard to the nomination of candidates for election as directors, other than by or at the direction of the board of directors.Although our bylaws do not give the board of directors any power to approve or disapprove shareholder nominations for the election of directors or proposals foraction, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the established procedures arenot followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its proposalwithout regard to whether consideration of those nominees or proposals might be harmful or beneficial to us and our shareholders.In addition, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivativeaction or proceeding brought on our behalf, (b) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees oragents to us or certain specified constituents of ours, (c) any action asserting a claim arising pursuant to any provision of the IBCL or our articles of incorporationor bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, will be, to the fullest extent permitted by law, the Marion Superior Court inMarion County, Indiana or, if the Marion Superior Court lacks jurisdiction, the United States District Court for the Southern District of Indiana.Amendment and Repeal of BylawsOur articles of incorporation and bylaws provide that the bylaws may be altered, amended or repealed by either (1) the affirmative vote of a majority of theentire number of directors, or (2) except for certain provisions of the bylaws, the affirmative vote, at a shareholder meeting, of at least a majority of the votesentitled to be cast by the holders of the outstanding shares of all classes of our stock entitled to vote generally in the election of directors, considered for thispurpose as a single voting group.Certain Provisions of the Indiana Business Corporation LawAs an Indiana corporation, we are governed by the IBCL. The following are some of the more significant provisions of the IBCL that may delay, prevent ormake more difficult certain unsolicited acquisitions or changes of control of us. These provisions also may have the effect of preventing changes in ourmanagement. It is possible that these provisions could make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their bestinterest.Control Share Acquisitions. Under Chapter 42 of the IBCL, an acquiring person or group who acquires, directly or indirectly, ownership of, or the power todirect the exercise of voting power with respect to, issued and outstanding “control shares” in an “issuing public corporation” may not exercise voting rights onany control shares unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meetingof those shareholders held upon the request and at the expense of the acquiring person. If the acquiring person has acquired control shares with a majority of thevoting power and the control shares are accorded full voting rights by the disinterested shareholders, the disinterested shareholders of the issuing public corporationhave dissenters’ rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL. We are an “issuing public corporation” as defined under Chapter42.Under Chapter 42, “control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by thatperson or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of theissuing public corporation in the election of directors within any of the following ranges: (i) one-fifth or more but less than one-third; (ii) one-third or more but lessthan a majority; or (iii) a majority or more.Chapter 42 does not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or bylaws, including a bylaw adopted bythe corporation’s board of directors, provide that they do not apply. Our bylaws provide that we are not subject to Chapter 42; however, our board of directorscould amend our bylaws to rescind our election to opt out of Chapter 42.Certain Business Combinations. Chapter 43 of the IBCL restricts the ability of an Indiana corporation that has 100 or more shareholders to engage in anycombinations with an “interested shareholder” for five years after the date the shareholder became an “interested shareholder” (such date, the “share acquisitiondate”), unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s share acquisition date is approved by theboard of directors of the corporation before the share acquisition date. If such prior approval is not obtained, the interested shareholder may effect a combinationafter the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified fair price criteria.For purposes of Chapter 43, “interested shareholder” means any person, other than the corporation or its subsidiaries, who is (1) the beneficial owner,directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation or (2) an affiliate or associate of the corporation,which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the votingpower of the then outstanding shares of the corporation.Chapter 43 does not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majorityof the disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitionsoccurring after its effective date. Our articles of incorporation do not exclude us from Chapter 43.Mandatory Classified Board of Directors. Under Chapter 33 of the IBCL, a corporation with a class of voting shares registered with the SEC underSection 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a bylaw expressly electing not to be governed by thisprovision. Although our articles of incorporation and bylaws provide for a classified board of directors so long as we are required to do so under our licenses withthe BCBSA, we adopted an amendment to our bylaws electing not to be subject to this mandatory requirement effective July 29, 2009.Unanimous Written Consent of Shareholders. Under Chapter 29 of the IBCL, as well as our articles of incorporation and our bylaws, any action required orpermitted to be taken by the holders of common stock may be effected only at an annual meeting or special meeting of such holders, and shareholders may act inlieu of such meetings only by unanimous written consent.Certain Provisions of the Indiana Business Corporation LawAs an Indiana corporation, we are governed by the IBCL. The following are some of the more significant provisions of the IBCL that may delay, prevent ormake more difficult certain unsolicited acquisitions or changes of control of us. These provisions also may have the effect of preventing changes in ourmanagement. It is possible that these provisions could make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their bestinterest.Control Share Acquisitions. Under Chapter 42 of the IBCL, an acquiring person or group who acquires, directly or indirectly, ownership of, or the power todirect the exercise of voting power with respect to, issued and outstanding “control shares” in an “issuing public corporation” may not exercise voting rights onany control shares unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meetingof those shareholders held upon the request and at the expense of the acquiring person. If the acquiring person has acquired control shares with a majority of thevoting power and the control shares are accorded full voting rights by the disinterested shareholders, the disinterested shareholders of the issuing public corporationhave dissenters’ rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL. We are an “issuing public corporation” as defined under Chapter42.Under Chapter 42, “control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by thatperson or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of theissuing public corporation in the election of directors within any of the following ranges: (i) one-fifth or more but less than one-third; (ii) one-third or more but lessthan a majority; or (iii) a majority or more.Chapter 42 does not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or bylaws, including a bylaw adopted bythe corporation’s board of directors, provide that they do not apply. Our bylaws provide that we are not subject to Chapter 42; however, our board of directorscould amend our bylaws to rescind our election to opt out of Chapter 42.Certain Business Combinations. Chapter 43 of the IBCL restricts the ability of an Indiana corporation that has 100 or more shareholders to engage in anycombinations with an “interested shareholder” for five years after the date the shareholder became an “interested shareholder” (such date, the “share acquisitiondate”), unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s share acquisition date is approved by theboard of directors of the corporation before the share acquisition date. If such prior approval is not obtained, the interested shareholder may effect a combinationafter the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified fair price criteria.For purposes of Chapter 43, “interested shareholder” means any person, other than the corporation or its subsidiaries, who is (1) the beneficial owner,directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation or (2) an affiliate or associate of the corporation,which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the votingpower of the then outstanding shares of the corporation.Chapter 43 does not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majorityof the disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitionsoccurring after its effective date. Our articles of incorporation do not exclude us from Chapter 43.Mandatory Classified Board of Directors. Under Chapter 33 of the IBCL, a corporation with a class of voting shares registered with the SEC underSection 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a bylaw expressly electing not to be governed by thisprovision. Although our articles of incorporation and bylaws provide for a classified board of directors so long as we are required to do so under our licenses withthe BCBSA, we adopted an amendment to our bylaws electing not to be subject to this mandatory requirement effective July 29, 2009. 3Exhibit 4.81DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACTOF 1934The common stock of Anthem, Inc. (“Anthem,” “we,” “our,” or “us”) is the only class of securities registered under Section 12 of the Securities Exchange Act of1934, as amended.The following is a summary of the general terms and provisions of our common stock. This summary does not purport to be complete and is subject to andqualified by reference to our amended and restated articles of incorporation, as amended (our “articles of incorporation”) and our bylaws, as amended (our“bylaws”), both of which are filed as exhibits to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).For additional information, please read our articles of incorporation, our bylaws and the applicable provisions of the Indiana Business Corporation Law, asamended (the “IBCL”).GeneralWe are authorized to issue up to 900,000,000 shares of common stock, par value $0.01 per share, as well as up to 100,000,000 shares of preferred stock,without par value. We have no shares of preferred stock issued or outstanding.Each holder of our common stock is entitled to one vote per share of record on all matters to be voted upon by the shareholders. Holders do not havecumulative voting rights in the election of directors or any other matter.Subject to the preferential rights of the holders of any preferred stock that may at the time be outstanding, each share of common stock will entitle the holderof that share to an equal and ratable right to receive dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by us) ifdeclared from time to time by our board of directors and if there are sufficient funds to legally pay a dividend.In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of common stock will be entitled to share ratably inall assets remaining after payments to creditors and after satisfaction of the liquidation preference, if any, of the holders of any preferred stock that may at the timebe outstanding.Holders of common stock have no preemptive or redemption rights and will not be subject to further calls or assessments by us.Our common stock trades on the New York Stock Exchange under the symbol “ANTM.” Computershare Trust Company, N.A. is the registrar, transferagent, conversion agent and dividend disbursing agent for the common stock. Authorized But Unissued SharesIndiana law does not require shareholder approval for any issuance of authorized shares. Authorized but unissued shares may be used for a variety ofcorporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existenceof authorized but unissued shares may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could rendermore difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity ofcurrent management and possibly deprive the shareholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Inaddition, depending on the rights prescribed for any series of preferred stock that may be issued, the issuance of preferred stock could have an adverse effect on thevoting power of the holders of common stock or could impose restrictions upon the payment of dividends and other distributions to the holders of common stock.Limitations on Ownership of Our Common Stock in Articles of IncorporationAs required under our licenses with the Blue Cross and Blue Shield Association (“BCBSA”), our articles of incorporation contain certain limitations on theownership of our common stock. Our articles of incorporation provide that no person may beneficially own shares of voting capital stock in excess of specifiedownership limits, except with the prior approval of a majority of the “continuing directors.” The ownership limits, which may not be exceeded without the priorapproval of the BCBSA, are the following:for any institutional investor (as defined in our articles of incorporation), one share less than 10% of our outstanding voting securities;for any non-institutional investor (as defined in our articles of incorporation), one share less than 5% of our outstanding voting securities; andfor any person, one share less than the number of shares of our common stock or other equity securities (or a combination thereof)representing a 20% ownership interest in us.Any transfer of stock that would result in any person beneficially owning shares of capital stock in excess of any ownership limit will result in the intendedtransferee acquiring no rights in the shares exceeding such ownership limit (with certain exceptions) and the person’s excess shares will be deemed transferred toan escrow agent to be held until the shares are transferred to a person whose ownership of the shares will not violate the ownership limit.Certain Other Provisions of Our Articles of Incorporation and BylawsCertain other provisions of our articles of incorporation and bylaws may delay or make more difficult unsolicited acquisitions or changes of control of us.These provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change in control of us,although these proposals, if made, might be considered desirable by a majority of our shareholders. These provisions may also have the effect of making it moredifficult for third parties to cause the replacement of the current management without the concurrence of the board of directors. These provisions include:the division of the board of directors into three classes serving staggered terms of office of three years;provisions limiting the maximum number of directors to 19;provisions requiring that, except in certain limited circumstances, the filling of any vacancy on the board of directors must be approved by amajority of continuing directors; andrequirements for advance notice for raising business or making nominations at shareholders’ meetings.Our bylaws establish an advance notice procedure with regard to business to be brought before an annual or special meeting of shareholders and advancenotice and proxy access procedures with regard to the nomination of candidates for election as directors, other than by or at the direction of the board of directors.Although our bylaws do not give the board of directors any power to approve or disapprove shareholder nominations for the election of directors or proposals foraction, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the established procedures arenot followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its proposalwithout regard to whether consideration of those nominees or proposals might be harmful or beneficial to us and our shareholders.In addition, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivativeaction or proceeding brought on our behalf, (b) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees oragents to us or certain specified constituents of ours, (c) any action asserting a claim arising pursuant to any provision of the IBCL or our articles of incorporationor bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, will be, to the fullest extent permitted by law, the Marion Superior Court inMarion County, Indiana or, if the Marion Superior Court lacks jurisdiction, the United States District Court for the Southern District of Indiana.Amendment and Repeal of BylawsOur articles of incorporation and bylaws provide that the bylaws may be altered, amended or repealed by either (1) the affirmative vote of a majority of theentire number of directors, or (2) except for certain provisions of the bylaws, the affirmative vote, at a shareholder meeting, of at least a majority of the votesentitled to be cast by the holders of the outstanding shares of all classes of our stock entitled to vote generally in the election of directors, considered for thispurpose as a single voting group.Certain Provisions of the Indiana Business Corporation LawAs an Indiana corporation, we are governed by the IBCL. The following are some of the more significant provisions of the IBCL that may delay, prevent ormake more difficult certain unsolicited acquisitions or changes of control of us. These provisions also may have the effect of preventing changes in ourmanagement. It is possible that these provisions could make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their bestinterest.Control Share Acquisitions. Under Chapter 42 of the IBCL, an acquiring person or group who acquires, directly or indirectly, ownership of, or the power todirect the exercise of voting power with respect to, issued and outstanding “control shares” in an “issuing public corporation” may not exercise voting rights onany control shares unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meetingof those shareholders held upon the request and at the expense of the acquiring person. If the acquiring person has acquired control shares with a majority of thevoting power and the control shares are accorded full voting rights by the disinterested shareholders, the disinterested shareholders of the issuing public corporationhave dissenters’ rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL. We are an “issuing public corporation” as defined under Chapter42.Under Chapter 42, “control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by thatperson or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of theissuing public corporation in the election of directors within any of the following ranges: (i) one-fifth or more but less than one-third; (ii) one-third or more but lessthan a majority; or (iii) a majority or more.Chapter 42 does not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or bylaws, including a bylaw adopted bythe corporation’s board of directors, provide that they do not apply. Our bylaws provide that we are not subject to Chapter 42; however, our board of directorscould amend our bylaws to rescind our election to opt out of Chapter 42.Certain Business Combinations. Chapter 43 of the IBCL restricts the ability of an Indiana corporation that has 100 or more shareholders to engage in anycombinations with an “interested shareholder” for five years after the date the shareholder became an “interested shareholder” (such date, the “share acquisitiondate”), unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s share acquisition date is approved by theboard of directors of the corporation before the share acquisition date. If such prior approval is not obtained, the interested shareholder may effect a combinationafter the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified fair price criteria.For purposes of Chapter 43, “interested shareholder” means any person, other than the corporation or its subsidiaries, who is (1) the beneficial owner,directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation or (2) an affiliate or associate of the corporation,which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the votingpower of the then outstanding shares of the corporation.Chapter 43 does not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majorityof the disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitionsoccurring after its effective date. Our articles of incorporation do not exclude us from Chapter 43.Mandatory Classified Board of Directors. Under Chapter 33 of the IBCL, a corporation with a class of voting shares registered with the SEC underSection 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a bylaw expressly electing not to be governed by thisprovision. Although our articles of incorporation and bylaws provide for a classified board of directors so long as we are required to do so under our licenses withthe BCBSA, we adopted an amendment to our bylaws electing not to be subject to this mandatory requirement effective July 29, 2009.Unanimous Written Consent of Shareholders. Under Chapter 29 of the IBCL, as well as our articles of incorporation and our bylaws, any action required orpermitted to be taken by the holders of common stock may be effected only at an annual meeting or special meeting of such holders, and shareholders may act inlieu of such meetings only by unanimous written consent.Unanimous Written Consent of Shareholders. Under Chapter 29 of the IBCL, as well as our articles of incorporation and our bylaws, any action required orpermitted to be taken by the holders of common stock may be effected only at an annual meeting or special meeting of such holders, and shareholders may act inlieu of such meetings only by unanimous written consent. 4Exhibit 10.6Summary of the Anthem, Inc. Directed Executive Compensation (DEC) Program (effective January 1, 2019)The Directed Executive Compensation (DEC) program is an executive perquisite plan that provides officers of Anthem, Inc. (the“Company”) with flexibility to tailor certain benefits to meet their needs with Credits.Credits can be used to reimburse the following expenses:•Investment Advisor Fees•Investment Management Fees•Financial Counseling Fees•Retirement Planning and Advice•Tax Preparation and Advice Fees•Estate Planning Fees•Legal Fees associated with:◦Anthem compensation and/or benefits program review◦Tax Preparation issues◦Estate Planning issues◦Financial Counseling issues•Tax and Investment Software•Tax, Investment and Financial SubscriptionsThe amount of Credits the executive receives is based upon his or her position.Corporate Title Credits Chief Executive Officer $54,000 per yearExecutive Vice President $30,000 per yearSenior Vice President $12,000 per yearVice President $12,000 per yearThose newly hired or promoted into an executive position will participate in the program at the beginning of the month following date of hireor promotion and will receive prorated credits for the year based on the number of full months in the position.Exhibit 10.11BLUE CROSS LICENSE AGREEMENT(Includes revisions, if any, adopted by Member Plans through their November 21, 2019 meeting)This agreement by and between Blue Cross and Blue Shield Association ("BCBSA") and The Blue Cross Plan,known as (the "Plan").PreambleWHEREAS, the Plan and/or its predecessor(s) in interest (collectively the "Plan") had the right to use the BLUECROSS and BLUE CROSS Design service marks (collectively the "Licensed Marks") for health care plans in its servicearea, which was essentially local in nature;WHEREAS, the Plan was desirous of assuring nationwide protection of the Licensed Marks, maintaining uniformquality controls among Plans, facilitating the provision of cost effective health care services to the public and otherwisebenefiting the public;WHEREAS, to better attain such ends, the Plan and the predecessor of BCBSA in 1972 simultaneously executedthe BCA License Agreement (s) and the Ownership Agreement; andWHEREAS, BCBSA and the Plan desire to supercede said Agreement(s) and to revise certain provisions of theOwnership Agreement to reflect their current practices and to assure the continued integrity of the Licensed Marks and ofthe BLUE CROSS system;NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree asfollows:Exhibit 10.11Agreement1.BCBSA hereby grants to the Plan, upon the terms and conditions of this License Agreement (“Agreement” or “Primary License Agreement”),the right to use BLUE CROSS in its trade and/or corporate name (the "Licensed Name"), and the right to use the Licensed Marks, in the sale, marketing andadministration of health care plans and related services in the Service Area set forth and defined in paragraph 5 below. As used herein, health care plans andrelated services shall include acting as a nonprofit health care plan, a for-profit health care plan, or mutual health insurer operating on a not-for-profit or for-profitbasis, under state law; financing access to health care services; when working with a bank that holds the relevant license to use the Licensed Name and Marks,offering: (i) tax- favored savings accounts for medical expenses and means for accessing such accounts, such as debit cards or checks, that are provided solelyto support access to such tax- favored savings accounts, all pursuant to such license, or (ii) prepaid rewards cards that are provided for completion of a wellnessprogram, all pursuant to such license; providing health care management and administration; administering, but not underwriting, non- health portions ofWorkers’ Compensation Insurance; delivering health care services, except hospital services (as defined in the Guidelines to Membership Standards Applicableto Regular Members); and performing the Eligibility and Enrollment functions of HR administration for all benefit plans offered by a group account to itsmembers, including benefit plans not provided by the Plan, provided that the Plan has contracted to provide Health Coverage under the Licensed Marks to theaccount (as the terms “Health Coverage,” “Eligibility” and “Enrollment” are defined in Exhibit 4, Paragraph 2.t.).2.The Plan may use the Licensed Marks and Name in connection with the offering of: i) health care plans and related services in the ServiceArea through Controlled Affiliates, provided that each such Controlled Affiliate is separately licensed to use the Licensed Marks and Name under the terms andconditions contained in the Agreement attached as Exhibit 1 hereto (the "Controlled Affiliate License Agreement"); and ii) insurance coverages offered by lifeinsurers under the applicable law in the Service Area, other than those which the Plan may offer in its own name, provided through Controlled Affiliates, providedthat each such Controlled Affiliate is separately licensed to use the Licensed Marks and Name under the terms and conditions contained in the Agreementattached as Exhibit 1A hereto (the "Controlled Affiliate License Agreement Applicable to Life Insurance Companies") or the Agreement attached as Exhibit 1A1hereto (the “Controlled Affiliate Trademark License Agreement for Life and Disability Insurance Products”) and further provided that the offering of such servicesdoes not and will not dilute or tarnish the unique value of the Licensed Marks and Name; and iii) administration and underwriting of Workers’ CompensationInsurance Controlled Affiliates, provided that each such Controlled Affiliate is separately licensed to use the Licensed Marks and Name under the terms andconditions contained in the Agreement attached as Exhibit 1 hereto (the “Controlled Affiliate License”); and iv) regional Medicare Advantage PPO products incooperation with one or more other Plans through jointly-held Controlled Affiliates, provided that each such Controlled Affiliate is separately licensed to use theLicensed Marks and Name under the terms and conditions contained in the Agreement attached as Exhibit 1B hereto (the “Controlled Affiliate LicenseAgreement Applicable to Regional Medicare Advantage PPO Products”); and v) regional Medicare Part D Prescription Drug Plan products in cooperation withone or more other Plans through jointly-held Controlled Affiliates, provided that each such Controlled Affiliate is separately licensed to use the Licensed Marksand Name under the terms and conditions contained in the Agreement attached as Exhibit 1C hereto (the “Controlled Affiliate License Agreement Applicable toRegional Medicare Part D Prescription Drug Plan Products”). As used herein, a Controlled Affiliate is defined as an entity organized and operated in such amanner that it is subject to the bona fide control of a Plan or Plans and, if the entity meets the standards of Paragraph 2a.B but not Paragraph2a.A, the entity, itsowners, and personsAmended as of September 19, 2014with authority to select or appoint members or board members, other than a Plan or Plans, have received written approval of BCBSA. Absent writtenapproval by BCBSA of an alternative method of control, bona fide control shall have the meaning set forth in Paragraphs 2a. and 2b.2a. With respect to the Controlled Affiliate Licenses authorized in clauses i) through iii) of Paragraph 2, bona fide control shall mean that a Plan (the“Sponsoring Plan”) authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant to this Primary License Agreement with BCBSAmust have:A.The legal authority, directly or indirectly through wholly-owned subsidiaries: (a) to select members of the Controlled Affiliate's governingbody having more than 50% voting control thereof; (b) to exercise control over the policy and operations of the Controlled Affiliate; (c) to prevent any change inthe articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which the Sponsoring Plan does not concur. Inaddition, the Sponsoring Plan directly or indirectly through wholly-owned subsidiaries shall own more than 50% of any for-profit Controlled Affiliate, provided thatin instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licensee and such publicly traded Controlled Affiliate Licensee owns andcontrols other Controlled Affiliate Licensees, the Sponsoring Plan directly or indirectly shall own and control more than 50% of any Controlled Affiliate that isindirectly owned and controlled by the publicly traded Controlled Affiliate Licensee; orB.The legal authority directly or indirectly through wholly-owned subsidiaries (a) to select members of the Controlled Affiliate's governing bodyhaving not less than 50% voting control thereof; (b) to prevent any change in the articles of incorporation, bylaws or other establishing or governing documentsof the Controlled Affiliate with which the Sponsoring Plan does not concur; (c) to exercise control over the policy and operations of the Controlled Affiliate at leastequal to that exercised by persons or entities (jointly or individually) other than the Sponsoring Plan. Notwithstanding anything to the contrary in (a) through (c)hereof, the Controlled Affiliate’s establishing or governing documents must also require written approval by the Sponsoring Plan before the Controlled Affiliatecan:1.Change its legal and/or trade name;2.Change the geographic area in which it operates;3.Change any of the types of businesses in which it engages;4.Create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in the ordinary course of business;5.Sell any assets, except for sales in the ordinary course of business or sales of equipment no longer useful or being replaced;6.Make any loans or advances except in the ordinary course of business; Amended as of March 26, 2015- 2 -7.Enter into any arrangement or agreement with any party directly or indirectly affiliated with any of the owners of the Controlled Affiliate orpersons or entities with the authority to select or appoint members or board members of the ControlledAffiliate, other than the Sponsoring Plan or other Plans (excluding owners of stock holdings of under 5% in a publicly traded Controlled Affiliate);8.Conduct any business other than under the Licensed Marks and Name;9. Take any action that the Sponsoring Plan or BCBSA reasonably believes will adversely affect the Licensed Marks or Names.In addition, the Sponsoring Plan directly or indirectly through wholly owned subsidiaries shall own at least 50% of any for-profit Controlled Affiliate,provided that in instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licensee and such publicly traded Controlled AffiliateLicensee owns and controls other Controlled Affiliate Licensees, the Sponsoring Plan directly or indirectly shall own and control at least 50% of any ControlledAffiliate that is indirectly owned and controlled by the publicly traded Controlled Affiliate Licensee; orC.With respect to a Controlled Affiliate that is 100% controlled by Plans including the Sponsoring Plan and which offers solely Medicaid,Medicare Advantage PPO, Medicare Advantage HMO and/or Special Need Plans products and services, the legal authority by the Sponsoring Plan togetherwith such other Plans (a) to select all members of the Controlled Affiliate’s governing body; (b) to prevent any change in the articles of incorporation, bylaws orother establishing or governing documents of the Controlled Affiliate; (c) to exercise control over the policy and operations of the Controlled Affiliate. In addition,the Sponsoring Plan and such other Plans shall own 100% of any for-profit Controlled Affiliate, with the Sponsoring Plan and such other Plans each having anownership interest. Such 100% control and ownership by Plans shall be direct or, if indirect, solely through affiliates that are licensed to use marks owned byBCBSA. Further, the Sponsoring Plan and such other Plans shall execute the “Addendum to Controlled Affiliate License” attached as Exhibit B-1 to Exhibit 1attached hereto; orAmended as of June 20, 2019D.With respect to a Controlled Affiliate that is 100% controlled by a Sponsoring Plan which on a Blue-branded basis offers solely a BasicMedicare Part D Prescription Drug product, the legal authority by the Sponsoring Plan: (a) to select all members of the Controlled Affiliate’s governing body; (b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate; (c) to exercise controlover the policy and operations of the Controlled Affiliate. In addition, the Sponsoring Plan shall own 100% of any for-profit Controlled Affiliate. Such 100%control and ownership by the Plan shall be direct or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA. Further, theSponsoring Plan and Participating Plan as defined on the Controlled Affiliate License Agreement shall execute the “Addendum to Controlled Affiliate License”attached as Exhibit B-2 to Exhibit 1 attached hereto.E.With respect to a Controlled Affiliate that operates as a clinic, the legal authority by the Sponsoring Plan to exercise control over the policyand operations of the Controlled Affiliate as defined in Exhibit 1, Standard 1(E) and the Guidelines to Administer Standard 1(E). In addition, if the clinic is for-profit, the Sponsoring Plan shall own at least 50% of the Controlled Affiliate and prevent any change in the articles of incorporation, bylaws or other establishingdocuments of the Controlled Affiliate with which the Sponsoring Plan does not concur.2b. With respect to the Controlled Affiliate License Agreements authorized in clauses iv) and v) of Paragraph 2, bona fide control shall mean that theControlled Affiliate is organized and operated in such a manner that it meets the following requirements:A.The Controlled Affiliate is owned or controlled by two or more Plans authorized to use the Licensed Marks pursuant to this LicenseAgreement with BCBSA (for purposes of this subparagraph A. through subparagraph C., the “Controlling Plans”); and Amended as of June 20, 2019B.Each Controlling Plan is authorized pursuant to this Agreement to use the Licensed Marks in a geographic area in the Region (as that termis defined in such Controlled Affiliate License Agreements) and every geographic area in the Region is so licensed to at least one of the Controlling Plans; andC.The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries (a) to select members of theControlled Affiliate’s governing body having not less than 100% voting control thereof; (b) to prevent any change in the articles of incorporation, bylaws or otherestablishing or governing documents of the Controlled Affiliate with which the Controlling Plans do not concur; and (c) to exercise control over the policy andoperations of the Controlled Affiliate. Notwithstanding anything to the contrary in (a) through (c) of this subparagraph E., the Controlled Affiliate’s establishing orgoverning documents must also require written approval by each of the Controlling Plans before the Controlled Affiliate can:1.Change its legal and/or trade names;2.Change the geographic area in which it operates (except such approval shall not be required with respect to business of the ControlledAffiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliate licenseagreement with BCBSA sponsored by such Controlling Plan);3.Change any of the type(s) of businesses in which it engages (except such approval shall not be required with respect to business of theControlled Affiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan);4.Take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall own 100% of any for-profit Controlled Affiliate.Amended as of June 19, 2014(The next page is page 3)-2b-3.With respect to a Controlled Affiliate that is not licensed to use the Licensed Marks and Name, the Plan may, in communications that containthe Licensed Marks or Name, indicate its corporate relationship to the Affiliate and permit such Affiliate to indicate its corporate relationship to the Plan, solelyin the circumstances, style and manner specified by BCBSA from time-to-time in regulations of general application consistent with the avoidance of confusionor mistake or the dilution or tarnishment of the Licensed Marks and Name. No rights are hereby created in any Controlled Affiliate to use the Licensed Marksor Name in its own name or otherwise.4.The Plan recognizes the importance of a comprehensive national network of independent BCBSA licensees which are committed tostrengthening the Licensed Marks and Name. The Plan further recognizes that its actions within its Service Area may affect the value of the Licensed Marksand Name nationwide. The Plan agrees (a) to maintain in good standing its membership in BCBSA; (b) promptly to pay its dues to BCBSA, said dues torepresent the royalties for this License Agreement; (c) materially to comply with all applicable laws; (d) to comply with the Membership Standards Applicable toRegular Members of BCBSA, a current copy of which is attached as Exhibit 2 hereto; and (e) reasonably to permit BCBSA, upon a written, good faith requestand during reasonable business hours, to inspect the Plan's books and records necessary to ascertain compliance herewith. As to other Plans and thirdparties, BCBSA shall maintain the confidentiality of all documents and information furnished by the Plan pursuant hereto, or pursuant to the MembershipStandards, and clearly designated by the Plan as containing proprietary information of the Plan.5.The rights hereby granted are exclusive to the Plan within the geographical area(s) served by the Plan on June 30, 1972, and/or as to whichthe Plan has been granted a subsequent license, which is hereby defined as the "Service Area," except that BCBSA reserves the right to use the LicensedMarks in said Service Area, and except to the extent that said Service Area may overlap areas served by one or more other licensed Blue Cross Plans as ofsaid date or subsequent license, as to which overlapping areas the rights hereby granted are nonexclusive as to such other Plan or Plans only. Amended as of June 19, 2014-3-6.Except as expressly provided by BCBSA with respect to National Accounts, Government Programs and certain other necessary andcollateral uses, the current rules and regulations governing which are attached as Exhibit 3 and Exhibit 4 hereto, and are contained in other documentsreferenced herein, or as expressly provided herein, the Plan may not use the Licensed Marks and Name outside the Service Area or in connection with othergoods and services, nor may the Plan use the Licensed Marks or Name in a manner which is intended to transfer in the Service Area the goodwill associatedtherewith to another mark or name. Nothing herein shall be construed to prevent the Plan from engaging in lawful activity anywhere under other marks andnames not confusingly similar to the Licensed Marks and Name, provided that engaging in such activity does and will not dilute or tarnish the unique value ofthe Licensed Marks and Name. In addition to any and all remedies available hereunder, BCBSA may impose monetary fines on the Plan for the Plan’s use ofthe Licensed Marks and Names outside the Service Area, and provided that the procedure used in imposing a fine is consistent with procedures specificallyprescribed by BCBSA from time to time in regulations of general application. In the case of regional Medicare Advantage PPO and regional Medicare Part DPrescription Drug Plan products offered by consenting and participating Plans in a region that includes the Service Areas, or portions thereof, of more than onePlan, such fine may be imposed jointly on the consenting and participating Plans for use of the Licensed Marks and Name in any geographic area of the regionin which a Plan having exclusive rights to the Licensed Marks and Name does not consent to and participate in such offering, provided that the basis forimposition of such fine is consistent with rules specifically prescribed by BCBSA from time to time in regulations of general application.7.The Plan agrees that it will display the Licensed Marks and Name only in such form, style and manner as shall be specifically prescribed byBCBSA fromtime-to-time in regulations of general application in order to prevent impairment of the distinctiveness of the Licensed Marks and Name and thegoodwill pertaining thereto. The Plan shall cause to appear on all materials on or in connection with which the Licensed Marks or Name are used such legends,markings and notices as BCBSA may reasonably request in order to give appropriate notice of service mark or other proprietary rights therein or pertainingthereto.8.BCBSA agrees that: (a) it will not grant any other license effective during the term of this License Agreement for the use of the LicensedMarks or Name which is inconsistent with the rights granted to the Plan hereunder; and (b) it will not itself use the Licensed Marks in derogation of the rights ofthe Plan or in a manner to deprive the Plan of the full benefits of this License Agreement, provided that BCBSA shall have the right to use the Licensed Marksin conjunction with any national offering under the Federal Employees Health Benefits Program in the manner set forth in Exhibit 4, Paragraph 4 (includingsubparagraphs) to this License Agreement. The Plan agrees that it will not attack the title of BCBSA in and to the Licensed Marks or Name or attack the validityof the Licensed Marks or of this License Agreement. The Plan further agrees that all use by it of the Licensed Marks and Name or any similar mark or nameshall inure to the benefit of BCBSA, and the Plan shall cooperate with BCBSA in effectuating the assignment to BCBSA of any service mark or trademarkregistrations of the Licensed Marks or anysimilar mark or name held by the Plan or a Controlled Affiliate of the Plan, all or any portion of which registrationconsists of the Licensed Marks.Amended as of November 16, 2006-3a-9.(a). Should the Plan fail to comply with the provisions of paragraphs 2-4, 6, 7 and/or 12, and not cure such failure within thirty (30) days ofreceiving written notice thereof (or commence curing such failure within such thirty day period and continue diligent efforts to complete the curing of suchfailure if such curing cannot reasonably be completed within such thirty day period), BCBSA shall have the right to issue a notice that the Plan is in a state ofnoncompliance. Except as to the termination of a Plan's License Agreement or the merger of two or more Plans, disputes as to noncompliance, and all otherdisputes between or among BCBSA, the Plan, other Plans and/or Controlled Affiliates, shall be submitted promptly to mediation and mandatory disputeresolution pursuant to the rules and regulations of BCBSA, a current copy of which is attached as Exhibit 5 hereto, and shall be timely presented and resolved.The mandatory dispute resolution panel shall have authority to issue orders for specific performance and assess monetary penalties. If a state ofnoncompliance as aforesaid is undisputed by the Plan or is found to exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSAshall have the right to seek judicial enforcement of the License Agreement. Except, however, as provided in paragraphs 9(d)(iii), 15(a)(i)-(viii), and 15(a)(x)below, no Plan's license to use the Licensed Marks and Name may be finally terminated for any reason without the affirmative vote of three-fourths of the Plansand three-fourths of the total then current weighted vote of all the Plans.(b).Notwithstanding any other provision of this License Agreement, a Plan's license to use the Licensed Marks and Name may be forthwithterminated by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans at a special meetingexpressly called by BCBSA for the purpose on ten (10) days written notice to the Plan advising of the specific matters at issue and granting the Plan anopportunity to be heard and to present its response to Member Plans for: (i) failure to comply with any minimum capital or liquidity requirement under theMembership Standard on Financial Responsibility; or (ii) impending financial insolvency; or (iii) the pendency of any action instituted against the Plan seekingits dissolution or liquidation or its assets or seeking appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business orseeking the declaration or establishment of a trust for any of its property of business, unless this License Agreement has been earlier terminated underparagraph 15(a); or (iv) such other reason as is determined in good faith immediately and irreparably to threaten the integrity and reputation of BCBSA, thePlans and/or the Licensed Marks. Amended as of March 16, 2006-4-(c).To the extent not otherwise provided therein, neither: (i) the Membership Standards Applicable to Regular Members of BCBSA; nor (ii) therules and regulations governing Government Programs and certain other uses; nor (iii) the rules and regulations governing mediation and mandatory disputeresolution, may be amended unless and until each such amendment is first adopted by the affirmative vote of three-fourths of the Plans and of three-fourths ofthe total then current weighted vote of all the Plans. The rules and regulations governing National Accounts and other national programs required by theMembership Standards Applicable to Regular Members of BCBSA (Exhibit 2) are contained, in addition to those set forth in Exhibit 3, in the followingdocuments, as amended from time to time: (1) the Inter-Plan Programs Policies and Provisions; (2) Inter- Plan Medicare Advantage Program Policies andProvisions. The voting requirements specified in rules and regulations governing such national programs may not be amended unless and until each suchamendment is first adopted by the affirmative vote of three- fourths of the Plans and of three-fourths of the total then current weighted vote of all the Plans. Amended as of November 21, 2014 -4a-(d).The Plan may operate as a for-profit company on the following conditions:(i)The Plan shall discharge all responsibilities which it has to theAssociation and to other Plans by virtue of this Agreement and the Plan's membership in BCBSA.(ii)The Plan shall not use the licensed Marks and Name, or any derivative thereof, as part of its legal name or any symbol used to identify thePlan in any securities market. The Plan shall use the licensed Marks and Name as part of its trade name within its service area for the sale, marketing andadministration of health care and related services in the service area.(iii)Plan's license to use the Licensed Marks and Name shall automatically terminate effective: (a) thirty days after the Plan knows, or there isan SEC filing indicating that, any Institutional Investor, has become the Beneficial Owner of securities representing 10% or more of the voting power of the Plan(“Excess Institutional Voter”), unless such Excess Institutional Voter shall cease to be an Excess Institutional Voter prior to such automatic terminationbecoming effective; (b) thirty days after the Plan knows, or there is an SEC filing indicating that, any Noninstitutional Investor has become the Beneficial Ownerof securities representing 5% or more of the voting power of the Plan (“Excess Noninstitutional Voter”) unless such Excess Noninstitutional Voter shall cease tobe an Excess Noninstitutional Voter prior to such automatic termination becoming effective; (c) thirty days after the Plan knows, or there is an SEC filingindicating that, any Person has become the Beneficial Owner of 20% or more of the Plan’s then outstanding common stock or other equity securities which(either by themselves or in combination) represent an ownership interest of 20% or more pursuant to determinations made under paragraph 9(d)(iv) below(“Excess Owner”), unless such Excess Owner shall cease to be an Excess Owner prior to such automatic termination becoming effective; (d) ten businessdays after individuals who at the time the Plan went public constituted the Board of Directors of the Plan (together with any new directors whose election to theBoard was approved by a vote of 2/3 of the directors then still in office who were directors at the time the Plan went public or whose election or nomination waspreviously so approved) (the "Continuing Directors") cease for any reason to constitute a majority of the Board of Directors; or (e) ten business days after thePlan consolidates with or merges with or into any person or conveys, assigns, transfers or sells all or substantially all of its assets to any person other than amerger in which the Plan is the surviving entity and immediately after which merger, no person is an Excess Institutional Voter, an Excess NoninstitutionalVoter or an Excess Owner: provided that, if requested by the affected Plan in a writing received by BCBSA prior to such automatic termination becomingeffective, the provisions of this paragraph 9(d)(iii) may be waived, in whole or in part,Amended as of September 17, 1997-5-upon the affirmative vote of a majority of the disinterested Plans and a majority of the total then current weighted vote of the disinterested Plans. Anywaiver so granted may be conditioned upon such additional requirements (including but not limited to imposing new and independent grounds for termination ofthis License) as shall be approved by the affirmative vote of a majority of the disinterested Plans and a majority of the total then current weighted vote of thedisinterested Plans. If a timely waiver request is received, no automatic termination shall become effective until the later of: (1) the conclusion of the applicabletime period specified in paragraphs 9(d)(iii)(a)-(d) above, or (2) the conclusion of the first Member Plan meeting after receipt of such a waiver request.In the event that the Plan's license to use the Licensed Marks and Name is terminated pursuant to this Paragraph 9(d)(iii), the license may bereinstated in BCBSA’s sole discretion if, within 30 days of the date of such termination, the Plan demonstrates that the Person referred to in clause (a), (b) or(c) of the preceding paragraph is no longer an Excess Institutional Voter, an Excess Noninstitutional Voter or an Excess Owner.(iv)The Plan shall not issue any class or series of security other than (i) shares of common stock having identical terms or options orderivatives of such common stock, (ii) non-voting, non-convertible debt securities or (iii) such other securities as the Plan may approve, provided that BCBSAreceives notice at least thirty days prior to the issuance of such securities, including a description of the terms for such securities, and BCBSA shall have theauthority to determine how such other securities will be counted in determining whether any Person is an Excess Institutional Voter, Excess NoninstitutionalVoter or an Excess Owner.(v)For purposes of paragraph 9(d)(iii), the following definitions shall apply:(a)"Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulationsunder the Securities Exchange Act of 1934, as amended and in effect on November 17, 1993 (the "Exchange Act").(b)A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities:(i)which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly;Amended as of September 17, 1997-5a-(ii)which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisableimmediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchangerights, warrants or options, or otherwise; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Personshall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1)arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordancewith, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act(or any comparable or successor report); or(iii)which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (orany of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (other than customary agreements with and betweenunderwriters and selling group members with respect to a bona fide public offering of securities) relating to the acquisition, holding, voting (except to the extentcontemplated by the proviso to (b)(ii)(B) above) or disposing of any securities of the Plan.Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to aPerson's Beneficial Ownership of securities of the Plan, shall mean the number of such securities then issued and outstanding together with the number ofsuch securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.(c)A Person shall be deemed an “Institutional Investor” if (but only if) such Person (i) is an entity or group identified in the SEC’s Rule 13d-1(b)(1)(ii) as constituted on June 1, 1997, and (ii) every filing made by such Person with the SEC under Regulation 13D-G (or any successor Regulation) withrespect to such Person’s Beneficial Ownership of Plan securities shall have contained a certification identical to the one required by item 10 of SEC Schedule13G as constituted on June 1, 1997.(d)“Noninstitutional Investor” means any Person who is not an Institutional Investor.(e)"Person" shall mean any individual, firm, partnership, corporation, trust, association, joint venture or other entity, and shall include anysuccessor (by merger or otherwise) of such entity.Amended as of September 17, 1997-5b- (The next page is page 6)10.This License Agreement shall remain in effect: (a) until terminated as provided herein; or (b) until this and all such other LicenseAgreements are terminated by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans; or (c)until termination of aforesaid Ownership Agreement; or(d) until terminated by the Plan upon eighteen (18) months written notice to BCBSA or upon a shorter notice period approved by BCBSA in writing atits sole discretion.11.Except as otherwise provided in paragraph 15 below or by the affirmative vote of three-fourths of the Plans and three-fourths of the totalthen current weighted vote of all the Plans, or unless this and all such other License Agreements are simultaneously terminated by force of law, the terminationof this License Agreement for any reason whatsoever shall cause the reversion to BCBSA of all rights in and to the Licensed Marks and Name, and the Planagrees that it will promptly discontinue all use of the Licensed Marks and Name, will not use them thereafter, and will promptly, upon written notice fromBCBSA, change its corporate name so as to eliminate the Licensed Name therefrom.12.The license hereby granted to Plan to use the Licensed Marks and Name is and shall be personal to the Plan so licensed and shall not beassignable by any act of the Plan, directly or indirectly, without the written consent of BCBSA. Said license shall not be assignable by operation of law, nor shallPlan mortgage or part with possession or control of this license or any right hereunder, and the Plan shall have no right to grant any sublicense to use theLicensed Marks and Name.13.BCBSA shall maintain appropriate service mark registrations of the Licensed Marks and BCBSA shall take such lawful steps andproceedings as may be necessary or proper to prevent use of the Licensed Marks by any person who is not authorized to use the same. Any actions orproceedings undertaken by BCBSA under the provisions of this paragraph shall be at BCBSA's sole cost and expense. BCBSA shall have the sole right todetermine whether or not any legal action shall be taken on account of unauthorized use of the Licensed Marks, such right not to be unreasonably exercised.The Plan shall report any unlawful usage of the Licensed Marks to BCBSA in writing and agrees, free of charge, to cooperate fully with BCBSA's program ofenforcing and protecting the service mark rights, trade name rights and other rights in the Licensed Marks.14.The Plan hereby agrees to save, defend, indemnify and hold BCBSA and any other Plan(s) harmless from and against all claims,damages, liabilities and costs of every kind, nature and description which may arise as a result of the activities of the Plan or of any hospital, medical group,clinic or other provider of health services that is owned or controlled directly or indirectly by Plan. BCBSA hereby agrees to save, defend, indemnify and holdthe Plan and any other Plan(s) harmless from and against all claims, damages, liabilities And costs of every kind, nature and description which may ariseexclusively and directly as a result of the activities of BCBSA.Amended as of June 21, 2012-6-15.(a). This Agreement shall automatically terminate upon the occurrence of any of the following events: (i) a voluntary petition shall be filedby the Plan or by BCBSA seeking bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or anyother law governing insolvency or debtor relief, or (ii) an involuntary petition or proceeding shall be filed against the Plan or BCBSA seeking bankruptcy,reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor reliefand such petition or proceeding is consented to or acquiesced in by the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon which thepetition or other document commencing the proceeding is served upon the Plan or BCBSA respectively, or (iii) an order for relief is entered against the Plan orBCBSA in any case under the bankruptcy laws of the United States, or the Plan or BCBSA is adjudged bankrupt or insolvent (as that term is defined in theUniform Commercial Code as enacted in the state of Illinois) by any court of competent jurisdiction, or (iv) the Plan or BCBSA makes a general assignment ofits assets for the benefit of creditors, or (v) any government or any government official, office, agency, branch, or unit assumes control of the Plan ordelinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by the Plan or BCBSA seeking its dissolution or liquidation of itsassets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business, or (vii) an action is instituted byany governmental entity or officer against the Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interimtrustee, receiver or other custodian for any of its property or business and such action is consented to or acquiesced in by the Plan or BCBSA or is notdismissed within one hundred thirty (130) days of the date upon which the pleading or other document commencing the action is served upon the Plan orBCBSA respectively, provided that if the action is stayed or its prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of thestay or injunction, and provided further, that the Association’s Board of Directors may toll or extend the 130 day period at any time prior to its expiration, or (viii)a trustee, interim trustee, receiver or other custodian for any of the Plan's or BCBSA's property or business is appointed, or the Plan or BCBSA is ordereddissolved or liquidated, or (ix) the Plan shall fail to pay its dues and shall not cure such failure within thirty (30) days of receiving written notice thereof, or (x) if,due to regulatory action, the Plan together with any applicable Controlled Affiliate becomes unable to do business using the Names and Marks in any State orportion thereof included in its Service Area, provided that: (i) automatic termination shall not occur prior to the exhaustion by any such Plan of its rights toappeal or challenge such regulatory action; and (ii) in the event the Plan is licensed to do business using the Names and Marks in multiple States or portions ofStates, the termination of its License Agreement shall be solely limited to the State(s) or portions thereof in which the regulatory action applies. By notappealing or challenging such regulatory action within the time prescribed by law or regulation, and in any event no later than 120 days after such action istaken, a Plan shall be deemed to have exhausted its rights to appeal or challenge, and automatic termination shall proceed.-7-Notwithstanding any other provision of this Agreement, a declaration or a request for declaration of the existence of a trust over any of the Plan’s orBCBSA’s property or business shall not in itself be deemed to constitute or seek appointment of a trustee, interim trustee, receiver or other custodian forpurposes of subparagraphs 15(a)(vii) and (viii) of this Agreement.Amended as of March 26, 2015-7a-(b).BCBSA, or the Plans (as provided and in addition to the rights conferred in Paragraph 10(b) above), may terminate this Agreementimmediately upon written notice upon the occurrence of either of the following events: (a) the Plan or BCBSA becomes insolvent (as that term is defined in theUniform Commercial Code enacted in the state of Illinois), or (b) any final judgment against the Plan or BCBSA remains unsatisfied or unbonded of record for aperiod of sixty (60) days or longer.(c).If this License Agreement is terminated as to BCBSA for any reason stated in subparagraphs 15(a) and (b) above, the ownership of theLicensed Marks shall revert to each of the Plans as provided in the Ownership Agreement.(d).Upon termination of this License Agreement or any Controlled Affiliate License Agreement of a Larger Controlled Affiliate, as defined inExhibit 1 to this License Agreement, the following conditions shall apply, except that, in the event of a partial termination of this Agreement pursuant toParagraph 15 (a)(x)(ii) of this Agreement, the notices, national account listing, payment and audit right listed below shall be applicable solely with respect to thegeographic area for which the Plan’s license to use the Licensed Names and Marks is terminated:(i)The terminated entity shall send a notice through the U.S. mails, with first class postage affixed, to all individual and group customers,providers, brokers and agents of products or services sold, marketed, underwritten or administered by the terminated entity or its Controlled Affiliates under theLicensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall, at a minimum, notify the recipient of the termination ofthe license, the consequences thereof, and instructions for obtaining alternate products or services licensed by BCBSA, subject to any conflicting state law andstate regulatory requirements. This notice shall be mailed within 15 days after termination or, if termination is pursuant to paragraph 10(d) of this Agreement,within 15 days after the written notice to BCBSA described in paragraph 10(d).(ii)The terminated entity shall deliver to BCBSA within five days of a request by BCBSA a listing of national accounts in which the terminatedentity is involved (in a Control, Participating or Servicing capacity), identifying the national account and the terminated entity's role therein. For those accountswhere the terminated entity is the Control Plan, the Plan must also indicate the Participating and Servicing Plans in the national account syndicate.Amended as of June 16, 2005-8-(iii)Unless the cause of termination is an event stated in paragraph 15(a) or (b) above respecting BCBSA, the Plan and its Licensed ControlledAffiliates shall be jointly liable for payment to BCBSA of an amount equal to the Re- Establishment Fee (described below) multiplied by the number of LicensedEnrollees of the terminated entity and its Licensed Controlled Affiliates; provided that if any other Plan is permitted by BCBSA to use marks or names licensedby BCBSA in the Service Area established by this Agreement, the Re-Establishment Fee shall be multiplied by a fraction, the numerator of which is the numberof Licensed Enrollees of the terminated entity and its Licensed Controlled Affiliates and the denominator of which is the total number of Licensed Enrollees inthe Service Area. The Re-Establishment Fee shall be indexed to a base fee of $80. The Re-Establishment Fee through December 31, 2005 shall be $80. TheRe-Establishment Fee for calendar years after December 31, 2005 shall be adjusted on January 1 of each calendar year up to and including January 1, 2010and shall be the base fee multiplied by 100% plus the cumulative percentage increase or decrease in the Plans’ gross administrative expense (standardBCBSA definition) per Licensed Enrollee since December 31, 2004. The adjustment shall end on January 1, 2011, at which time the Re-Establishment Feeshall be fixed at the then-current amount and no longer automatically adjusted. For example, if the Plans’ gross administrative expense per Licensed Enrolleewas $278.60, $285.00 and $290.00 for calendar year end 2004, 2005 and 2006, respectively, the January 1, 2007 Re-Establishment Fee would be $83.27(100% of the base fee plus $1.84 for calendar year 2005 and $1.43 for calendar year 2006). Licensed Enrollee means each and every person and covereddependent who is enrolled as an individual or member of a group receiving products or services sold, marketed or administered under marks or names licensedby BCBSA as determined at the earlier of (a) the end of the last fiscal year of the terminated entity which ended prior to termination or (b) the fiscal year whichended before any transactions causing the termination began. Notwithstanding the foregoing, the amount payable pursuant to this subparagraph (d)(iii) shall bedue only to the extent that, in BCBSA's opinion, it does not cause the net worth of the Plan to fall below 100% of the Health Risk- Based Capital formula or itsequivalent under any successor formula, as set forth in the applicable financial responsibility standards established by BCBSA (provided such equivalent isapproved for purposes of this sub paragraph by the affirmative vote of three-fourths of the Plans andAmended as of June 16, 2005-8a-three-fourths of the total then current weighted vote of all the Plans), measured as of the date of termination and adjusted for the value of anytransactions not made in the ordinary course of business. This payment shall not be due in connection with transactions exclusively by or among Plan or theiraffiliates, including reorganizations, combinations or mergers, where the BCBSA Board of Directors determines that the license termination does not result in amaterial diminution in the number of Licensed Enrollees or the extent of their coverage. At least 50% of the Re Establishment Fee shall be awarded to the Plan(or Plans) that receive the new license(s) for the service area(s) at issue; provided, however, that such award shall not become due or payable until all disputes,if any, regarding the amount of and BCBSA’s right to such Re- Establishment Fee have been finally resolved; and provided further that the award shall bebased on the final amount actually received by BCBSA. The Board of Directors shall adopt a resolution which it may amend from time to time that shall governBCBSA’s use of its portion of the award. In the event that the terminated entity’s license is reinstated by BCBSA or is deemed to have remained in effectwithout interruption by a court of competent jurisdiction, BCBSA shall reimburse the Plan (and/or its Licensed Controlled Affiliates, as the case may be) forpayments made under this subparagraph only to the extent that such payments exceed the amounts due to BCBSA pursuant to subparagraph 15(d)(vi) and anycosts associated with reestablishing the Service Area, including any payments made by BCBSA to a Plan or Plans (or their Licensed Controlled Affiliates) forpurposes of replacing the terminated entity.(iv)The terminated entity shall comply with all financial settlement procedures set forth in BCBSA’s License Termination Contingency Plan, asamended from time to time and shall work diligently and in good faith with BCBSA, any Alternative Control Licensee or Replacement Licensee and any existingor potentialAmended as of June 16, 2005-8b-new account for Blue-branded products and services to minimize the disruption of termination, and honor, to the fullest extent possible, the desire ofaccounts to continue to receive or obtain Blue-branded products and services through a new Licensee (“Transition”). Such diligence and good faith on the partof the terminated entity shall include, but not be limited to: (a) working cooperatively with BCBSA to protect the Names and Marks from potential harm; (b)cooperating with BCBSA’s use of the Names and Marks in the terminated entity’s former service area during the termination and Transition; (c) transmitting,upon the request of an existing Blue account or of BCBSA with consent and on behalf of an existing Blue account, all member and account-data relating to theFederal Employee Program to BCBSA, and all member and account data relating to other programs to an Alternative Control Licensee or ReplacementLicensee; (d) working with BCBSA and the Alternative Control or Replacement Licensee with respect to potential new Blue accounts headquartered in theterminated entity’s former service area; (e) continuing to service Blue accounts during the Transition; (f) continuing to comply with National Programs, FederalEmployee Program and NASCO policies and procedures and all voluntary BCBSA programs, policies and performance standards, such as Away From HomeCare, including being responsible for payment of all penalties for non-compliance duly levied in conformity with the License Agreements, MembershipStandards, or the Federal Employee Program agreements, that may arise during the Transition; (g) maintaining and providing access to its provider networks,as defined by Federal Employee Program agreements and National Account Program Policies and Provisions, and Inter-Plan Programs Policies andProvisions, and making those networks and discounts available to members and providers who participate in National Programs and the Federal EmployeeProgram during the Transition; (h) maintaining its technical connections and processing capabilities during the Transition;and (i) working diligently to conclude all financial settlements and account reconciliations as negotiated in the termination transition agreement.Amended as of November 16, 2006-8c-(v)Notwithstanding any other provision in this Agreement, BCBSA shall have the right, with the approval of its Board of Directors, to assessadditional fines against the terminated entity during the Transition in the event it fails to maintain and provide access to provider networks as defined byFederal Employee Program agreements, National Account Program Policies and Provisions, and Inter-Plan Programs Policies and Provisions, and/or pass onapplicable discounts. Such fines shall be in addition to any other assessments, fees or liquidated damages payable herein, or under existing policies andprograms and shall be imposed to make whole BCBSA and/or the Plans. Terminated entity shall pay any such fines to BCBSA no later than 30 days after theyare approved by the Board of Directors.(vi)BCBSA shall have the right to examine and audit and/or hire at terminated entity’s expense a third-party auditor to examine and audit thebooks and records of the terminated entity and its Licensed Controlled Affiliates to verify compliance with the terms and requirements this paragraph 15(d).(vii)Subsequent to termination of this Agreement, the terminated entity and its affiliates, agents, and employees shall have an ongoing andcontinuing obligation to protect all BCBSA and Blue Licensee data that was acquired or accessed during the period this Agreement was in force, including butnot limited to all confidential processes, pricing, provider, discount and other strategic and competitively sensitive information (“Blue Information”) fromdisclosure, and shall not, either alone or with another entity, disclose such Blue Information or use it in any manner to compete without the express writtenpermission of BCBSA.(viii)As to a breach of 15 (d) (i), (ii), (iii), (iv), (vi), or (vii) the parties agree that the obligations are immediately enforceable in a court ofcompetent jurisdiction. As to a breach of 15 (d) (i), (ii), (iv), (vi), or (vii) by the Plan, the parties agree there is no adequate remedy at law and BCBSA is entitledto obtain specific performance.Amended as of November 16, 2006-8d-(ix)In the event that the terminated entity’s license is reinstated by BCBSA or is deemed to have remained in effect without interruption by acourt of competent jurisdiction, the Plan and its Licensed Controlled Affiliates shall be jointly liable for reimbursing BCBSA the reasonable costs incurred byBCBSA in connection with the termination and the reinstatement or court action, and any associated legal proceedings, including but not limited to: outsidelegal fees, consulting fees, public relations fees, advertising costs, and costs incurred to develop, lease or establish an interim provider network. Any amountdue to BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board of Directors in its sole discretion.(e).BCBSA shall be entitled to enjoin the Plan or any related party in a court of competent jurisdiction from entry into any transaction which wouldresult in a termination of this License Agreement unless the License Agreement has been terminated pursuant to paragraph 10 (d) of this Agreement upon therequired six(6) month written notice.(f). BCBSA acknowledges that it is not the owner of assets of the Plan.Amended as of June 16, 2006-8e-16.This Agreement supersedes any and all other agreements between the parties with respect to the subject matter herein, and contains all ofthe covenants and agreements of the parties as to the licensing of the Licensed Marks and Name. This Agreement may be amended only by the affirmativevote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans as officially recorded by the BCBSA CorporateSecretary.17.If any provision or any part of any provision of this Agreement is judicially declared unlawful, each and every other provision, or any part ofany provision, shall continue in full force and effect notwithstanding such judicial declaration.18.No waiver by BCBSA or the Plan of any breach or default in performance on the part of BCBSA or the Plan or any other licensee of any ofthe terms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants orconditions.19a. All notices provided for hereunder shall be in writing and shall be sent in duplicate by regular mail to BCBSA or the Plan at the address currentlypublished for each by BCBSA and shall be marked respectively to the attention of the President and, if any, the General Counsel, of BCBSA or the Plan.19b. Except as provided in paragraphs 9(b), 9(d)(iii), 15(a), and 15(b) above, this Agreement may be terminated for a breach only upon at least 30days’ written notice to the Plan advising of the specific matters at issue and granting the Plan an opportunity to be heard and to present its response to theMember Plans.19c. For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans,the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (ifany) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourthsweighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (roundedto the nearest whole number, with 0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question;or (ii) three (3) of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty- nine (39) Plans, therequirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or more Plans fail to castweighted votes in favor of the question.Amended as of June 16, 2006-8f-(The next page is page 9)20.Nothing herein contained shall be construed to constitute the parties hereto as partners or joint venturers, or either as the agent of theother, and Plan shall have no right to bind or obligate BCBSA in any way, nor shall it represent that it has any right to do so. BCBSA shall have no liability tothird parties with respect to any aspect of the business, activities, operations, products, or services of the Plan.21.This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Illinois.IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signature written below.BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy Title Date PLAN:By , Title Date-9-EXHIBIT 1BLUE CROSSCONTROLLED AFFILIATE LICENSE AGREEMENT(Includes revisions adopted by Member Plans through their November 21, 2019 meeting)This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and (“Controlled Affiliate"), a Controlled Affiliate of the BlueCross Plan, known as ("Plan" or “Sponsoring Plan”), which is also a Party signatory hereto.WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;WHEREAS, Plan and Controlled Affiliate desire that the latter be entitled to use the BLUE CROSS and BLUE CROSS Design service marks(collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE CROSS in a trade name ("Licensed Name");NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the Licensed Marks and Name inconnection with, and only in connection with: (i) health care plans and related services, as defined in BCBSA's License Agreement with Plan, and administeringthe non-health portion of workers’ compensation insurance, and (ii) underwriting the indemnity portion of workers’ compensation insurance, provided thatControlled Affiliate’s total premium revenue comprises less than 15 percent of the Sponsoring Plan’s net subscription revenue.This grant of rights is non-exclusive and is limited to the Service Area served by the Plan Subject to paragraph 3A(3) of this Agreement, ControlledAffiliate may use the Licensed Marks and Name in its legal name on the following conditions: (i) the legal name must be approved in advance, in writing, byBCBSA; (ii) Controlled Affiliate shall not do business outside the Service Area under any name or mark; and (iii) Controlled Affiliate shall not use the LicensedMarks and Name, or any derivative thereof, as part of any name or symbol used to identify itself in any securities market, unless such Controlled Affiliate is anot-for-profit company which may use the Licensed Marks and Name, or an approved derivative therefor, to identify itself in debt securities markets. ControlledAffiliate may use the Licensed Marks and Name in its Trade Name only with the prior, written, consent of BCBSA. Amended as of March 26, 201512.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and further agrees to bebound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees to comply with all applicable federal, state and locallaws.C.Controlled Affiliate agrees that it will provide on an annual basis (or more oftenif reasonably required by Plan or by BCBSA) a report or reports to Plan and BCBSA demonstrating Controlled Affiliate's compliance with therequirements of this Agreement including but not limited to the quality control provisions of this paragraph and the attached Exhibit A.D.Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon reasonable notice, review and inspect the manner andmethod of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.E.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that the Sponsoring Plan has:(1)The legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 50% voting control thereof; and(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate withwhich the Sponsoring Plan does not concur; and(c)to exercise control over the policy and operations of the Controlled Affiliate at least equal to that exercised by persons or entities (jointly orindividually) other than the Sponsoring Plan; andNotwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must also requirewritten approval by the Sponsoring Plan before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates;(iii)change any of the type(s) of businesses in which it engages;Amended as of September 19, 20142(iv)create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in the ordinary course of business;(v)sell any assets, except for sales in the ordinarycourse of business or sales of equipment no longer useful or being replaced;(vi)make any loans or advances except in the ordinary course of business;(vii)enter into any arrangement or agreement with anyparty directly or indirectly affiliated with any of the owners or persons or entities with the authority to select or appoint members or board members ofthe Controlled Affiliate, other than the Sponsoring Plan or other Plans (excluding owners of stock holdings of under 5% in a publicly traded Controlled Affiliate);(viii)conduct any business other than under the Licensed Marks and Name;(ix)take any action that the Sponsoring Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.In addition, the Sponsoring Plan directly or indirectly through wholly owned subsidiaries shall own at least 50% of any for-profit Controlled Affiliate,provided that in instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licensee and such publicly traded Controlled AffiliateLicensee owns and controls other Controlled Affiliate Licensees, the Sponsoring Plan directly or indirectly shall own and control at least 50% of any ControlledAffiliate that is indirectly owned and controlled by the publicly traded Controlled Affiliate Licensee.Or(2)the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having more than 50% voting control thereof and;(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate withwhich the Sponsoring Plan does not concur; and(c)to exercise control over the policy and operations of the Controlled Affiliate.Amended as of March 26, 20153In addition, the Sponsoring Plan directly or indirectly through wholly-owned subsidiaries shall own more than 50% of any for-profit Controlled Affiliate,provided that in instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licensee and such publicly traded Controlled AffiliateLicensee owns and controls other Controlled Affiliate Licensees, the Sponsoring Plan directly or indirectly shall own and control more than 50% of anyControlled Affiliate that is indirectly owned and controlled by the publicly traded Controlled Affiliate Licensee.Or(3)With respect to a Controlled Affiliate that is 100% controlled by Plans including the Sponsoring Plan and which offers solely Medicaid,Medicare Advantage PPO, Medicare Advantage HMO and/or Special Need Plans products and services, the Sponsoring Plan has the legal authority togetherwith such other Plans:(a)to select all members of the Controlled Affiliate’s governing body; and(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate; and(c)to exercise control over the policy and operations of the Controlled Affiliate. In addition, the Sponsoring Plan and such other Plans shall own100% of any for-profitControlled Affiliate with the Sponsoring Plan and such other Plans each having an ownership interest. Such control and ownership by Plans must bedirect or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA. Further, the Sponsoring Plan and such other Plans shall executea separate Addendum to Controlled Affiliate License Agreement attached hereto as Exhibit B-1 for each product noted in Paragraph 2E(3) that is licensed touse the Marks.Or(4)With respect to a Controlled Affiliate that is 100% controlled by a Sponsoring Plan which on a Blue-branded basis, only offers a BasicMedicare Part D Prescription Drug Plan product, the Sponsoring Plan has the legal authority:(a)to select all members of the Controlled Affiliate’s governing body; and(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate; and(c)to exercise control over the policy and operations of the Controlled Affiliate.Amended June 20, 20194In addition, the Sponsoring Plan shall own 100% of any for-profit Controlled Affiliate. Such 100% control and ownership by Sponsoring Plan must bedirect or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA. Further, the Participating Plan as defined in Exhibit B-2 and theSponsoring Plan shall execute the Addendum to Controlled Affiliate License Agreement attached hereto as Exhibit B-2.Or(5)With respect to a Controlled Affiliate that operates as a clinic, absent an alternative method of control approved in writing by BCBSA, theSponsoring Plan shall have bona fide operational control over the Controlled Affiliate as specified in Exhibit A, Standard 1(E) and the Guidelines to AdministerStandard 1(E). In addition, if the clinic is for-profit, the Sponsoring Plan shall own at least 50% of the Controlled Affiliate and prevent any change in the articlesof incorporation, bylaws or other establishing documents of the Controlled Affiliate with which the Sponsoring Plan does not concur.3.FOR-PROFIT, PUBLICLY TRADED LICENSEESA.The Controlled Affiliate may operate as a for-profit publicly traded company on the following conditions:(1)The Controlled Affiliate shall discharge all responsibilities which it has to the Association and to other Plans by virtue of this Agreement.(2)The Controlled Affiliate shall provide 90 days advance written notice to BCBSA prior to the initial filing with the SEC.(3)The Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part of its legal name or any symbol usedto identify the Controlled Affiliate in any securities market. The Controlled Affiliate shall use the Licensed Marks and Name as part of its trade name within itsservice area for the sale, marketing and administration of health care and related services in the service area.(4)The Controlled Affiliate’s license to use the Licensed Marks and Name shall automatically terminate effective: (a) thirty days after theControlled Affiliate knows, or there is an SEC filing indicating that, any Institutional Investor, has become the Beneficial Owner of securities representing 10%or more of the voting power of the Controlled Affiliate (“Excess Institutional Voter”), unless such Excess Institutional Voter shall cease to be an ExcessInstitutional Voter prior to such automatic termination becoming effective; (b) thirty days after the Controlled Affiliate knows, or there is an SEC filing indicatingthat, any Noninstitutional Investor, other than a Plan or Plans or Controlled Affiliate Licensee or Licensees has become the Beneficial Owner of securitiesrepresenting 5% or more of the voting power of the Controlled Affiliate (“Excess Noninstitutional Voter”) unless such Excess Noninstitutional Voter shall ceaseto be an Excess Noninstitutional Voter prior to such automatic termination becoming effective; (c) thirty days after the Controlled Affiliate knows, or there is anSEC filing indicating that, any Person has become the Beneficial Owner, other than aAmended as of June 20, 20195Plan or Plans or Controlled Affiliate Licensee or Licensees, of 20% or more of the Controlled Affiliate’s then outstanding common stock or other equitysecurities which (either by themselves or in combination) represent an ownership interest of 20% or more pursuant to determinations made under paragraph3A(4) below (“Excess Owner”), unless such Excess Owner shall cease to be an Excess Owner prior to such automatic termination becoming effective; (d) tenbusiness days after individuals who at the time the Controlled Affiliate went public constituted the Board of Directors of the Controlled Affiliate (together with anynew directors whose election to the Board was approved by a vote of 2/3 of the directors then still in office who were directors at the time the Controlled Affiliatewent public or whose election or nomination was previously so approved) (the “Continuing Directors”) cease for any reason to constitute a majority of the Boardof Directors; or (e) ten business days after the Controlled Affiliate consolidates with or merges with or into any person or conveys, assigns, transfers or sells allor substantially all of its assets to any person other than a merger in which the Sponsoring Plan is the surviving entity and immediately after which merger, noperson is an Excess Institutional Voter, an Excess Noninstitutional Voter or an Excess Owner: provided that, if requested by the affected Controlled Affiliate ina writing received by BCBSA prior to such automatic termination becoming effective, the provisions of this paragraph 3A(4) may be waived, in whole or in part,upon the affirmative vote of a majority of the disinterested Plans and majority of the total then current weighted vote of the disinterested Plans. Any waiver sogranted may be conditioned upon such additional requirements (including but not limited to imposing new and independent grounds for termination of thisLicense) as shall be approved by the affirmative vote of a majority of the disinterested Plans and a majority of the total then current weighted vote of thedisinterested Plans. If a timely waiver request is received, no automatic termination shall become effective until the later of: (1) the conclusion of the applicabletime period specified in paragraphs 3A(4) (a)-(d) above, or (2) the conclusion of the first Member Plan meeting after receipt of such a waiver request.In the event that the Controlled Affiliate’s license, or any other license, to use the Licensed Marks and Name is terminated pursuant to Paragraph3A(4), the license may be reinstated in BCBSA’s sole discretion if, within 30 days of the date of such termination, the Controlled Affiliate demonstrates that thePerson referred to in clause (a), (b), or (c) of the preceding paragraph is no longer an Excess Institutional Voter, an Excess Noninstitutional Voter or an ExcessOwner.(5)The Controlled Affiliate shall not issue any class or series of security other than(i) shares of common stock having identical terms or options or derivatives of such common stock, (ii) non-voting, non-convertible debt securities or(iii) such other securities as the Controlled Affiliate may approve, provided that BCBSA receives notice at least thirty days prior to the issuance of suchsecurities, including a description of the terms for such securities, and BCBSA shall have the authority to determine how such other securities will be counted indetermining whether any Person is an Excess Institutional Voter, Excess Noninstitutional Voter or an Excess Owner.Amended as of March 26, 20156(6)For purposes of paragraph 3A(4) above, the following definitions shall apply:(i)“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulationsunder the Securities Exchange Act of 1934, as amended and in effect on November 17, 1993 (the “Exchange Act”).(ii)A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” any securities:(1)which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly;(2)which such Person or any of such Person’s Affiliates or Associates has(A)the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement,arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or(B)the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed theBeneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocableproxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules andregulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable orsuccessor report); or(3)which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (orany of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (other than customary agreements with and betweenunderwriters and selling group members with respect to a bona fide public offering of securities) relating to the acquisition, holding, voting (except to the extentcontemplated by the proviso to (ii)2(B) above) or disposing of any securities of the Controlled Affiliate.Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase “then outstanding,” when used with reference to aPerson’s Beneficial Ownership of securities of the Controlled Affiliate, shall mean the number of such securities then issued and outstanding together with thenumber of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.Amended as of March 26, 20157(iii)A Person shall be deemed an “Institutional Investor” if (but only if) such Person (i) is an entity or group identified in the SEC’s Rule 13d-1(b)(1)(ii) as constituted on June 1, 1997, and (ii) every filing made by such Person with the SEC under Regulation 13D-G (or any successor Regulation) withrespect to such Person’s Beneficial Ownership of Plan securities shall have contained a certification identical to the one required by item 10 of SEC Schedule13G as constituted on June 1, 1997.(iv)“Noninstitutional Investor” means any Person who is not an Institutional Investor.(v)“Person” shall mean any individual, firm, partnership, corporation, trust, association, joint venture or other entity, and shall include anysuccessor (by merger or otherwise) of such entity.4.SERVICE MARK USEA.Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licensees which are committedto strengthening the LicensedMarks and Name. The Controlled Affiliate further recognizes that its actions within its Service Area may affect the value of the Licensed Marks andName nationwide.B.Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but not limited to use of suchsymbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules (generally applicable to ControlledAffiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued from time-to-time by BCBSA. Controlled Affiliate recognizesand agrees that all use of the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.C.Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or is intended to transfer inthe Service Area the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage in activity that may dilute or tarnish the uniquevalue of the Licensed Marks and Name.D.If Controlled Affiliate meets the standards of 2E(1) but not 2E(2) above and any of Controlled Affiliate's advertising or promotional material isreasonably determined by BCBSA and/or the Plan to be in contravention of rules and regulations governing the use of the Licensed Marks and Name,Controlled Affiliate shall for ninety (90) days thereafter obtain prior approval from BCBSA of advertising and promotional efforts using the Licensed Marks andName, approval or disapproval thereof to be forthcoming within five (5) business days of receipt of same by BCBSA or its designee. In all advertising andpromotional efforts, Controlled Affiliate shall observe the Service Area limitations applicable to Plan.Amended as of March 26, 20158E.Notwithstanding any other provision in the Plan’s License Agreement with BCBSA or in this Agreement, Controlled Affiliate shall use its bestefforts to promote and build the value of the Licensed Marks and Name.5.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, therights granted hereunder and any such act shall be voidable at the sole option of Plan or BCBSA. This Agreement and all rights and duties hereunder arepersonal to Controlled Affiliate.6.INFRINGEMENTControlled Affiliate shall promptly notify Plan and Plan shall promptly notify BCBSA of any suspected acts of infringement, unfair competition orpassing off that may occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not beentitled to require Plan or BCBSA to take any actions or institute any proceedings to prevent infringement, unfair competition or passing off by thirdparties. Controlled Affiliate agrees to render to Plan and BCBSA, without charge, all reasonable assistance in connection with any matter pertaining to theprotection of the Licensed Marks and Name by BCBSA.7.LIABILITY INDEMNIFICATIONControlled Affiliate and Plan hereby agree to save, defend, indemnify and hold BCBSA harmless from and against all claims, damages, liabilities andcosts of every kind, nature and description (except those arising solely as a result of BCBSA's negligence) that may arise as a result of or related to: (i)Controlled Affiliate's rendering of services under the Licensed Marks and Name; or (ii) the activities of any hospital, medical group, clinic or other provider ofhealth services that is owned or controlled directly or indirectly by Plan or Controlled Affiliate.8.LICENSE TERMA.Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1) year and shall beautomatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.B.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entityin the event that: (i) the Plan ceases to be authorized to use the Licensed Marks and Name; or (ii) pursuant to Paragraph 15(a)(x) of the Blue Cross LicenseAgreement the Plan ceases to be authorized to use the Licensed Names and Marks in the geographic area served by the Controlled Affiliate provided,however, that if the Controlled Affiliate is serving more than one State or portions thereof, the termination of this Agreement shall be limited to the State(s) orportions thereof inAmended as of March 26, 20159which the Plan’s license to use the Licensed Marks and Names is terminated. By not appealing or challenging such regulatory action within the timeprescribed by law or regulation, and in any event no later than 120 days after such action is taken, a Plan shall be deemed to have exhausted its rights toappeal or challenge, and automatic termination shall proceed.C.Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may be forthwith terminated by thePlan or the affirmative vote of the majority of the Board of Directors of BCBSA present and voting at a special meeting expressly called by BCBSA for thepurpose on ten (10) days written notice to the Plan advising of the specific matters at issue and granting the Plan an opportunity to be heard and to present itsresponse to the Board for: (1) failure to comply with any applicable minimum capital or liquidity requirement under the quality control standards of thisAgreement; or (2) failure to comply with the "Organization and Governance" quality control standard of thisAgreement; or (3) impending financial insolvency; or(4) for a Smaller Controlled Affiliate (as defined in Exhibit A), failure to comply with any of the applicable requirements of Standards 2, 3, 4, 5 or 7 of attachedExhibit A; or (5) the pendency of any action instituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking appointment ofa trustee, interim trustee, receiver or other custodian for any of its property or business or seeking the declaration or establishment of a trust for any of itsproperty or business, unless this Controlled Affiliate License Agreement has been earlier terminated under paragraph 8(E); or (6) failure by a ControlledAffiliate that meets the standards of 2E(1) but not 2E(2) above to obtain BCBSA's written consent to a change in the identity of any owner, in the extent ofownership, or in the identity of any person or entity with the authority to select or appoint members or board members, provided that as to publicly tradedControlled Affiliates this provision shall apply only if the change affects a person or entity that owns at least 5% of the Controlled Affiliate's stock before or afterthe change; or (7) such other reason as is determined in good faith immediately and irreparably to threaten the integrity and reputation of BCBSA, the Plans,any other licensee including Controlled Affiliate and/or the Licensed Marks and Name.D.Except as otherwise provided in Paragraphs 8(B), 8(C) or 8(E) herein, should Controlled Affiliate fail to comply with the provisions of thisAgreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day period and continuediligent efforts to complete the cure if such curing cannot reasonably be completed within such thirty day period) BCBSA or the Plan shall have the right toissue a notice that the Controlled Affiliate is in a state of noncompliance. If a state of noncompliance as aforesaid is undisputed by the Controlled Affiliate or isfound to exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSA shall have the right to seek judicial enforcement of theAgreement or to issue a notice of termination thereof. Notwithstanding any other provisions of this Agreement, any disputes as to the termination of thisLicense pursuant to Paragraphs 8(B), 8(C) or 8(E) of this Agreement shall not be subject to mediation and mandatory dispute resolution. All other disputesbetween BCBSA, the Plan and/or Controlled Affiliate shall be submitted promptly to mediation and mandatory dispute resolution. The mandatory disputeresolution panel shall have authority to issue orders forAmended as of March 26, 201510specific performance and assess monetary penalties. Except, however, as provided in Paragraphs 8(B) and 8(E) of this Agreement, this license to usethe LicensedMarks and Name may not be finally terminated for any reason without the affirmative vote of a majority of the present and voting members of theBoard of Directors of BCBSA.E.This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately terminate without any further action by any party or entityin the event that:(1)Controlled Affiliate shall no longer comply with item 2(E) above;(2)Appropriate dues, royalties and other payments for ControlledAffiliate pursuant to paragraph 10 hereof, which are the royalties for this License Agreement, are more than sixty (60) days in arrears to BCBSA; or(3)Any of the following events occur: (i) a voluntary petition shall be filed by Controlled Affiliate seeking bankruptcy, reorganization,arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or (ii) aninvoluntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief underthe bankruptcy laws of the United States or any other law governing insolvency or debtor relief and such petition or proceeding is consented to or acquiesced inby Controlled Affiliate or is not dismissed within sixty (60) days of the date upon which the petition or other document commencing the proceeding is servedupon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled Affiliate in any case under the bankruptcy laws of the United States, orControlled Affiliate is adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted in the State of Illinois by anycourt of competent jurisdiction, or (iv) Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v) any government or anygovernment official, office, agency, branch, or unit assumes control of Controlled Affiliate or delinquency proceedings (voluntary or involuntary) are instituted, or(vi) an action is brought by Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiveror other custodian for any of its property or business, or (vii) an action is instituted by any governmental entity or officer against Controlled Affiliate seeking itsdissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business andsuch action is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one hundred thirty (130) days of the date upon which the pleadingor other document commencing the action is served upon the Controlled Affiliate, provided that if the action is stayed or its prosecution is enjoined, the onehundred thirty (130) day period is tolled for the duration of the stay or injunction, and provided further, that the Association’s Board of Directors may toll orextend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any of Controlled Affiliate's propertyor business is appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any other provision of this Agreement, a declaration or arequest for declaration of the existence of a trust over any of the Controlled Affiliate’s property or business shall not in itself beAmended as of March 26, 201511deemed to constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for purposes of subparagraphs 8(E)(3)(vii) and (viii)of this Agreement.(4)The for-profit, publicly traded Controlled Affiliate is terminated pursuant to Paragraph 3A(4) of this Agreement. In which case, the licenses ofany Controlled Affiliates directly or indirectly owned by the terminated for-profit, publicly traded Controlled Affiliate also shall immediately terminate as providedfor in paragraph 3A(4) of this Agreement.F.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all use of theLicensed Marks and Name, including any use in its trade name.G.Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers that it is no longer a licensee of BCBSAand, if directed by the Association’s Board of Directors, shall provide instruction on how the customer can contact BCBSA or a designated licensee to obtainfurther information on securing coverage. The notification required by this paragraph shall be in writing and in a form approved by BCBSA. The BCBSA shallhave the right to audit the terminated entity's books and records to verify compliance with this paragraph.H.In the event this Agreement terminates pursuant to 8(B) hereof, or in the event the Controlled Affiliate is a Larger Controlled Affiliate (asdefined in Exhibit A), upon termination of this Agreement, the provisions of Paragraph 8.G. shall not apply and the following provisions shall apply, except that,in the event of a partial termination of this Agreement pursuant to Paragraph 8(B)(ii) of this Agreement, the notices, national account listing, payment, and auditright listed below shall be applicable solely with respect to the geographic area for which the Plan’s license to use the Licensed Names and Marks isterminated.(1)The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to all individual and group customers,providers, brokers and agents of products or services sold, marketed, underwritten or administered by the Controlled Affiliate under the Licensed Marks andName. The form and content of the notice shall be specified by BCBSA and shall, at a minimum, notify the recipient of the termination of the license, theconsequences thereof, and instructions for obtaining alternate products or services licensed by BCBSA, subject to any conflicting state law and state regulatoryrequirements. This notice shall be mailed within 15 days after termination.(2)The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a listing of national accounts in which the ControlledAffiliate is involved (in acontrol, participating or servicing capacity), identifying the national account and the Controlled Affiliate’s role therein.Amended as of March 26, 201512(3)Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or (b) of the Plan’s license agreement withBCBSA to use the Licensed Marks and Name, the Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan shall be jointly liable forpayment to BCBSA of an amount equal to the Re-Establishment Fee (described below) multiplied by the number of Licensed Enrollees of the ControlledAffiliate; provided that if any other Plan is permitted by BCBSA to use marks or names licensed by BCBSA in the Service Area established by this Agreement,the Re- Establishment Fee shall be multiplied by a fraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the Plan, andany other Licensed Controlled Affiliates and the denominator of which is the total number of Licensed Enrollees in the Service Area.The Re-Establishment Fee shall be indexed to a base fee of $80. The Re-Establishment Fee through December 31, 2005 shall be $80. The Re-establishment Fee for calendar years after December 31, 2005 shall be adjusted on January 1 of each calendar year up to and including January 1, 2010 andshall be the base fee multiplied by 100% plus the cumulative percentage increase or decrease in the Plans’ gross administrative expense (standard BCBSAdefinition) per Licensed Enrollee since December 31, 2004. The adjustment shall end on January 1, 2011, at which time the Re-Establishment Fee shall befixed at the then- current amount and no longer automatically adjusted. For example, if the Plans’ gross administrative expense per Licensed Enrollee was$278.60, $285.00 and $290.00 for calendar year end 2004, 2005 and 2006, respectively, the January 1, 2007 Re-Establishment Fee would be $83.27 (100% ofbase fee plus $1.84 for calendar year 2005 and $1.43 for calendar year 2006). Licensed Enrollee means each and every person and covered dependent who isenrolled as an individual or member of a group receiving products or services sold, marketed or administered under marks or names licensed by BCBSA asdetermined at the earlier of (i) the end of the last fiscal year of the terminated entity which ended prior to termination or (ii) the fiscal year which ended beforeany transactions causing the termination began. Notwithstanding the foregoing, the amount payable pursuant to this subparagraph H. (3) shall be due only tothe extent that, in BCBSA’s opinion, it does not cause the net worth of the Controlled Affiliate, the Plan or any other Licensed Controlled Affiliates of the Plan tofall below 100% of the Health Risk-Based Capital formula, or its equivalent under any successor formula, as set forth in the applicable financial responsibilitystandards established by BCBSA (provided such equivalent is approved for purposes of this sub paragraph by the affirmative vote of three-fourths of the Plansand three-fourths of the total then current weighted vote of all the Plans); measured as of the date of termination, and adjusted for the value of any transactionsnot made in the ordinary course of business. This payment shall not be due in connection with transactions exclusively by or among Plans or their affiliates,including reorganizations, combinations or mergers, where the BCBSA Board of Directors determines that the license termination does not result in a materialdiminution in the number of Licensed Enrollees or the extent of their coverage. At least 50% of the Re- Establishment Fee shall be awarded to the Plan (orPlans) that receive the new license(s) for the service area(s) at issue; provided, however, that such award shall not become due or payable until all disputes, ifany, regarding the amount of and BCBSA’s right to such Re- Establishment Fee have been finally resolved; and provided further that the award shall beAmended as of March 26, 201513based on the final amount actually received by BCBSA. The Board of Directors shall adopt a resolution which it may amend from time to time that shallgovern BCBSA’s use of its portion of the award. In the event that the Controlled Affiliate’s license is reinstated by BCBSA or is deemed to have remained ineffect without interruption by a court of competent jurisdiction, BCBSA shall reimburse the Controlled Affiliate (and/or the Plan or its other Licensed ControlledAffiliates, as the case may be) for payments made under this subparagraph 8.H.(3) only to the extent that such payments exceed the amounts due to BCBSApursuant to paragraph 8.M. and any costs associated with reestablishing the Service Area, including payments made by BCBSA to a Plan or Plans (or theirLicensed Controlled Affiliates) for purposes of replacing the Controlled Affiliate.(4)BCBSA shall have the right to examine and audit and/or hire atterminated entity’s expense a third party auditor to examine and audit the books and records of the Controlled Affiliate, the Plan, and any otherLicensed Controlled Affiliates of the Plan to verify compliance with this paragraph 8.H.(5)Subsequent to termination of this Agreement, the terminated entityand its affiliates, agents, and employees shall have an ongoing and continuing obligation to protect all BCBSA and Blue Licensee data that wasacquired or accessed during the period this Agreement was in force, including but not limited to all confidential processes, pricing, provider, discount and otherstrategic and competitively sensitive information (“Blue Information”) from disclosure, and shall not, either alone or with another entity, disclose such BlueInformation or use it in any manner to compete without the express written permission of BCBSA.(6)As to a breach of 8.H.(1), (2), (3), (4) or (5) the parties agree thatthe obligations are immediately enforceable in a court of competent jurisdiction. As to a breach of 8.H.(1), (2) or (4) by the Controlled Affiliate, theparties agree there is no adequate remedy at law and BCBSA is entitled to obtain specific performance.I.This Agreement shall remain in effect until terminated by the Controlled Affiliate or the Plan upon not less than eighteen (18) months writtennotice to the Association or upon a shorter notice period approved by BCBSA in writing at its sole discretion, or until terminated as otherwise provided herein.The Plan’s right to terminate without cause upon such notice is unfettered and may be exercised in the Plan’s sole discretion.J.In the event the Controlled Affiliate is a Smaller Controlled Affiliate (as defined in Exhibit A), the Controlled Affiliate agrees to be jointly liablefor the amount described inH.3. and M. hereof upon termination of the BCBSA license agreement of any Larger Controlled Affiliate of the Plan.K.BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdiction from entry into anytransaction which would result in a termination of this Agreement unless the Plan’s license from BCBSA to use the Licensed Marks and Names has beenterminated pursuant to 10(d) of the Plan’s license agreement upon the required 18 months written notice.Amended as of March 26, 201514L.BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.M.In the event that the Plan has more than 50 percent voting control of the Controlled Affiliate under Paragraph 2(E)(2) above and is a LargerControlled Affiliate (as defined in Exhibit A), then the vote called for in Paragraphs 8(C) and 8(D) above shall require the affirmative vote of three-fourths of thePlans and three-fourths of the total then current weighted vote of all the Plans.N.In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed to have remained in effect withoutinterruption by a court of competent jurisdiction, the Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan shall be jointly liablefor reimbursing BCBSA the reasonable costs incurred by BCBSA in connection with the termination and the reinstatement or court action, and any associatedlegal proceedings, including but not limited to: outside legal fees, consulting fees, public relations fees, advertising costs, and costs incurred to develop, leaseor establish an interim provider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board ofDirectors in its sole discretion.9.DISPUTE RESOLUTIONThe parties agree that any disputes between them or between or among either of them and one or more Plans or Controlled Affiliates of Plans thatuse in any manner the Blue Cross and Blue Cross Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached to andmade a part of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibit 5 as amended from time-to-time, which documents areincorporated herein by reference as though fully set forth herein.10.LICENSE FEEControlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit C.11.JOINT VENTURENothing contained in the Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between Plan andControlled Affiliate or between either and BCBSA.12.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to thelast known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.Amended as of March 26, 20151513.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amended bythe affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans as officially recorded by the BCBSACorporate Secretary.14.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect the remaining obligationsof the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is toprovide the parties with the benefits of this Agreement.15.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of the terms, covenants orconditions ofthis Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants or conditions.15A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans,the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (ifany) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourthsweighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (roundedto the nearest whole number, with 0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question;or (ii) three (3) of the Plans fail to cast weighted votes in favor of the question.Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans, the requirement of an affirmative three-fourths weighted vote shall bedeemed satisfied with a lesser weighted vote unless four (4) or more Plans fail to cast weighted votes in favor of the question.Amended as of March 26, 201516THIS PAGE IS INTENTIONALLY BLANK.16.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.17.HEADINGSThe headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of last signature written below.Controlled Affiliate:By: Date: Plan:By: Date: BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: Date: Amended as of March 26, 201517EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDSNovember 2019 PREAMBLEFor purposes of definition:•A "smaller Controlled Affiliate:" (1) comprises less than fifteen percent (15%) of Sponsoring Plan's and its licensed Controlled Affiliates' totalmember enrollment (as reported on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an entity seekinglicensure as licensed);* or (2) underwrites the indemnity portion of workers’ compensation insurance and has total premium revenue less than 15 percent of theSponsoring Plan’s net subscription revenue.•A "larger Controlled Affiliate" comprises fifteen percent (15%) or more of Sponsoring Plan's and its licensed Controlled Affiliates' total memberenrollment (as reported on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an entity seeking licensure aslicensed.)*Changes in Controlled Affiliate status:If any Controlled Affiliate's status changes regarding: its Plan ownership level, its risk acceptance or direct delivery of medical care, the ControlledAffiliate shall notify BCBSA within thirty (30) days of such occurrence in writing and come into compliance with the applicable standards within six (6) months.If a smaller Controlled Affiliate’s health and workers’ compensation administration business reaches or surpasses fifteen percent (15%) of the totalmember enrollment of the Sponsoring Plan and licensed Controlled Affiliates, the Controlled Affiliate shall:Amended as of September 19, 201418EXHIBIT A (continued)1.Within thirty (30) days, notify BCBSA of this fact in writing, including evidence that the Controlled Affiliate meets the minimum liquidity andcapital (BCBSA “Health Risk-Based Capital (HRBC)” as defined by the NAIC and state-established minimum reserve) requirements of the larger ControlledAffiliate Financial Responsibility standard; and2.Within six (6) months after reaching or surpassing the fifteen percent (15%) threshold, demonstrate compliance with all license requirementsfor a larger Controlled Affiliate.If a Controlled Affiliate that underwrites the indemnity portion of workers’ compensation insurance receives a change in rating or proposed change inrating, the Controlled Affiliate shall notify BCBSA within 30 days of notification by the external rating agency.*For purposes of this calculation, The numerator equals:Applicant Controlled Affiliate's member enrollment, as defined in BCBSA's Quarterly Enrollment Report (excluding rider and freestanding coverage).The denominator equals:Numerator PLUS Sponsoring Plan and all other licensed Controlled Affiliates' member enrollment, as reported in BCBSA's Quarterly EnrollmentReport (excluding rider and freestanding coverage).Amended as of September 19, 201419EXHIBIT A (continued)STANDARDS FOR LICENSED CONTROLLED AFFILIATESEach licensed controlled affiliate shall be subject to certain standards as determined below:1.What percent of the licensed controlled affiliate is controlled by the Sponsoring Plan and other Plans?More than 50% bySponsoring PlanòStandard 1A, 450% by Sponsoring PlanòStandard 1B, 4100% Plan control but less than50% Sponsoring Plan Controland it offers solely Medicaid,Medicare Advantage PPO,Medicare Advantage HMOand/or Special Need Plansproducts and services ò100% Sponsoring Plancontrol and on a Blue-branded basis, it only offersa Basic Medicare Part DPrescription Drug PlanproductòStandard 1D, 4At least 50% by SponsoringPlan or operational Controlby Sponsoring Plan and itsolely operates as a Clinicas defined in Standard 1E.òStandard 1E, 4IN ADDITION,2.Is risk being assumed? Yes NoControlledAffiliateunderwrites anyindemnityportion ofworkers’compensatio ninsurance òStandards 7A-7E, 11 òControlled Affiliatecomprises < 15% of totalmember enrollment ofSponsoring Plan and itslicensed affiliates, anddoes not underwrite theindemnity portion ofworkers’ compensationinsurance òStandard 2(Guidelines 1.1,1.2)and Standard 11 øControlled Affiliatecomprises > 15% of totalmember enrollment ofSponsoring Plan and itslicensed affiliates, and doesnot underwrite theindemnity portion ofworkers’ compensationinsurance òStandard 6H ÷Controlled Affiliatecomprises < 15% of totalmember enrollment ofSponsoring Plan and itslicensed affiliates òStandard 2(Guidelines 1.1,1.3)and Standard 11 òControlled Affiliate comprises > 15% of totalmember enrollment of Sponsoring Plan andits licensed affiliates òStandard 6HIN ADDITION,3.Is medical care being directly provided as a staff model HMO? Yesò Standard 3ANo ò Standard 3BAmended June 20, 201920EXHIBIT A (continued)STANDARDS FOR LICENSED CONTROLLED AFFILIATESEach licensed controlled affiliate shall be subject to certain standards as determined below:IN ADDITION,4.Is the licensed controlled affiliate operating as a Clinic as defined in Standard 1(E Yes ò Standard 3C and Standard 2, 1.4 (if organized as a health plan that also operates as a Clinic) 5.If the controlled affiliate has health or workers’ compensation administration business, does such business comprise 15% or more of thetotal member enrollment of Plan and its licensed Controlled Affiliates?Yes No òStandards 6A- 6J ÷Controlled Affiliate is not aformerprimary licensee and is notsubject to Standard 1(C)Standards 5,8,9B,10,11 ÷Controlled Affiliate is a former primary licenseeòStandards 5,8,9A,10,11 øControlled Affiliate isnot a former primarylicensee and is subjectto Standard 1(C)òStandards 5,8,9B,11Amended June 20, 201921EXHIBIT A (continued)Standard 1 - Organization and Governance1A.) The Standard for more than 50% Plan control is:A Controlled Affiliate shall be organized and operated in such a manner that a Plan authorized to use the Licensed Marks in the Service Area of theControlled Affiliate pursuant to the separate Primary License Agreement with BCBSA , has the legal authority, directly or indirectly through wholly-ownedsubsidiaries: 1) to select members of the Controlled Affiliate’s governing body having more than 50% voting control thereof; and 2) to prevent any change in thearticles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which the Sponsoring Plan does not concur; and 3)to exercise control over the policy and operations of the Controlled Affiliate. In addition, the Sponsoring Plan directly or indirectly through wholly-ownedsubsidiaries shall own more than 50% of any for-profit Controlled Affiliate.1B.) The Standard for 50% Plan control is:A Controlled Affiliate shall be organized and operated in such a manner that a Plan authorized to use the Licensed Marks in the Service Area of theControlled Affiliate pursuant to the separate Primary License Agreement with BCBSA has the legal authority, directly or indirectly through wholly-ownedsubsidiaries:1)to select members of the Controlled Affiliate’s governing body having not less than 50% voting control thereof; and2)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate withwhich the Sponsoring Plan does not concur; and3)to exercise control over the policy and operations of the Controlled Affiliate at least equal to that exercised by persons or entities (jointly orindividually) other than the Sponsoring Plan.Amendedas of September 19, 201422EXHIBIT A (continued)Notwithstanding anything to the contrary in 1) through 3) hereof, the Controlled Affiliate’s establishing or governing documents must also requirewritten approval by Sponsoring Plan before the Controlled Affiliate can:◦change the geographic area in which it operates◦change its legal and/or trade names◦change any of the types of businesses in which it engages◦create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in the ordinary course of business◦sell any assets, except for sales in the ordinary course of business or sales of equipment no longer useful or being replaced◦make any loans or advances except in the ordinary course of business◦enter into any arrangement or agreement with any party directly or indirectly affiliated with any of the owners or persons or entities with theauthority to select or appoint members or board members of the Controlled Affiliate, other than the Sponsoring Plan or other Plans (excluding owners of stockholdings of under 5% in a publicly traded Controlled Affiliate)◦conduct any business other than under the Licensed Marks and Name◦take any action that the Sponsoring Plan or BCBSA reasonablybelieves will adversely affect the Licensed Marks and Name.In addition, the Sponsoring Plan directly or indirectly through wholly-owned subsidiaries shall own at least 50% of any for-profit Controlled Affiliate.Amended September 19, 2014231C.) The Standard for a Controlled Affiliate that offers solely Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/or Special NeedPlans products and service and has 100% Plan control but less than 50% Sponsoring Plan Control is:A Controlled Affiliate shall be organized and operated in such a manner that (i) it offers solely Medicaid, Medicare Advantage PPO, MedicareAdvantage HMO and/or Special Need Plans products and services; and (ii) a Plan authorized to use the Licensed Marks in the Service Area of the ControlledAffiliate pursuant to the separate Primary License Agreement with BCBSA has the legal authority together with Other Plans:1)to select all members of the Controlled Affiliate’s governing body; and2)to prevent any change in the articles of incorporation, bylaws, or other establishing or governing documents of the Controlled Affiliate; and3)to exercise control over the policy and operations of the Controlled Affiliate. In addition, the Sponsoring Plan and such other Plans shall own100% of anyfor-profit Controlled Affiliate, with the Sponsoring Plan and such other Plans each having an ownership interest. Such 100% control and ownership byPlans shall be direct or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA. Further, the Sponsoring Plan and such other Plansshall execute the Addendum to Controlled Affiliate License.1D.) The Standard for a Controlled Affiliate that on a Blue-branded basis only offers a Basic Medicare Part D Prescription Drug Plan product and has100% Plan control is:A Controlled Affiliate shall be organized and operated in such a manner that (i) on a Blue-branded basis, it only offers a Basic Medicare Part DPrescription Drug Plan product; and (ii) the Sponsoring Plan has the legal authority:1)to select all members of the Controlled Affiliate's governing body; and2)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate; and3)to exercise control over the policy and operations of the Controlled Affiliate.In addition, the Sponsoring Plan shall own 100% of any for-profit Controlled Affiliate. Such 100% control and ownership by Sponsoring Plan must bedirect or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA.Further, the Sponsoring Plan and Participating Plan shall execute the Addendum to Controlled Affiliate License.241E.) The Standard for a Controlled Affiliate that operates as a Clinic and the Sponsoring Plan has control of the Clinic is:A Controlled Affiliate shall be organized in such a manner that it operates as a Clinic and the Sponsoring Plan exercises operation control over theControlled Affiliate.In addition, if the Clinic is for-profit, the Sponsoring Plan shall own at least 50% of the Controlled Affiliate and prevent any change in the articles ofincorporation, bylaws or other establishing or governing documents of the Controlled Affiliate.Amended June 20, 201925EXHIBIT A (continued)Standard 2 - Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to itscustomers. If a risk- assuming Controlled Affiliate ceases operations for any reason, Blue Cross and/or Blue Cross Plan coverage will be offered to allControlled Affiliate subscribers without exclusions, limitations or conditions based on health status. If a nonrisk-assuming Controlled Affiliate ceases operationsfor any reason, Sponsoring Plan will provide for services to its customers. The requirements of the preceding two sentences shall apply to all lines of businessunless a line of business is specially exempted from the requirement(s) by the BCBSA Board of Directors.Standard 3 - State Licensure/Certification3A.) The Standard for a Controlled Affiliate that employs, owns or contracts on a substantially exclusive basis for medical services is:A Controlled Affiliate shall maintain unimpaired licensure or certification for its medical care providers to operate under applicable state laws.3B.) The Standard for a Controlled Affiliate that does not employ, own or contract on a substantially exclusive basis for medical services is:A Controlled Affiliate shall maintain unimpaired licensure or certification to operate under applicable state laws.3C.) The Standard for a Controlled Affiliate that operates as a Clinic as defined in Standard 1(E) is:A Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.Standard 4 - Certain DisclosuresA Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of 1) the structure of theBlue Cross and Blue Shield System; and 2) the independent nature of every licensee; and 3) the Controlled Affiliate's financial condition.Amended as of June 20, 201926EXHIBIT A (continued)Standard 5 - Reports and Records for Certain Smaller Controlled AffiliatesFor a smaller Controlled Affiliate that does not underwrite the indemnity portion of workers’ compensation insurance, the Standard is:A Controlled Affiliate and/or its Sponsoring licensed Plan shall furnish, on a timely and accurate basis, reports and records relating to these Standardsand the License Agreements between BCBSA and Controlled Affiliate.Standard 6 - Other Standards for Larger Controlled Affiliates Standards 6(A) - (I) that follow apply to larger Controlled Affiliates. Standard 6(A):Board of DirectorsA Controlled Affiliate Governing Board shall act in the interest of its Corporation in providing cost-effective health care services to its customers. AControlled Affiliate shall maintain a governing Board, which shall control the Controlled Affiliate, composed of a majority of persons other than providers ofhealth care services, who shall be known as public members. A public member shall not be an employee of or have a financial interest in a health careprovider, nor be a member of a profession which provides health care services.Standard 6(B): Responsiveness to CustomersA Controlled Affiliate shall be operated in a manner responsive to customer needs and requirements.Standard 6(C): Participation in National ProgramsA Controlled Affiliate shall effectively and efficiently participate in each national program as from time to time may be adopted by the Member Plans forthe purposes of providing portability of membership between the licensees and ease of claims processing for customers receiving benefits outside of theControlled Affiliate's Service Area.Amended as of September 19, 201427EXHIBIT A (continued)Standard 6(C): Participation in National Programs (continued) Such programs are applicable to licensees, and include:1.BlueCard Program;2.Inter-Plan Teleprocessing System (ITS);3.National Account Programs4.Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April 14, 2003; and5.Inter-Plan Medicare Advantage Program.Standard 6(D): Financial Performance RequirementsIn addition to requirements under the national programs listed inStandard 6C: Participation in National Programs, a Controlled Affiliate shall take such action as required to ensure its financial performance inprograms and contracts of an inter-licensee nature or where BCBSA is a party.Standard 6(E): Cooperation with Plan Performance Response ProcessA Controlled Affiliate shall cooperate with BCBSA's Board of Directors and its Brand Enhancement & Protection Committee in the administration of thePlan Performance Response Process and in addressing Controlled Affiliate performance problems identified thereunder.Standard 6(F): Independent Financial RatingA Controlled Affiliate shall obtain a rating of its financial strength from an independent rating agency approved by BCBSA's Board of Directors for suchpurpose.Standard 6(G): Local and National Best EffortsNotwithstanding any other provision in the Plan’s License Agreement with BCBSA or in this License Agreement, during each year, a ControlledAffiliate shall use its best efforts to promote and build the value of the Blue Cross Mark.Amended as of November 21, 201428EXHIBIT A (continued)Standard 6(H): Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to itscustomers.Standard 6(I): Reports and RecordsA Controlled Affiliate shall furnish to BCBSA on a timely and accurate basis reports and records relating to compliance with these Standards and theLicense Agreements between BCBSA and Controlled Affiliate. Such reports and records are the following:A)BCBSA Controlled Affiliate Licensure Information Request; andB)Triennial trade name and service mark usage material, including disclosure material; andC)Changes in the ownership and governance of the Controlled Affiliate, including changes in its charter, articles of incorporation, or bylaws,changes in a Controlled Affiliate's Board composition, or changes in the identity of the Controlled Affiliate's Principal Officers, and changes in risk acceptance,contract growth, or direct delivery of medical care; andD)Semi-annual “Health Risk-Based Capital (HRBC) Report” as defined by the NAIC, Annual Certified Audit Report, Insurance DepartmentExamination Report, Annual Statement filed with State Insurance Department (with all attachments), andAmended as of November 17, 201129EXHIBIT A (continued)Standard 6(J): Control by Unlicensed Entities ProhibitedNo Controlled Affiliate shall cause or permit an entity other than a Plan or a Licensed Controlled Affiliate thereof to obtain control of the ControlledAffiliate or to acquire a substantial portion of its assets related to licensable services.Standard 7 - Other Standards for Risk-Assuming Workers’ Compensation Controlled AffiliatesStandards 7(A) - (E) that follow apply to Controlled Affiliates that underwrite the indemnity portion of workers’ compensation insurance.Standard 7 (A): Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to itscustomers.Standard 7(B): Reports and RecordsA Controlled Affiliate shall furnish, on a timely and accurate basis, reports and records relating to compliance with these Standards and the LicenseAgreements between BCBSA and the Controlled Affiliate. Such reports and records are the following:A.BCBSA Controlled Affiliate Licensure Information Request; andB.Triennial trade name and service mark usage materials, including disclosure materials; andC.Annual Certified Audit Report, Annual Statement as filed with the State Insurance Department (with all attachments), Annual NAIC’s Risk-Based Capital Worksheets for Property and Casualty Insurers; andD.Quarterly Estimated Risk-Based Capital for Property and Casualty Insurers, Insurance Department Examination Report; andAmended as of November 17, 201130EXHIBIT A (continued)Standard 7(B): Reports and Records, continuedE.Notification of all changes and proposed changes to independent ratings within 30 days of receipt and submission of a copy of all ratingreports; andF.Changes in the ownership and governance of the Controlled Affiliate including changes in its charter, articles of incorporation, or bylaws,changes in a Controlled Affiliate’s Board composition, Plan control, state license status, operating area, the Controlled Affiliate’s Principal Officers or directdelivery of medical care.Standard 7(C): Loss PreventionA Controlled Affiliate shall apply loss prevention protocol to both new and existing business.Standard 7(D): Claims AdministrationA Controlled Affiliate shall maintain an effective claims administration process that includes all the necessary functions to assure prompt and properresolution of medical and indemnity claims.Standard 7(E): Disability and Provider ManagementA Controlled Affiliate shall arrange for the provision of appropriate and necessary medical and rehabilitative services to facilitate early intervention bymedical professionals and timely and appropriate return to work.Amended as of November 16, 200031EXHIBIT A (continued)Standard 8 - Cooperation with Controlled Affiliate License Performance Response Process ProtocolA Controlled Affiliate and its Sponsoring Plan shall cooperate with BCBSA’s Board of Directors and its Brand Enhancement & Protection Committee inthe administration of the Controlled Affiliate License Performance Response Process Protocol (ALPRPP) and in addressing Controlled Affiliate complianceproblems identified thereunder.Standard 9(A) - Participation in National Programs by Smaller Controlled Affiliates that were former Primary LicenseesA smaller controlled affiliate that formerly was a Primary Licensee shall effectively and efficiently participate in certain national programs from time totime as may be adopted by Member Plans for the purposes of providing ease of claims processing for customers receiving benefits outside of the ControlledAffiliate’s service area and be subject to certain relevant financial and reporting requirements.A.National program requirements include:•BlueCard Program;•Inter-Plan Teleprocessing System (ITS);•National Account Programs.B.Financial Requirements include:•Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial Responsibility; or•A financial guarantee covering the Controlled Affiliate’s Inter-Plan Programs obligations in a form, and from a guarantor, acceptable toBCBSA.Amended as of November 21, 201432EXHIBIT A (continued)Standard 9(A) - Participation in National Programs by Smaller Controlled Affiliates that were former Primary LicenseesC.Reporting requirements include:•The Semi-annual Health Risk-Based Capital (HRBC) Report.Amended as of June 13, 200233EXHIBIT A (continued)Standard 9(B) - Participation in National Programs by Smaller Controlled AffiliatesA smaller controlled affiliate shall participate in national programs in accordance with BlueCard and other relevant Policies and Provisions shalleffectively and efficiently participate in national programs from time to time as may be adopted by Member Plans for the purposes of providing ease of claimsprocessing for customers receiving benefits outside of the controlled affiliate’s service area and be subject to certain relevant financial and reportingrequirements.A.National program requirements include:•BlueCard Program;•Inter-Plan Teleprocessing System (ITS);•National Account Programs.B.Financial Requirements include:•Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial Responsibility; or•A financial guarantee covering the Controlled Affiliate’s Inter-Plan Programs obligations in a form, and from a guarantor, acceptable toBCBSA.Amended as of June 20, 201334EXHIBIT A (continued)Standard 10 - Participation in Inter-Plan Medicare Advantage ProgramA smaller controlled affiliate for which this standard applies pursuant to the Preamble section of Exhibit A of the Controlled Affiliate License Agreementshall effectively and efficiently participate in certain national programs from time to time as may be adopted by Member Plans for the purposes of providingease of claims processing for customers receiving benefits outside of the controlled affiliate’s service area.National program requirements include:A.Inter-Plan Medicare Advantage Program.Standard 11: Participation in Master Business Associate Agreement by Smaller Controlled Affiliate LicenseesEffective April 14, 2003, all smaller controlled affiliates shall comply with the terms of the Business Associate Agreement for Blue Cross and BlueShield Licensees to the extent they perform the functions of a business associate or subcontractor to a business associate, as defined by the BusinessAssociate Agreement.Amended as of September 19, 201435EXHIBIT B-1ADDENDUM TO CONTROLLED AFFILIATE LICENSE TO BE EXECUTED BY CONTROLLED AFFILIATES LICENSED UNDER CONTROLLEDAFFILIATE LICENSE STANDARD 1C.ADDENDUM TO CONTROLLED AFFILIATE LICENSEThis Addendum is made to that certain Blue Cross Controlled Affiliate License Agreement executed by and among Blue Cross and Blue ShieldAssociation (“Licensor”), (“Controlled Affiliate Licensee”) and (“Sponsoring Plan”) dated the day of , (“Agreement”). The parties to this Addendum are Licensor, Controlled Affiliate Licensee, Sponsoring Plan, and the undersigned otherPlans (‘Other Plans”). This Addendum is made and shall be deemed effective as of the date of the Agreement.WHEREAS, the Sponsoring Plan asserts that it can serve the Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/or Special NeedPlans market in its Service Area more efficiently and with less risk through an enterprise jointly owned and controlled with other Plans than through a whollyowned and Controlled Affiliate Licensee.WHEREAS, in such circumstance Controlled Affiliate License Standard 1C permits the licensing of a Controlled Affiliate that is less than 50% ownedand controlled by the Sponsoring Plan but which is 100% owned and controlled by Plans including the Sponsoring Plan, subject to certain conditions;WHEREAS, one such condition is that the Sponsoring Plan and all such other owning and controlling Plans enter into this Addendum;NOW THEREFORE, for good and valuable consideration, including the promises and covenants set forth herein, the parties agree as follows:1.This Addendum is limited to [identify product name].2.The Sponsoring Plan shall participate operationally in Controlled Affiliate’s business that is conducted under the Licensed Marks. The partiesunderstand that participation may take many forms, one of which should be providing a network of providers in the Service Area of the Controlled Affiliate forthe Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/or Special Need Plans services being offered under the Agreement and beinginvolved in network development and provider engagement functions.3.Each of the Other Plans agrees that (i) it will cooperate fully with the Sponsoring Plan and BCBSA as needed to enable Sponsoring Plan and36Controlled Affiliate Licensee to meet their obligations to Licensor under the Agreement and all associated rules and regulations of Licensor, includingthe Brand Regulations, (ii) it will not take any action, either individually or jointly with any of the Other Plans, that would cause Sponsoring Plan or ControlledAffiliate Licensee to violate the Agreement, and (iii) it will not fail to take any action, either individually or jointly with any of the Other Plans, where such failurewould cause Sponsoring Plan or Controlled Affiliate Licensee to violate the Agreement.4.Each of the Other Plans acknowledges that it has reviewed the Agreement and understands that Sponsoring Plan has the right to terminatethe Agreement without cause upon notice as provided in Paragraph 8 of the Agreement, and that such right is unfettered and may be exercised by SponsoringPlan in its sole discretion.WHEREFORE, by signing below the parties agree to be bound to the terms stated herein.BLUE CROSS BLUE SHIELD ASSOCIATIONBy: [Controlled Affiliate Licensee]By: [Sponsoring Plan]By: [Other Plan 1]By: [Other Plan 2]By: Amended September 27, 201837EXHIBIT B-2ADDENDUM TO CONTROLLED AFFILIATE LICENSE TO BE EXECUTED BY CONTROLLED AFFILIATES LICENSED UNDER CONTROLLEDAFFILIATE LICENSE STANDARD 1D.ADDENDUM TO CONTROLLED AFFILIATE LICENSEThis Addendum is made to that certain Blue Cross Controlled Affiliate License Agreement executed by and among Blue Cross and Blue ShieldAssociation (“Licensor”), (“Controlled Affiliate Licensee”), (“Sponsoring Plan”) and (“Participating Plan”) dated the day of , (“Agreement”).WHEREAS, the Participating Plan is defined as the Plan that holds the Primary License with BCBSA to use the Service Marks in the Service Areawhere the Controlled Affiliate will use the Service Marks;WHEREAS, the Participating Plan asserts that it can offer a lower cost Basic Medicare Part D Prescription Drug Plan product more efficiently in theParticipating Plan’s Service Area through the Controlled Affiliate Licensee;WHEREAS, the Controlled Affiliate shall only use the Service Marks inside of the Participating Plan(s) Service Area subject to each Participating Plansigning a separate Addendum;WHEREAS, in such circumstance Controlled Affiliate License Standard 1D permits the licensing of a Controlled Affiliate that is 100% owned andcontrolled by a Sponsoring Plan, subject to certain conditions;WHEREAS, one such condition is that the Sponsoring Plan, Controlled Affiliate and the Participating Plan enter into this Addendum;NOW THEREFORE, for good and valuable consideration, including the promises and covenants set forth herein, the parties agree as follows:1.The Participating Plan shall participate in Controlled Affiliate’s business that is conducted under the Licensed Marks. The parties understandthat the Participating Plan shall conduct sales support and marketing of the Controlled Affiliate’s Basic Medicare Part D Prescription Drug Plan product offeredin the Participating Plan’s Service Area. Any other form of participation shall require BCBSA’s written approval.2.Participating Plan agrees that (i) it will cooperate fully with the Sponsoring Plan and BCBSA as needed to enable Sponsoring Plan and38Controlled Affiliate Licensee to meet their obligations to Licensor under the Agreement and all associated rules and regulations of Licensor, includingthe Brand Regulations, (ii) it will not take any action that would cause Sponsoring Plan or Controlled Affiliate Licensee to violate the Agreement, and (iii) it willnot fail to take any action, either individually or jointly with the Sponsoring Plan or Controlled Affiliate Licensee, where such failure would cause SponsoringPlan or Controlled Affiliate Licensee to violate the Agreement.3.The Controlled Affiliate Licensee shall only use the Licensed Marks authorized by the Participating Plan in connection with the BasicMedicare Part D Prescription Drug Plan product offered in the Participating Plan’s Service Area.4.The Sponsoring Plan and Controlled Affiliate acknowledge that it hasreviewed the Agreement and understands that Participating Plan hasthe right to terminate this Agreement: (i) immediately upon the expiration or termination of the Plan Participation Agreement by and between Participating Planand Controlled Affiliate upon written notice to the Sponsoring Plan, Controlled Affiliate Licensee and Licensor, or (ii) without cause upon 18 months writtennotice to the Sponsoring Plan, Controlled Affiliate Licensee and Licensor, and that such right is unfettered and may be exercised by Participating Plan in its solediscretion. In the event that Participating Plan and Controlled Affiliate fail to execute the Plan Participation Agreement by (Date), Participating Plan mayterminate this Agreement immediately upon notice to Sponsoring Plan, Controlled Affiliate Licensee and Licensor.5.This Agreement and all of Controlled Affiliate Licensee's rights hereunder shall immediately terminate without any further action by any partyor entity in the event that the Sponsoring Plan or Participating Plan ceases to be authorized to use the Licensed Marks and Name.WHEREFORE, by signing below the parties agree to be bound to the terms stated herein.BLUE CROSS BLUE SHIELD ASSOCIATIONBy: [Controlled Affiliate Licensee]By: [Sponsoring Plan]By: [Participating Plan]By: Amended March 17, 201639EXHIBIT CROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENTControlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula:FOR RISK PRODUCTS:For Controlled Affiliates not underwriting the indemnity portion of workers’ compensation insurance:An amount equal to its pro rata share of Sponsoring Plan's dues payable to BCBSA computed with the addition of the Controlled Affiliate's membersusing the Marks on health care plans and related services as reported on the Quarterly Enrollment Report with BCBSA. The payment by Sponsoring Plan of itsdues to BCBSA, including that portion described in this paragraph, will satisfy the requirement of this paragraph, and no separate payment will be necessary.For Controlled Affiliates underwriting the indemnity portion of workers’ compensation insurance:An amount equal to 0.35 percent of the gross revenue per annum of Controlled Affiliate arising from products using the marks; plus, an annual fee of$5,000 per license for a Controlled Affiliate subject to Standard 7.Amended as of September 19, 201440EXHIBIT C (continued)FOR NONRISK PRODUCTS:For third-party administrative business, an amount equal to its pro rata share of Sponsoring Plan’s dues payable to BCBSA computed with the additionof the Controlled Affiliate’s members using the Marks on health care plans and related services as reported on the Quarterly Enrollment Report with BCBSA.The payment by Sponsoring Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy the requirement of this paragraph, and noseparate payment will be necessary.For non-third party administrative business (e.g., case management, provider networks, etc.), an amount equal to 0.24 percent of the gross revenueper annum of Controlled Affiliate arising from products using the marks; plus:1)An annual fee of $5,000 per license for a Controlled Affiliate subject to Standard 6 D.2)An annual fee of $2,000 per license for all other Controlled Affiliates.The foregoing shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® License are issued to the same Controlled Affiliate. Inthe event that any license period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under this formula will be calculated, billedand paid in arrears.Amended as of September 19, 201441EXHIBIT 1ACONTROLLED AFFILIATE LICENSE AGREEMENT APPLICABLE TO LIFE INSURANCECOMPANIES(Includes revisions adopted by Member Plans through their November 21, 2019 meeting)This agreement by and among Blue Cross and Blue Shield Association ("BCBSA") ("Controlled Affiliate"), a Controlled Affiliate of the Blue Cross Plan(s), known as ("Plan").WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;WHEREAS, the Plan and the Controlled Affiliate desire that the latter be entitled to use the BLUE CROSS and BLUE CROSS Design service marks(collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE CROSS in a trade name ("Licensed Name");NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to the Controlled Affiliate the exclusive right to use the licensed Marksand Names in connection with and only in connection with those life insurance and related services authorized by applicable state law, other than health careplans and related services (as defined in the Plan's License Agreements with BCBSA) which services are not separately licensed to Controlled Affiliate byBCBSA, in the Service Area served by the Plan, except that BCBSA reserves the right to use the Licensed Marks and Name in said Service Area, and exceptto the extent that said Service Area may overlap the area or areas served by one or more other licensed Blue Cross Plans as of the date of this License as towhich overlapping areas the rights hereby granted are non-exclusive as to such other Plan or Plans and their respective Licensed Controlled Affiliates only.Controlled Affiliate cannot use the Licensed Marks or Name outside the Service Area or in its legal or trade name; provided, however, that if and only for solong as Controlled Affiliate also holds a Blue Cross Controlled Affiliate License Agreement applicable to health care plans and related services, ControlledAffiliate may use the Licensed Marks and Name in its legal and trade name according to the terms of such license agreement.Amended as of June 12, 2003-1-2.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in relation to the sale, marketing and rendering of authorized productsand further agrees to be bound by the conditions regarding quality control shown in Exhibit A as it may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon reasonable notice, review and inspect the manner andmethod of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by Plan or by BCBSA) a report to Planand BCBSA demonstrating Controlled Affiliate's compliance with the requirements of this Agreement including but not limited to the quality control provisions ofExhibit A.D.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner that it is subject to the bona fidecontrol of a Plan or Plans. Absent written approval by BCBSA of an alternative method of control, bona fide control shall mean the legal authority, directly orindirectly through wholly-owned subsidiaries: (a) to select members of the Controlled Affiliate's governing body having not less than 51% voting control thereof;(b) to exercise operational control with respect to the governance thereof; and (c) to prevent any change in its articles of incorporation, bylaws or othergoverning documents deemed inappropriate. In addition, a Plan or Plans shall own at least 51% of any for-profit Controlled Affiliate. If the Controlled Affiliate isa mutual company, the Plan or its designee(s) shall have and maintain, in lieu of the requirements of items (a) and (c) above, proxies representing 51% of thevotes at any meeting of the policyholders and shall demonstrate that there is no reason to believe this such proxies shall be revoked by sufficient policyholdersto reduce such percentage below 51%.3.SERVICE MARK USEControlled Affiliate shall at all times make proper service mark use of the Licensed Marks, including but not limited to use of such symbols or words asBCBSA shall specify to protect the Licensed Marks, and shall comply with such rules (applicable to all Controlled Affiliates licensed to use the Marks) relative toservice mark use, as are issued fromtime-to-time by BCBSA. If there is any public reference to the affiliation between the Plan and the Controlled Affiliate, all of the Controlled Affiliate'slicensed services in the Service Area of the Plan shall be rendered under the Licensed Marks. Controlled Affiliate recognizes and agrees that all use of theLicensed Marks by Controlled Affiliate shall inure to the benefit of BCBSA.-2-4.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, the rights grantedhereunder and any such act shall be voidable at the option of Plan or BCBSA.This Agreement and all rights and duties hereunder are personal to Controlled Affiliate.5.INFRINGEMENTSControlled Affiliate shall promptly notify Plan and BCBSA of any suspected acts of infringement, unfair competition or passing off which may occur inrelation to the Licensed Marks. Controlled Affiliate shall not be entitled to require Plan or BCBSA to take any actions or institute any proceedings to preventinfringement, unfair competition or passing off by third parties. Controlled Affiliate agrees to render to Plan and BCBSA, free of charge, all reasonableassistance in connection with any matter pertaining to the protection of the Licensed Marks by BCBSA.6.LIABILITY INDEMNIFICATIONControlled Affiliate hereby agrees to save, defend, indemnify and hold Plan and BCBSA harmless from and against all claims, damages, liabilities andcosts of every kind, nature and description which may arise as a result of Controlled Affiliate's rendering of health care services under the Licensed Marks.7.LICENSE TERMThe license granted by this Agreement shall remain in effect for a period of one (1) year and shall be automatically extended for additional one (1)year periods upon evidence satisfactory to the Plan and BCBSA that Controlled Affiliate meets the then applicable quality control standards, unless one of theparties hereto notifies the other party of the termination hereof at least sixty (60) days prior to expiration of any license period.This Agreement may be terminated by the Plan or by BCBSA for cause at any time provided that Controlled Affiliate has been given a reasonableopportunity to cure and shall not effect such a cure within thirty (30) days of receiving written notice of the intent to terminate (or commence a cure within suchthirty day period and continue diligent efforts to complete the cure if such curing cannot reasonably be completed within such thirty day period). By way ofexample and not for purposes of limitation, Controlled Affiliate's failure to abide by the quality control provisions of Paragraph 2, above, shall be considered aproper ground for cancellation of this Agreement.-3-This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entity in theevent that:A.Controlled Affiliate shall no longer comply with Standard No. 1 (Organization and Governance) of Exhibit A or, following an opportunity tocure, with the remaining quality control provisions of Exhibit A, as it may be amended from time-to-time; orB.Plan ceases to be authorized to use the Licensed Marks; orC.Appropriate dues for Controlled Affiliate pursuant to item 8 hereof, which are the royalties for this License Agreement are more than sixty(60) days in arrears to BCBSA.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all use of the LicensedMarks including any use in its trade name.In the event of any disagreement between Plan and BCBSA as to whether grounds exist for termination or as to any other term or condition hereof,the decision of BCBSA shall control, subject to provisions for mediation or mandatory dispute resolution in effect between the parties.Upon termination of this Agreement, Licensed Controlled Affiliate shall immediately notify all of its customers that it is no longer a licensee of the BlueCross and Blue Shield Association and provide instruction on how the customer can contact the Blue Cross and Blue Shield Association or a designatedlicensee to obtain further information on securing coverage. The written notification required by this paragraph shall be in writing and in a form approved by theAssociation. The Association shall have the right to audit the terminated entity's books and records to verify compliance with this paragraph.8.DUESControlled Affiliate will pay to BCBSA a fee for this license in accordance with the following formula:•An annual fee of five thousand dollars ($5,000) per license, plus•.05% of gross revenue per year from branded group products, plus•.5% of gross revenue per year from branded individual products plus•.14% of gross revenue per year from branded individual annuity products.Amended as of November 20, 1997-4-The foregoing percentages shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® license are issued to the same entity. Inthe event that any License period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under this formula will be calculated, billedand paid in arrears.Plan will promptly and timely transmit to BCBSA all dues owed by Controlled Affiliate as determined by the above formula and if Plan shall fail to do so,Controlled Affiliate shall pay such dues directly.9.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between Plan andControlled Affiliate or between either and BCBSA.9A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans,the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (ifany) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourthsweighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (roundedto the nearest whole number, with 0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question;or (ii) three (3) of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine(39) Plans, the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or morePlans fail to cast weighted votes in favor of the question.10.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to thelast known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.Amended as of November 20, 1997-5-11.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amended bya writing executed by all parties.12.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such finding shall in no way effect the remaining obligations ofthe parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is toprovide the parties with the benefits of this Agreement.13.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of the Controlled Affiliate or any other licensee of any of the terms,covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants or conditions.14.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.Amended as of June 16, 2005-6-IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signature written below.BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy:Date:Controlled Affiliate:By:Date:Plan:By:Date:-7-EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS LIFE INSURANCE COMPANIESPage 1 of 2PREAMBLEThe standards for licensing Life Insurance Companies (Life and Health Insurance companies, as defined by state statute) are established by BCBSAand are subject to change from time-to-time upon the affirmative vote of three- fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote of allPlans. Each Licensed Plan is required to use a standard controlled affiliate license form provided by BCBSA and to cooperate fully in assuring that the licensedLife Insurance Company maintains compliance with the license standards.An organization meeting the following standards shall be eligible for a license to use the Licensed Marks within the service area of its sponsoringLicensed Plan to the extent and the manner authorized under the Controlled Affiliate License applicable to Life Insurance Companies and the principal licenseto the Plan.Standard 1 - Organization and GovernanceThe LIC shall be organized and operated in such a manner that it is controlled by a licensed Plan or Plans which have, directly or indirectly: 1) not lessthan 51% of the voting control of the LIC; and 2) the legal ability to prevent any change in the articles of incorporation, bylaws or other establishing or governingdocuments of the LIC with which it does not concur; and 3) operational control of the LIC.If the LIC is a mutual company, the Plan or its designee(s) shall have and maintain, in lieu of the requirements of items 1 and 2 above, proxiesrepresenting at least 51% of the votes at any policyholder meeting and shall demonstrate that there is no reason to believe such proxies shall be revoked bysufficient policyholders to reduce such percentage below 51%.Standard 2 - State LicensureThe LIC must maintain unimpaired licensure or certificate of authority to operate under applicable state laws as a life and health insurance company ineach state in which the LIC does business.-1-EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS LIFE INSURANCE COMPANIESPage 2 of 2Standard 3 - Records and ExaminationThe LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a timely and accurate basis, such records and reports regarding the LIC asmay be required in order to establish compliance with the license agreement. The LIC and its sponsoring licensed Plan(s) shall permit BCBSA to examine theaffairs of the LIC and shall agree that BCBSA's board may submit a written report to the chief executive officer(s) and the board(s) of directors of thesponsoring Plan(s).Standard 4 - MediationThe LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA mediation and mandatory dispute resolution processes, in lieu of alegal action between or among another licensed controlled affiliate, a licensed Plan or BCBSA.Standard 5 - Financial ResponsibilityThe LIC shall maintain adequate financial resources to protect its customers and meet its business obligations.Standard 6 - Cooperation with Affiliate License Performance Response Process ProtocolThe LIC and its Sponsoring Plan(s) shall cooperate with BCBSA’s Board of Directors and its Brand Enhancement & Protection Committee in theadministration of the Affiliate License Performance Response Process Protocol (ALPRPP) and in addressing LIC compliance problems identified thereunder.-2-Exhibit 1A1CONTROLLED AFFILIATE TRADEMARK LICENSE AGREEMENTFOR LIFE AND DISABILTY INSURANCE PRODUCTSThis Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and , (“Life and Disability Controlled Affiliate”) which is acompany offering life and disability insurance products owned and controlled by , , ( individually, “Sponsoring Plan” and when referred to collectively, “Sponsoring Plans”).Whereas, BCBSA is the owner of the BLUE CROSS and BLUE SHIELD word and design service marks and any derivatives thereof (“LicensedMarks”);Whereas, each Sponsoring Plan is licensed separately by BCBSA to use one or more of the Licensed Marks in a particular Service Area;Whereas, the Sponsoring Plans and the Life and Disability Controlled Affiliate desire that the latter be entitled to use the appropriate Licensed Marksin connection with life and disability insurance products in some or all of such Sponsoring Plans’ Service Areas and in the Service Areas of other RegularMember Plans, as defined in the BCBSA By-laws, (“Blue Plans”) consistent with the terms of this Agreement.NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSEA.Subject to the terms and conditions of this Agreement, BCBSA hereby grants to the Life and Disability Controlled Affiliate the limited right touse the Licensed Marks in connection with and only in connection with the following life and disability insurance products authorized by state law: (1) Group:Term Life, Long Term Disability, Whole Life, Benefit Life, Universal Life; (2)Individual: Term Life, Whole Life, Dependent Life, Spouse Life; (3)Other: Disability Income, Short Term Disability, Long Term Disability, Income Replacement; and (4) such other life and disability products approved byBCBSA in writing (“Licensed Products”) in the Service Areas served by the Sponsoring Plans or in the Service Area or Areas of one or more other licensedBlue Plans, provided that such Blue Plans have consented to such use as authorized by this Agreement. Life and Disability Controlled Affiliate may not use theLicensed Marks in its legal or trade name.1B.Notwithstanding that the license granted to Life and Disability Controlled Affiliate is a license to use all of the Licensed Marks, Life andDisability Controlled Affiliate may only use those of the Licensed Marks in the Service Area of a Sponsoring Plan or other consenting Blue Plan as describedbelow that such Plan is authorized to use as a Blue Plan pursuant to its separate license agreements with BCBSA.C.Life and Disability Controlled Affiliate may use the Licensed Marks in the Service Areas of Sponsoring Plans or in the Service Area of a BluePlan that is not a signatory to this Agreement only after such Sponsoring Plan(s) or non-signatory Blue Plan consents to such use by executing a writtenconsent in substantially the same form as the Consent Agreement attached as Exhibit B.D.The following provisions apply with respect to Consent Agreements once such agreements have been fully and properlyexecuted:(1)All sales, marketing and advertising materials developed by and proposed for use by Life and Disability Controlled Affiliate in the ServiceArea of Sponsoring Plan or consenting Blue Plan (hereinafter, such consenting Sponsoring Plan or consenting Blue Plan collectively referred to “ConsentingPlan(s)”) must clearly identify the Consenting Plan (for example, a statement on such materials that reads “This product is offered with the cooperation of BlueCross and/or Blue Shield of [Geography]”);(2)To the extent the Consenting Plan has separate divisions or other Affiliates that use the Licensed Marks in distinct geographic areas withinits Service Area, consent obtained under this Agreement may be limited to one or more of such specific geographic areas as specified by the Consenting Planin its signed Consent Agreement. For purposes of this entire Agreement, all references to the Service Area of a Sponsoring Plan, Blue Plan or Consenting Planmay include the entire Service Area or a distinct geographic area within such Service Area as specified in this Section 1 D (2);(3)Where BCBSA has licensed two or more Blue Plans to use the same Licensed Marks in the same Service Area, in addition to therequirements set forth in Section D (1) above, the sales, marketing and advertising materials referenced in such section above must be communicated to theConsenting Plan’s existing and prospective accounts through or with the approval of such Consenting Plan, and the personnel of such Consenting Plan mustactively participate in all sales and marketing activities conducted by Life and Disability Controlled Affiliate in the same Service Area, including participating inmeetings (whether in- person or via telephone, video or internet conference) with both existing and prospective accounts of the Consenting Plan;2(4)Life and Disability Controlled Affiliate shall be entitled to use in a Service Area only those Licensed Marks that the Consenting Plan hasbeen granted by BCBSA the license to use under its Blue Plan license(5)agreements (for example, if a Consenting Plan is licensed to use only the Blue Cross Marks in its Service Area, the materials used by Lifeand Disability Controlled Affiliate in that Service Area may only contain or reference the Blue Cross Marks and not the Blue Shield Marks).(6)If a Consent Agreement is terminated, Life and Disability Controlled Affiliate shall, unless BCBSA and the Consenting Plan agree in theirsole discretion to a phase out in writing, immediately (i) cease all use of the Licensed Marks, including in connection with any and all sales and marketing of theLicensed Products in the Service Area where consent has been terminated, and (ii) notify its customers that it is no longer a licensee and provide instruction onhow the customer can contact BCBSA or a designated licensee to obtain further information on securing coverage. The notification required by this paragraphshall be in writing and in form approved by BCBSA.2.QUALITY CONTROLA.Life and Disability Controlled Affiliate agrees to use the Licensed Marks only in relation to the sale, marketing and administration of theLicensed Products and further agrees to be bound by the conditions regarding quality control shown in Exhibit A and the Guidelines to Administer theStandards for Trademark License Agreement for Life and Disability Insurance Products attached thereto.B.Life and Disability Controlled Affiliate agrees that BCBSA may, from time-to-time, upon reasonable notice, review and inspect the mannerand method of Life and Disability Controlled Affiliate's rendering of service and use of the Licensed Marks.C.Life and Disability Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by BCBSA) a reportto BCBSA demonstrating Life and Disability Controlled Affiliate's compliance with the requirements of this Agreement including but not limited to the qualitycontrol provisions of Exhibit A.D.As used herein, a Life and Disability Controlled Affiliate is defined as: An entity organized and operated in such a manner that it is 100%owned and controlled by Sponsoring Plans. Absent written approval by BCBSA of an alternative method of control, control shall mean the legal authority,directly or indirectly through wholly-owned subsidiaries: (a) to select members of the Life and Disability Controlled Affiliate's governing body having not lessthan 100% voting control thereof; (b) to exercise operational control with respect to the governance thereof; and (c) to prevent any change in its articles of3incorporation, bylaws or other governing documents deemed inappropriate. In addition, a Sponsoring Plan or Plans shall own at least 100% of any forprofit Life and Disability Controlled Affiliate.3.SERVICE MARK USELife and Disability Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and shall ensure all uses of the LicensedMarks comply with the BCBSA Brand Regulations, as amended by BCBSA from time to time. Life and Disability Controlled Affiliate recognizes and agrees thatall use of the Licensed Marks by Life and Disability Controlled Affiliate shall inure to the benefit of BCBSA.4.SUBLICENSING AND ASSIGNMENTThe license hereby granted to Life and Disability Controlled Affiliate to use the Licensed Marks is and shall be personal to Life and DisabilityControlled Affiliate and shall not be assignable by any act of the Life andDisability Controlled Affiliate, directly or indirectly, without the written consent of BCBSA. Said license shall not be assignable by operation of law, norshall Life and Disability Controlled Affiliate mortgage or part with possession or control of this license or any right hereunder, and the Life and DisabilityControlled Affiliate shall have no right to grant any sublicense to use the Licensed Marks.5.INFRINGEMENTSLife and Disability Controlled Affiliate shall promptly notify BCBSA of any suspected acts of infringement, unfair competition or passing off which mayoccur in relation to the Licensed Marks. Life and Disability Controlled Affiliate shall not be entitled to require BCBSA to take any actions or institute anyproceedings to prevent infringement, unfair competition or passing off by third parties. Life and Disability Controlled Affiliate agrees to render to BCBSA, free ofcharge, all reasonable assistance in connection with any matter pertaining to the protection of the Licensed Marks by BCBSA. BCBSA shall have sole control ofthe defense and resolution of any claim of infringement brought or threatened by others.6.LIABILITY INDEMNIFICATIONLife and Disability Controlled Affiliate hereby agrees to save, defend, indemnify and hold BCBSA harmless from and against all claims, damages,liabilities and costs of every kind, nature and description which may arise as a result of Life and Disability Controlled Affiliate's conduct.47.LICENSE TERMA.The license granted by this Agreement shall remain in effect for a period of one (1) year and shall be automatically extended for additionalone (1) year periods, unless either BCBSA or Life and Disability Controlled Affiliate notifies the other party in writing of the termination hereof at least sixty (60)days prior to expiration of any license period.B.This Agreement may be terminated by BCBSA for cause at any time provided that Life and Disability Controlled Affiliate has been given areasonable opportunity to cure and shall not effect such a cure within thirty (30) days of receiving written notice of the intent to terminate (or commence a curewithin such thirty day period and continue diligent efforts to complete the cure if such curing cannot reasonably be completed within such thirty day period). Byway of example and not for purposes of limitation, Life and Disability Controlled Affiliate's failure to abide by the conditions regarding use of the Licensed Marksset forth in Section 1 of this Agreement or the quality control provisions of Section 2 (other than with respect to Section 2 D which is subject to immediatetermination as stated in Section 7 C (1) below) shall be considered proper grounds for termination of this Agreement.C.This Agreement and all of Life and Disability Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that:(1)Life and Disability Controlled Affiliate shall no longer comply with Section 2 D (or Standard No. 1 (Organization and Governance) of ExhibitA); or(2)Any Sponsoring Plan ceases to be authorized to use the Licensed Marks; or(3)Appropriate fees for Life and Disability Controlled Affiliate pursuant to Section 8 of this Agreement are more than sixty (60) days in arrearsto BCBSA.Upon termination of this Agreement for cause or otherwise, Life and Disability Controlled Affiliate agrees that it shall immediately discontinue all use ofthe Licensed Marks.In the event of any disagreement between Life and Disability Controlled Affiliate and BCBSA as to whether grounds exist for termination or as to anyother term or condition hereof, the decision of BCBSA shall control, subject to provisions for mediation or mandatory dispute resolution in effect between theparties.5Upon termination of this Agreement, Licensed Life and Disability Controlled Affiliate shall immediately notify all of its customers that it is no longer alicensee of BCBSA and provide instruction on how the customer can contact BCBSA or a designated licensee to obtain further information on securingcoverage. The notification required by this paragraph shall be in writing and in a form approved by BCBSA. BCBSA shall have the right to audit the terminatedentity's books and records to verify compliance with this paragraph.8.ROYALTIESLife and Disability Controlled Affiliate will pay to BCBSA a fee for this license in accordance with the following formula:•An annual fee of five thousand dollars ($5,000) per license, plus•.05% of gross revenue per year from group products sold under the Licensed Marks, plus•.5% of gross revenue per year from individual products sold under the Licensed MarksIn the event that any license period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under this formula will becalculated, billed and paid in arrears.Life and Disability Controlled Affiliate will promptly and timely transmit to BCBSA all fees owed by Life and Disability Controlled Affiliate as determinedby the above formula.9.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between anySponsoring Plan and Life and Disability Controlled Affiliate or between among them and/or BCBSA.10.VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans,the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (ifany) that it holds as a Blue Shield Plan. For all other votes of the Plans, the6Plan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall be deemed satisfiedwith a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (rounded to the nearest whole number, with 0.5 or multiples thereof beingrounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3) of the Plans fail to cast weighted votes in favor ofthe question. Notwithstanding the foregoing provision, if there are thirty-nine(39) Plans, the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or morePlans fail to cast weighted votes in favor of the question.11.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to thelast known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.12.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amendedby:(a) a writing signed by all parties; or (b) a writing approved by the affirmative vote of three-fourths of the Blue Plans and three-fourths of the total thencurrent weighted vote of all the Blue Plans as officially recorded by the BCBSA Corporate Secretary. Upon such adoption by the Blue Plans, this Agreementand all other Trademark License Agreements for Life and Disability Insurance Products then in effect shall simultaneously be amended.13.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such finding shall in no way affect the remaining obligations ofthe parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is toprovide the parties with the benefits of this Agreement.14.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of the Life and Disability Controlled Affiliate or any other licensee of any ofthe terms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants orconditions.15.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.7IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signature written below.BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy:Date:Life and Disability Controlled Affiliate:By:Date:Sponsoring Plan:By:Date:Name: Sponsoring Plan:By:Date:Name: [Add other Sponsoring Plans as necessary]8EXHIBIT ALICENSE STANDARDS APPLICABLE TO TRADEMARK LICENSE AGREEMENT FOR LIFE AND DISABILITY INSURANCE PRODUCTSPage 1 of 2Standard 1 - Organization and GovernanceAny Life and Disability Controlled Affiliate licensed under the Trademark License Agreement for Life and Disability Insurance Products (“licensee”)shall be organized and operated in such a manner that it is an entity organized and operated in such a manner that it is 100% owned and controlled bySponsoring Plans. Absent written approval by BCBSA of an alternative method of control, control shall mean the legal authority, directly or indirectly throughwholly-owned subsidiaries: (a) to select members of the Life and Disability Controlled Affiliate's governing body having not less than 100% voting controlthereof; (b) to exercise operational control with respect to the governance thereof; and (c) to prevent any change in its articles of incorporation, bylaws or othergoverning documents deemed inappropriate. In addition, a Sponsoring Plan or Plans shall own at least 100% of any for profit Life and Disability ControlledAffiliate.Standard 2 - State LicensureThe licensee must maintain unimpaired licensure or certificate of authority to operate under applicable state laws as a life company in each state inwhich the licensee does business.Standard 3 - Records and ExaminationThe licensee shall maintain and furnish, on a timely and accurate basis, such records and reports regarding the licensee as may be required in orderto establish compliance with the Agreement. The licensee shall permit BCBSA to examine the affairs of the licensee and shall agree that BCBSA's board maysubmit a written report to the chief executive officer(s) and the board(s) of directors of the Sponsoring Plan(s).Standard 4 - MediationThe licensee, its Sponsoring Plan(s) and all consenting Blue Plans shall agree to use the then-current BCBSA mediation and mandatory disputeresolution processes, in lieu of a legal action between or among another licensed Life and Disability Controlled Affiliate, a Sponsoring Plan and or consentingBlue Plan or BCBSA.1EXHIBIT ALICENSE STANDARDS APPLICABLE TO TRADEMARK LICENSE AGREEMENT FOR LIFE AND DISABILITY INSURANCE PRODUCTSPage 2 of 2Standard 5 - Financial ResponsibilityThe licensee shall maintain adequate financial resources to protect its customers and meet its business obligations.Standard 6 - Cooperation with BCBSA GovernanceThe licensee shall cooperate with BCBSA’s Board of Directors and its Brand Enhancement & Protection Committee in the administration of and inaddressing licensee compliance problems that may be identified in connection with the operation or administration of the Trademark License Agreement forLife and Disability Insurance Products.2EXHIBIT BCONSENT AGREEMENTThis Consent Agreement is made and entered into by and among the undersigned Blue Plan, and (“Life and Disability Controlled Affiliate”), andthe Blue Cross and Blue Shield Association (“BCBSA”) and shall be deemed effective on (“Effective Date”).Whereas, BCBSA owns the Blue Cross and Blue Shield word and design service marks and any derivative mark thereof (the “Brands”);Whereas, the undersigned Blue Plan is licensed to use one or more of the Brands within a specific geographic area (“Service Area”);Whereas Life and Disability Controlled Affiliate is licensed by BCBSA to use one or more of the Brands to offer life and disability insurance products(“Products”) as defined and authorized in the Trademark License Agreement for Life and Disability Insurance Products (“Life and Disability LicenseAgreement”);Whereas neither the Blue Plan nor its affiliates offer the Products under any of the Brands in such Blue Plan’s Service Area or portion thereof whereBlue Plan has consented to sale of the Products by Life and Disability Controlled Affiliate; andWhereas BCBSA and the undersigned Blue Plan desire to consent to Life and Disability Controlled Affiliate’s use of the Brands in Blue Plan’s ServiceArea consistent with the terms of the Life and Disability License Agreement and this Consent Agreement.Now, therefore, in consideration of the obligations and conditions stated in this Agreement, Blue Plan, Life and Disability Controlled Affiliate andBCBSA agree as follows:1.Life and Disability Controlled Affiliate may market, sell, administer and underwrite the Products in Blue Plan’s Service Area under the Brandslicensed to Blue Plan in such Service Area subject to the terms of this Consent Agreement, the Life and Disability License Agreement and Blue Plan’s licenseagreement(s) with BCBSA. Life and Disability Controlled Affiliate’s rights under the Brands to offer the Products under the Brands are limited to offering theProducts only under the Brand(s) licensed to the consenting Blue Plan.2.Life and Disability Controlled Affiliate shall work with the undersigned Blue Plan to develop a written sales and marketing agreement thatidentifies the relationship between it and Blue Plan for the sales, marketing and customer service for the Products. The term of the sales and marketingagreement shall be the same as the term of this Consent Agreement.13.All sales, marketing and advertising materials developed by and proposed for use by Life and Disability Controlled Affiliate in a consentingBlue Plan’s Service Area must clearly identify the consenting Blue Plan (for example, a statement on such materials that reads “This product is offered with thecooperation of Blue Cross and/or Blue Shield of [Geography]”);4.Life and Disability Controlled Affiliate may use the Brands to sell the Products in the following Service Area or portion thereof as designatedby Blue Plan:5.If two or more Blue Plans to use the same Licensed Marks in the same Service Area, Life and Disability Controlled Affiliate shall work withthe consenting Blue Plan in the following manner: (a) the sales, marketing and advertising materials must be communicated to the consenting Blue Plan’sexisting and prospective accounts through or with the approval of such Blue Plan, and (b) the personnel of such Blue Plan must actively participate in all salesand marketing activities conducted by Life and Disability Controlled Affiliate in the same Service Area, including participating in meetings (whether in-person orvia telephone, video or internet conference) with both existing and prospective accounts of the consenting Blue Plan;6.Life and Disability Controlled Affiliate shall be entitled to use in a Service Area only those Licensed Marks that the consenting Blue Plan hasbeen granted by BCBSA the license to use under its license agreement (for example, if a consenting Blue Plan is licensed to use only the Blue Cross Marks inits Service Area, the materials used by Life and Disability Controlled Affiliate in that Service Area may only contain or reference the Blue Cross Marks and notthe Blue Shield Marks).7.If this Consent Agreement is terminated, Life and Disability Controlled Affiliate shall, unless each BCBSA and the Blue Plan agree in theirsole discretion to a phase out in writing, immediately (i) cease all use of the Licensed Marks, including in connection with any and all sales and marketing of theLicensed Products in the Service Area where consent has been terminated, and (ii) notify its customers that it is no longer a licensee of BCBSA and provideinstruction on how the customer can contact BCBSA or a designated licensee to obtain further information on securing coverage. The notification required bythis paragraph shall be in writing and in form approved by BCBSA.28.The term of this Consent Agreement shall be one year from the Effective Date. Unless either Blue Plan or Life and Disability ControlledAffiliate provides the other party with written notice of its desire not to renew this Consent Agreement at least 60 days prior to expiration of the term or anyextended term or unless terminated as provided in Paragraph 9 below, this Consent Agreement shall automatically renew for subsequent one year periods.9.This Consent Agreement may be terminated as follows:A.Upon mutual written consent of Life and Disability Controlled Affiliate and Blue Plan;B.By Blue Plan or Life and Disability Controlled Affiliate upon 60 days advance written notice to the non-terminating party and BCBSA; orC.By Blue Plan immediately if Life and Disability Controlled Affiliate does not comply with this Consent Agreement or the sales protocolagreement.10.This Consent Agreement shall automatically terminate if Blue Plan’s primary licensee agreement terminates for any reason or if the Lifeand Disability License Agreement terminates for any reason.Agreed and Accepted by:[Blue Plan]:By: Title: BLUE CROSS AND BLUE SHIELD ASSOCIATION:By: Title:LIFE AND DISABILITY CONTROLLED AFFILIATE:By: Title:3Exhibit 1BBLUE CROSSCONTROLLED AFFILIATE LICENSE AGREEMENT APPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTS(Adopted by Member Plans at their November 21, 2019 meeting)This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and (“Controlled Affiliate"), a Controlled Affiliate of the BlueCross Plan(s), known as Party signatory hereto.("Controlling Plans"), each of which is also aWHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;WHEREAS, under the Medicare Modernization Act, companies may apply to and be awarded a contract by the Centers for Medicare and MedicaidServices (“CMS”) to offer Medicare Advantage PPO products in geographic regions designated by CMS (hereafter “regional MAPPO products”).WHEREAS, some of the CMS-designated regions include the Service Areas, or portions thereof, of more than one Plan.WHEREAS, the Controlling Plans and Controlled Affiliate desire that the latter be entitled to use the BLUE CROSS and BLUE CROSS Design servicemarks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE CROSS in a trade name ("Licensed Name") to offer regionalMAPPO products in a region that includes the Service Areas, or portions thereof, of more than one Controlling Plan;NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the Licensed Marks and Name inconnection with, and only in connection with the sale, marketing and administration of regional MAPPO products and related services.This grant of rights is non-exclusive and is limited to the following states: (the “Region”). Controlled Affiliate may use the Licensed-1-Marks and Name in its legal name on the following conditions: (i) the legal name must be approved in advance, in writing, by BCBSA; (ii) ControlledAffiliate shall not do business outside the Region under any name or mark except business conducted in the Service Area of a Controlling Plan provided thatControlled Affiliate is separately licensed by BCBSA to use the Licensed Marks and Name in connection with health care plans and related services in theService Area of such Controlling Plan; and (iii) Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part of any nameor symbol used to identify itself in any securities market. Controlled Affiliate may use the Licensed Marks and Name in its Trade Name only with the prior,written, consent of BCBSA.2.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and further agrees to bebound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees to comply with all applicable federal, state and local laws.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by the Controlling Plans or by BCBSA)a report or reports to the Controlling Plans and BCBSA demonstrating Controlled Affiliate's compliance with the requirements of this Agreement including butnot limited to the quality control provisions of this paragraph and the attached Exhibit A.D.Controlled Affiliate agrees that the Controlling Plans and/or BCBSA may, from time-to-time, upon reasonable notice, review and inspect themanner and method of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.E.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the followingrequirements:(1)Controlled Affiliate is owned or controlled by two or more Controlling Plans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to use the Licensed Marks in a geographic areain theRegion and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and-2-(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate withwhich the Controlling Plans do not concur;(c)to exercise control over the policy and operations of the Controlled Affiliate; andNotwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must also requirewritten approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respect to business of the ControlledAffiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliate licenseagreement with BCBSA sponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be required with respect to business of theControlled Affiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly owned subsidiaries shall own 100% of any for-profit Controlled Affiliate.-3-3.SERVICE MARK USEA.Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licensees which are committedto strengthening the Licensed Marks and Name. The Controlled Affiliate further recognizes that its actions within the Region may affect the value of theLicensed Marks and Name nationwide.B.Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but not limited to use of suchsymbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules (generally applicable to ControlledAffiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued from time-to-time by BCBSA. Controlled Affiliate recognizesand agrees that all use of the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.C.Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or is intended to transfer inthe Region the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage in activity that may dilute or tarnish the uniquevalue of the Licensed Marks and Name.D.Controlled Affiliate shall use its best efforts to promote and build the value of the Licensed Marks and Name in connection with the sale,marketing and administration of regional MAPPO products and related services.4.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, therights granted hereunder and any such act shall be voidable at the sole option of any Controlling Plan or BCBSA. This Agreement and all rights and dutieshereunder are personal to Controlled Affiliate.-4-5.INFRINGEMENTControlled Affiliate shall promptly notify the Controlling Plans and the Controlling Plans shall promptly notify BCBSA of any suspected acts ofinfringement, unfair competition or passing off that may occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not be entitled to requirethe Controlling Plans or BCBSA to take any actions or institute any proceedings to prevent infringement, unfair competition or passing off by third parties.Controlled Affiliate agrees to render to the Controlling Plans and BCBSA, without charge, all reasonable assistance in connection with any matter pertaining tothe protection of the Licensed Marks and Name by BCBSA.6.LIABILITY INDEMNIFICATIONControlled Affiliate and the Controlling Plans hereby agree to save, defend, indemnify and hold BCBSA harmless from and against all claims,damages, liabilities and costs of every kind, nature and description (except those arising solely as a result of BCBSA's negligence) that may arise as a result ofor related to Controlled Affiliate's rendering of services under the Licensed Marks and Name.7.LICENSE TERMA.Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1) year and shall beautomatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.B.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entityin the event that: (i) any one of the Controlling Plans ceases to be authorized to use the Licensed Marks and Name; or (ii) pursuant to Paragraph 15(a)(x) of theBlue Cross License Agreement any one of the Controlling Plans ceases to be authorized to use the Licensed Names and Marks in the Region.C.Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may be forthwith terminated by theControlling Plans or the affirmative vote of the majority of the Board of Directors of BCBSA present and voting at a special meeting expressly called by BCBSAfor the purpose on ten (10) days written notice to the Controlling Plans advising of the specific matters at issue and granting the Controlling Plans anopportunity to be heard and to present their response to the Board for: (1) failure to comply with any applicable minimum capital or liquidity requirement underthe quality control standards of this-5-Agreement; or (2) failure to comply with the "Organization and Governance" quality control standard of this Agreement; or (3) impending financialinsolvency; or(4)failure to comply with any of the applicable requirements of Standards 2, 3, 4, or 5 of attached Exhibit A; or (5) the pendency of any actioninstituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interim trustee, receiver or othercustodian for any of its property or business or seeking the declaration or establishment of a trust for any of its property or business, unless this ControlledAffiliate License Agreement has been earlier terminated under paragraph 7(E); or (6) such other reason as is determined in good faith immediately andirreparably to threaten the integrity and reputation of BCBSA, the Plans (including the Controlling Plans), any other licensee including Controlled Affiliate and/orthe Licensed Marks and Name.D.Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled Affiliate fail to comply with the provisions of thisAgreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day period and continuediligent efforts to complete the cure if such curing cannot reasonably be completed within such thirty day period) BCBSA or the Controlling Plans shall have theright to issue a notice that the Controlled Affiliate is in a state of noncompliance. If a state of noncompliance as aforesaid is undisputed by the ControlledAffiliate or is found to exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSA shall have the right to seek judicial enforcementof the Agreement or to issue a notice of termination thereof. Notwithstanding any other provisions of this Agreement, any disputes as to the termination of thisLicense pursuant to Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to mediation and mandatory dispute resolution. All other disputesbetween or among BCBSA, any of the Controlling Plans and/or Controlled Affiliate shall be submitted promptly to mediation and mandatory dispute resolution.The mandatory dispute resolution panel shall have authority to issue orders for specific performance and assess monetary penalties. Except, however, asprovided in Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marks and Name may not be finally terminated for any reason withoutthe affirmative vote of a majority of the present and voting members of the Board of Directors of BCBSA.E.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entityin the event that:(1)Controlled Affiliate shall no longer comply with item 2(E) above;(2)Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to paragraph 9 hereof, which are the royalties for thisLicense Agreement, are more than sixty (60) days in arrears to BCBSA; or-6-(3)Any of the following events occur: (i) a voluntary petition shall be filed by Controlled Affiliate seeking bankruptcy, reorganization,arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or (ii) aninvoluntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief underthe bankruptcy laws of the United States or any other law governing insolvency or debtor relief and such petition or proceeding is consented to or acquiesced inby Controlled Affiliate or is not dismissed within sixty (60) days of the date upon which the petition or other document commencing the proceeding is servedupon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled Affiliate in any case under the bankruptcy laws of the United States, orControlled Affiliate is adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted in the State of Illinois by anycourt of competent jurisdiction, or (iv) Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v) any government or anygovernment official, office, agency, branch, or unit assumes control of Controlled Affiliate or delinquency proceedings (voluntary or involuntary) are instituted, or(vi) an action is brought by Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiveror other custodian for any of its property or business, or (vii) an action is instituted by any governmental entity or officer against Controlled Affiliate seeking itsdissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business andsuch action is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one hundred thirty (130) days of the date upon which the pleadingor other document commencing the action is served upon the Controlled Affiliate, provided that if the action is stayed or its prosecution is enjoined, the onehundred thirty (130) day period is tolled for the duration of the stay or injunction, and provided further, that the Association’s Board of Directors may toll orextend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any of Controlled Affiliate's propertyor business is appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any other provision of this Agreement, a declaration or arequest for declaration of the existence of a trust over any of the Controlled Affiliate’s property or business shall not in itself be deemed to constitute or seekappointment of a trustee, interim trustee, receiver or other custodian for purposes of subparagraphs 7(E)(3)(vii) and(viii) of this Agreement.F.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all use of theLicensed Marks and Name, including any use in its trade name, except to the extent that it continues to be authorized to use the Licensed Marks within theService Area of one of the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSA sponsored by such Controlling Plan.7G.Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers to whom it provides products or servicesunder the Licensed Marks pursuant to this Agreement that it is no longer a licensee of BCBSA and, if directed by the Association’s Board of Directors, shallprovide instruction on how the customer can contact BCBSA or a designated licensee to obtain further information on securing coverage. The notificationrequired by this paragraph shall be in writing and in a form approved by BCBSA. The BCBSA shall have the right to audit the terminated entity's books andrecords to verify compliance with this paragraph.H.In the event this Agreement terminates pursuant to 7(B) hereof, upon termination of this Agreement the provisions of Paragraph 7(G) shallnot apply and the following provisions shall apply, except that, in the event that Controlled Affiliate is separately licensed by BCBSA to use the Licensed Marksin the Service Area of a Controlling Plan and termination of this Agreement is due to a partial termination of such Controlling Plan’s license pursuant toParagraph 15(a)(x)(ii) of the Blue Cross License Agreement, the notices, national account listing, payment, and audit right listed below shall be applicablesolely with respect to the Region and the geographic area for which the Controlling Plan’s license to use the Licensed Names and Marks is terminated:(1)The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to all individual and group customers,providers, brokers and agents of products or services sold, marketed, underwritten or administered by the Controlled Affiliate under the LicensedMarks and Name.The form and content of the notice shall be specified by BCBSA and shall, at a minimum, notify the recipient of the termination of the license, theconsequences thereof, and instructions for obtaining alternate products or services licensed by BCBSA. This notice shall be mailed within 15 days aftertermination.(2)The Controlled Affiliate shall deliver to BCBSA within five daysof a request by BCBSA a listing of national accounts in which the Controlled Affiliate is involved (in a control, participating or servicing capacity),identifying the national account and the Controlled Affiliate’s role therein.(3)Unless the cause of termination is an event respecting BCBSAstated in paragraph 15(a) or (b) of the Plan’s license agreement with BCBSA to use the Licensed Marks and Name, the Controlled Affiliate, theControlling Plans, and any other Licensed Controlled Affiliates of the Controlling Plans shall be jointly liable for payment to BCBSA of an amount equal to $25multiplied by the number of Licensed Enrollees of the Controlled Affiliate; provided that if any Plan other than a Controlling Plan is permitted by BCBSA to usemarks or names licensed by BCBSA in a geographic area in the Region, the payment for Licensed Enrollees in such geographic area shall be multiplied by afraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the Controlling Plans, and8any other Licensed Controlled Affiliates of the Controlling Plans in such geographic area and the denominator of which is the total number of LicensedEnrollees in such geographic area. Licensed Enrollee means each and every person and covered dependent who is enrolled as an individual or member of agroup receiving products or services sold, marketed or administered under marks or names licensed by BCBSA as determined at the earlier of (i) the end of thelast fiscal year of the terminated entity which ended prior to termination or (ii) the fiscal year which ended before any transactions causing the terminationbegan. Notwithstanding the foregoing, the amount payable pursuant to this subparagraph H. (3) shall be due only to the extent that, in BCBSA’s opinion, it doesnot cause the net worth of the Controlled Affiliate, the Controlling Plans or any other Licensed Controlled Affiliates of the Controlling Plans to fall below 100% ofthe Health Risk-Based Capital formula, or its equivalent under any successor formula, as set forth in the applicable financial responsibility standardsestablished by BCBSA (provided such equivalent is approved for purposes of this subparagraph by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans); measured as of the date of termination, and adjusted for the value of any transactions not madein the ordinary course of business. This payment shall not be due in connection with transactions exclusively by or among Plans (including the ControllingPlans) or their affiliates, including reorganizations, combinations or mergers, where the BCBSA Board of Directors determines that the license termination doesnot result in a material diminution in the number of Licensed Enrollees or the extent of their coverage. In the event that the Controlled Affiliate’s license isreinstated by BCBSA or is deemed to have remained in effect without interruption by a court of competent jurisdiction, BCBSA shall reimburse the ControlledAffiliate (and/or the Controlling Plans or their other Licensed Controlled Affiliates, as the case may be) for payments made under this subparagraph 7.H.(3) onlyto the extent that such payments exceed the amounts due to BCBSA pursuant to paragraph 7.K. and any costs associated with reestablishing the terminatedControlling Plan’s Service Area or the Region, including any payments made by BCBSA to a Plan or Plans (including the other Controlling Plans), or theirLicensed Controlled Affiliates, for purposes of replacing the Controlled Affiliate.(4)BCBSA shall have the right to audit the books and records ofthe Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the Controlling Plans to verify compliance with thisparagraph 7.H.(5)As to a breach of 7.H.(1), (2), (3) or (4), the parties agree thatthe obligations are immediately enforceable in a court of competent jurisdiction. As to a breach of 7.H.(1), (2) or (4) by the Controlled Affiliate, theparties agree there is no adequate remedy at law and BCBSA is entitled to obtain specific performance.-9-I.BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdiction from entry into anytransaction which would result in a termination of this Agreement unless a Controlling Plan’s license from BCBSA to use the Licensed Marks and Names hasbeen terminated pursuant to 10(d) of such Controlling Plan’s license agreement upon the required 6 month written notice.J.BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.K.In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed to have remained in effect withoutinterruption by a court of competent jurisdiction, the Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the ControllingPlans shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by BCBSA in connection with the termination and the reinstatement or courtaction, and any associated legal proceedings, including but not limited to: outside legal fees, consulting fees, public relations fees, advertising costs, and costsincurred to develop, lease or establish an interim provider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in part bythe BCBSA Board of Directors in its sole discretion.8.DISPUTE RESOLUTIONThe parties agree that any disputes between or among them or between or among any of them and one or more Plans or Controlled Affiliates of Plansthat use in any manner the Blue Cross and Blue Cross Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached toand made a part of each Controlling Plan’s License from BCBSA to use the Licensed Marks and Name as Exhibit 5 as amended from time-to-time, whichdocuments are incorporated herein by reference as though fully set forth herein.9.LICENSE FEEControlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit B.10.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between theControlling Plans and Controlled Affiliate or between either and BCBSA.11.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to thelast10known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.12.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amended bythe affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans as officially recorded by the BCBSACorporate Secretary.13.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect the remaining obligationsof the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is toprovide the parties with the benefits of this Agreement.14.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of the terms, covenants orconditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants or conditions.14A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans,the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (ifany) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourthsweighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (roundedto the nearest whole number, with0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3) of the Plansfail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans, the requirement of an affirmativethree-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or more Plans fail to cast weighted votes in favor of thequestion.1115.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.16.HEADINGSThe headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.12IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of last signature written below.Controlled Affiliate:By: Date: Controlling Plan:By: Date:Controlling Plan:By: Date:BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: Date: 13EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS APPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTSNovember 2019PREAMBLEThe standards for licensing Controlled Affiliates for Medicare Advantage PPO Products are established by BCBSA and are subject to change fromtime-to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote. Each Controlling Plan is required touse a standard Controlled Affiliate license form provided by BCBSA and to cooperate fully in assuring that the licensed Controlled Affiliate maintainscompliance with the license standards.Standard 1 - Organization and GovernanceA Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the following requirements:(1)Controlled Affiliate is owned or controlled by two or more ControllingPlans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to use the Licensed Marks in a geographic areain the Region and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a) to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate withwhich the Controlling Plans do not concur;(c)exercise control over the policy and operations of the Controlled Affiliate; and1EXHIBIT A (continued)Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must also requirewritten approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respect to business of the ControlledAffiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliate licenseagreement with BCBSA sponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be required with respect to business of theControlled Affiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly owned subsidiaries shall own 100% of any for-profit Controlled Affiliate.Standard 2 - Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to itscustomers.Standard 3 - State Licensure/CertificationA Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.2EXHIBIT A (continued)Standard 4 - Certain DisclosuresA Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of:a.the structure of the Blue Cross and Blue Shield System; andb.the independent nature of every licensee.Standard 5 - Reports and Records for Controlled AffiliatesA Controlled Affiliate and/or its Controlling Plans shall furnish, on a timely and accurate basis, reports and records relating to these Standards and theLicense Agreements between BCBSA and Controlled Affiliate.Standard 6 - Best EffortsDuring each year, a Controlled Affiliate shall use its best efforts to promote and build the value of the Blue Cross Marks.Standard 7 - Participation in Certain National ProgramsA Controlled Affiliate shall effectively and efficiently participate in certain national programs from time to time as may be adopted by Member Plans forthe purposes of providing ease of claims processing for customers receiving benefits outside of the Controlled Affiliate’s service area.National program requirements include:a.Inter-Plan Teleprocessing System (ITS); andb.Inter-Plan Medicare Advantage Program.Standard 8 - Participation in Master Business Associate AgreementControlled Affiliates shall comply with the terms of the Business Associate Agreement for Blue Cross and Blue Shield Licensees to the extent theyperform the functions of a business associate or subcontractor to a business associate, as defined by the Business Associate Agreement.Amended as of November 15, 20073EXHIBIT BROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENTSAPPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTSControlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula:An amount equal to its pro rata share of each Controlling Plan dues payable to BCBSA computed with the addition of the Controlled Affiliate'smembers using the Marks on regional MAPPO products and related services as reported on the Quarterly Enrollment Report with BCBSA. The payment byeach Controlling Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy the requirement of this paragraph, and no separatepayment will be necessary.Amended as of June 14, 20074Exhibit 1CBLUE CROSSCONTROLLED AFFILIATE LICENSE AGREEMENTAPPLICABLE TO REGIONAL MEDICARE PART D PRESCRIPTION DRUG PLAN PRODUCTS(Adopted by Member Plans at their November 21, 2019 meeting)This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and (“ControlledAffiliate"), a Controlled Affiliate of the BlueCross Plan(s), known as Party signatory hereto.WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;WHEREAS, under the Medicare Modernization Act, companies may apply to and be awarded a contract by the Centers for Medicare and MedicaidServices (“CMS”) to offer Medicare Part D Prescription Drug Plan products in geographic regions designated by CMS (hereafter “regional PDP products).”WHEREAS, some of the CMS-designated regions include the Service Areas, or portions thereof, of more than one Plan.WHEREAS, the Controlling Plans and Controlled Affiliate desire that the latter be entitled to use the BLUE CROSS and BLUE CROSS Design servicemarks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE CROSS in a trade name ("Licensed Name") to offer regionalPDP products in a region that includes the Service Areas, or portions thereof, of more than one Controlling Plan;NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the Licensed Marks and Name inconnection with, and only in connection with the sale, marketing and administration of regional PDP products and related services.This grant of rights is non-exclusive and is limited to the following states: (the “Region”). Controlled Affiliate may use the Licensed-1-Marks and Name in its legal name on the following conditions: (i) the legal name must be approved in advance, in writing, by BCBSA; (ii) ControlledAffiliate shall not do business outside the Region under any name or mark except business conducted in the Service Area of a Controlling Plan provided thatControlled Affiliate is separately licensed by BCBSA to use the Licensed Marks and Name in connection with health care plans and related services in theService Area of such Controlling Plan; and (iii) Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part of any nameor symbol used to identify itself in any securities market. Controlled Affiliate may use the Licensed Marks and Name in its Trade Name only with the prior,written, consent of BCBSA.2.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and further agrees to bebound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees to comply with all applicable federal, state and local laws.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by the Controlling Plans or by BCBSA)a report or reports to the Controlling Plans and BCBSA demonstrating Controlled Affiliate's compliance with the requirements of this Agreement including butnot limited to the quality control provisions of this paragraph and the attached Exhibit A.D.Controlled Affiliate agrees that the Controlling Plans and/or BCBSA may, from time-to-time, upon reasonable notice, review and inspect themanner and method of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.E.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the followingrequirements:(1)Controlled Affiliate is owned or controlled by two or more Controlling Plans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to use the Licensed Marks in a geographic areain theRegion and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and-2-(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing Body having not less than 100% voting control thereof;(b)to prevent any change in the articles of incorporation,bylaws or other establishing or governing documents of the Controlled Affiliate with which the Controlling Plans do not concur;(c)to exercise control over the policy and operations of the Controlled Affiliate; andNotwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must also requirewritten approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates(except such approval shall not be required with respect to business of the Controlled Affiliate conducted under the Licensed Marks within the ServiceArea of one of the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSA sponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be required with respect to business of theControlled Affiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall own 100% of any for-profit Controlled Affiliate.-3-3.SERVICE MARK USEA.Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licensees which are committedto strengthening the Licensed Marks and Name. The Controlled Affiliate further recognizes that its actions within the Region may affect the value of theLicensed Marks and Name nationwide.B.Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but not limited to use of suchsymbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules (generally applicable to ControlledAffiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued from time-to-time by BCBSA. Controlled Affiliate recognizesand agrees that all use of the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.C.Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or is intended to transfer inthe Region the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage in activity that may dilute or tarnish the uniquevalue of the Licensed Marks and Name.D.Controlled Affiliate shall use its best efforts to promote and build the value of the Licensed Marks and Name in connection with the sale,marketing and administration of regional PDP products and related services.4.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, therights granted hereunder and any such act shall be voidable at the sole option of any Controlling Plan or BCBSA. This Agreement and all rights and dutieshereunder are personal to Controlled Affiliate.5.INFRINGEMENTControlled Affiliate shall promptly notify the Controlling Plans and the Controlling Plans shall promptly notify BCBSA of any suspected acts ofinfringement, unfair competition or passing off that may occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not be entitled to requirethe Controlling Plans or BCBSA to take any actions or institute any proceedings to prevent infringement, unfair competition or passing off by third parties.Controlled Affiliate agrees to render to the Controlling Plans and BCBSA, without charge, all reasonable assistance in connection with any matter pertaining tothe protection of the Licensed Marks and Name by BCBSA.-4-6.LIABILITY INDEMNIFICATIONControlled Affiliate and the Controlling Plans hereby agree to save, defend, indemnify and hold BCBSA harmless from and against all claims,damages, liabilities and costs of every kind, nature and description (except those arising solely as a result of BCBSA's negligence) that may arise as a result ofor related to Controlled Affiliate's rendering of services under the Licensed Marks and Name.7.LICENSE TERMA.Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1) year and shall beautomatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.B.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entityin the event that: (i) any one of the Controlling Plans ceases to be authorized to use the Licensed Marks and Name; or (ii) pursuant to Paragraph 15(a)(x) of theBlue Cross License Agreement any one of the Controlling Plans ceases to be authorized to use the Licensed Names and Marks in the Region.C.Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may be forthwith terminated by theControlling Plans or the affirmative vote of the majority of the Board of Directors of BCBSA present and voting at a special meeting expressly called by BCBSAfor the purpose on ten (10) days written notice to the Controlling Plans advising of the specific matters at issue and granting the Controlling Plans anopportunity to be heard and to present their response to the Board for: (1) failure to comply with any applicable minimum capital or liquidity requirement underthe quality control standards of this Agreement; or (2) failure to comply with the "Organization and Governance" quality control standard of this Agreement; or(3) impending financial insolvency; or (4) failure to comply with any of the applicable requirements of Standards 2, 3, 4, or 5 of attached Exhibit A; or (5) thependency of any action instituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interimtrustee, receiver or other custodian for any of its property or business or seeking the declaration or establishment of a trust for any of its property or business,unless this Controlled Affiliate License Agreement has been earlier terminated under paragraph 7(E); or (6) such other reason as is determined in good faithimmediately and irreparably to threaten the integrity and reputation of BCBSA, the Plans (including the Controlling Plans), any other licensee includingControlled Affiliate and/or the Licensed Marks and Name.D.Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled Affiliate fail to comply with the provisions of thisAgreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day period and continuediligent efforts to-5-complete the cure if such curing cannot reasonably be completed within such thirty day period) BCBSA or the Controlling Plans shall have the right to issue a noticethat the Controlled Affiliate is in a state of noncompliance. If a state of noncompliance as aforesaid is undisputed by the Controlled Affiliate or is found to exist by a mandatorydispute resolution panel and is uncured as provided above, BCBSA shall have the right to seek judicial enforcement of the Agreement or to issue a notice of terminationthereof. Notwithstanding any other provisions of this Agreement, any disputes as to the termination of this License pursuant to Paragraphs 7(B), 7(C) or 7(E) of thisAgreement shall not be subject to mediation and mandatory dispute resolution. All other disputes between or among BCBSA, any of the Controlling Plans and/or ControlledAffiliate shall be submitted promptly to mediation and mandatory dispute resolution. The mandatory dispute resolution panel shall have authority to issue orders for specificperformance and assess monetary penalties.Except, however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marks and Name may not be finally terminated forany reason without the affirmative vote of a majority of the present and voting members of the Board of Directors of BCBSA.E.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entity in the eventthat:(1)Controlled Affiliate shall no longer comply with item 2(E) above;(2)Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to paragraph 9 hereof, which are the royalties for this LicenseAgreement, are more than sixty (60) days in arrears to BCBSA; or(3)Any of the following events occur: (i) a voluntary petition shallbe filed by Controlled Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or anyother law governing insolvency or debtor relief, or (ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy, reorganization,arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief and such petition or proceedingis consented to or acquiesced in by Controlled Affiliate or is not dismissed within sixty (60) days of the date upon which the petition or other document commencing theproceeding is served upon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled Affiliate in any case under the bankruptcy laws of the United States,or Controlled Affiliate is adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted in the State of Illinois by any court ofcompetent jurisdiction, or (iv) Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v) any government or any government official, office,agency, branch, or unit assumes control of Controlled Affiliate or delinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by ControlledAffiliate seeking its-6-dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business, or (vii)an action is instituted by any governmental entity or officer against Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of atrustee, interim trustee, receiver or other custodian for any of its property or business and such action is consented to or acquiesced in by Controlled Affiliate or is notdismissed within one hundred thirty (130) days of the date upon which the pleading or other document commencing the action is served upon the Controlled Affiliate, providedthat if the action is stayed or its prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of the stay or injunction, and provided further, that theAssociation’s Board of Directors may toll or extend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any ofControlled Affiliate's property or business is appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any other provision of this Agreement, adeclaration or a request for declaration of the existence of a trust over any of the Controlled Affiliate’s property or business shall not in itself be deemed to constitute or seekappointment of a trustee, interim trustee, receiver or other custodian for purposes of subparagraphs 7(E)(3)(vii) and(viii) of this Agreement.F.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all use of the Licensed Marksand Name, including any use in its trade name, except to the extent that it continues to be authorized to use the Licensed Marks within the Service Area of one of theControlling Plans pursuant to a separate controlled affiliate license agreement with BCBSA sponsored by such Controlling Plan.G.Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers to whom it provides products or services under theLicensed Marks pursuant to this Agreement that it is no longer a licensee of BCBSA and, if directed by the Association’s Board of Directors, shall provide instruction on howthe customer can contact BCBSA or a designated licensee to obtain further information on securing coverage. The notification required by this paragraph shall be in writingand in a form approved by BCBSA. The BCBSA shall have the right to audit the terminated entity's books and records to verify compliance with this paragraph.H.In the event this Agreement terminates pursuant to 7(B) hereof, upon termination of this Agreement the provisions of Paragraph 7(G) shall not apply andthe following provisions shall apply, except that, in the event that Controlled Affiliate is separately licensed by BCBSA to use the Licensed Marks in the Service Area of aControlling Plan and termination of this Agreement is due to a partial termination of such Controlling Plan’s license pursuant to Paragraph 15(a)(x)(ii) of the Blue Cross-7-License Agreement, the notices, national account listing, payment, and audit right listed below shall be applicable solely with respect to the Regionand the geographic area for which the Controlling Plan’s license to use the Licensed Names and Marks is terminated:(1)The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to all individual and group customers,providers, brokers and agents of products or services sold, marketed, underwritten or administered by the Controlled Affiliate under the LicensedMarks and Name.The form and content of the notice shall be specified by BCBSA and shall, at a minimum, notify the recipient of the termination of the license, theconsequences thereof, and instructions for obtaining alternate products or services licensed by BCBSA. This notice shall be mailed within 15 days aftertermination.(2)The Controlled Affiliate shall deliver to BCBSA within five daysof a request by BCBSA a listing of national accounts in which the Controlled Affiliate is involved (in a control, participating or servicing capacity),identifying the national account and the Controlled Affiliate’s role therein.(3)Unless the cause of termination is an event respecting BCBSAstated in paragraph 15(a) or (b) of the Plan’s license agreement with BCBSA to use the Licensed Marks and Name, the Controlled Affiliate, theControlling Plans, and any other Licensed Controlled Affiliates of the Controlling Plans shall be jointly liable for payment to BCBSA of an amount equal to $25multiplied by the number of Licensed Enrollees of the Controlled Affiliate; provided that if any Plan other than a Controlling Plan is permitted by BCBSA to usemarks or names licensed by BCBSA in a geographic area in the Region, the payment for Licensed Enrollees in such geographic area shall be multiplied by afraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the Controlling Plans, and any other Licensed ControlledAffiliates of the Controlling Plans in such geographic area and the denominator of which is the total number of Licensed Enrollees in such geographic area.Licensed Enrollee means each and every person and covered dependent who is enrolled as an individual or member of a group receiving products or servicessold, marketed or administered under marks or names licensed by BCBSA as determined at the earlier of (i) the end of the last fiscal year of the terminatedentity which ended prior to termination or (ii) the fiscal year which ended before any transactions causing the termination began. Notwithstanding theforegoing, the amount payable pursuant to this subparagraph H. (3) shall be due only to the extent that, in BCBSA’s opinion, it does not cause the net worth ofthe Controlled Affiliate, the Controlling Plans or any other Licensed Controlled Affiliates of the Controlling Plans to fall below 100% of the Health Risk-BasedCapital formula, or its equivalent under any successor formula, as set forth in the applicable financial responsibility standards established by BCBSA (providedsuch equivalent is approved for purposes of this subparagraph by the affirmative vote of three-fourths-8-of the Plans and three-fourths of the total then current weighted vote of all the Plans); measured as of the date of termination, and adjusted for thevalue of any transactions not made in the ordinary course of business. This payment shall not be due in connection with transactions exclusively by or amongPlans (including the Controlling Plans) or their affiliates, including reorganizations, combinations or mergers, where the BCBSA Board of Directors determinesthat the license termination does not result in a material diminution in the number of Licensed Enrollees or the extent of their coverage. In the event that theControlled Affiliate’s license is reinstated by BCBSA or is deemed to have remained in effect without interruption by a court of competent jurisdiction, BCBSAshall reimburse the Controlled Affiliate (and/or the Controlling Plans or their other Licensed Controlled Affiliates, as the case may be) for payments made underthis subparagraph 7.H.(3) only to the extent that such payments exceed the amounts due to BCBSA pursuant to paragraph 7.K. and any costs associated withreestablishing the terminated Controlling Plan’s Service Area or the Region, including any payments made by BCBSA to a Plan or Plans (including the otherControlling Plans), or their Licensed Controlled Affiliates, for purposes of replacing the Controlled Affiliate.(4)BCBSA shall have the right to audit the books and records ofthe Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the Controlling Plans to verify compliance with thisparagraph 7.H.(5)As to a breach of 7.H.(1), (2), (3) or (4), the parties agree thatthe obligations are immediately enforceable in a court of competent jurisdiction. As to a breach of 7.H.(1), (2) or (4) by the Controlled Affiliate, theparties agree there is no adequate remedy at law and BCBSA is entitled to obtain specific performance.I.BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdiction from entry into anytransaction which would result in a termination of this Agreement unless a Controlling Plan’s license from BCBSA to use the Licensed Marks and Names hasbeen terminated pursuant to 10(d) of such Controlling Plan’s license agreement upon the required 6 month written notice.J.BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.K.In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed to have remained in effect withoutinterruption by a court of competent jurisdiction, the Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the ControllingPlans shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by BCBSA in connection with the termination and the reinstatement or courtaction, and any associated legal proceedings, including but not limited to: outside legal fees, consulting fees, public relations fees, advertising costs, and costsincurred to develop, lease or establish an interim provider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in part bythe BCBSA Board of Directors in its sole discretion.-9-8.DISPUTE RESOLUTIONThe parties agree that any disputes between or among them or between or among any of them and one or more Plans or Controlled Affiliates of Plansthat use in any manner the Blue Cross and Blue Cross Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached toand made a part of each Controlling Plan’s License from BCBSA to use the Licensed Marks and Name as Exhibit 5 as amended from time-to-time, whichdocuments are incorporated herein by reference as though fully set forth herein.9.LICENSE FEEControlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit B.10.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between theControlling Plans and Controlled Affiliate or between either and BCBSA.11.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to thelast known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.12.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amended bythe affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans as officially recorded by the BCBSACorporate Secretary.-10-13.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect the remaining obligationsof the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is toprovide the parties with the benefits of this Agreement.14.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of the terms, covenants orconditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants or conditions.14A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans,the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (ifany) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourthsweighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (roundedto the nearest whole number, with0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3) of the Plansfail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans, the requirement of an affirmativethree-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or more Plans fail to cast weighted votes in favor of thequestion.15.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.16.HEADINGSThe headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.-11-IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of last signature written below.Controlled Affiliate:By: Date: Controlling Plan:By: Date: Controlling Plan:By: Date: BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: Date: -12-EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS APPLICABLE TO REGIONAL MEDICAREPART D PRESCRIPTION DRUG PLAN PRODUCTSNovember 2019 PREAMBLEThe standards for licensing Controlled Affiliates for Medicare Part D Prescription Drug Plan Products are established by BCBSA and are subject tochange from time- to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote. Each Controlling Plan isrequired to use a standard Controlled Affiliate license form provided by BCBSA and to cooperate fully in assuring that the licensed Controlled Affiliate maintainscompliance with the license standards.Standard 1 - Organization and GovernanceA Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the following requirements:(1)Controlled Affiliate is owned or controlled by two or more Controlling Plans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to use the Licensed Marks in a geographic areain the Region and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate withwhich the Controlling Plans do not concur;(c)exercise control over the policy and operations of the Controlled Affiliate; and-13-EXHIBIT A (continued)Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must also requirewritten approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respect to business of the ControlledAffiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliate licenseagreement with BCBSA sponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be required with respect to business of theControlled Affiliate conducted under the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall own 100% of any for-profit Controlled Affiliate.Standard 2 - Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to itscustomers.Standard 3 - State Licensure/CertificationA Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.-14-EXHIBIT A (continued)Standard 4 - Certain DisclosuresA Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of:a.the structure of the Blue Cross and Blue Shield System; andb.the independent nature of every licensee.Standard 5 - Reports and Records for Controlled AffiliatesA Controlled Affiliate and/or its Controlling Plans shall furnish, on a timely and accurate basis, reports and records relating to these Standards and theLicense Agreements between BCBSA and Controlled Affiliate.Standard 6 - Best EffortsDuring each year, a Controlled Affiliate shall use its best efforts to promote and build the value of the Blue Cross Marks.Standard 7 - Participation in Master Business Associate AgreementControlled Affiliates shall comply with the terms of the Business Associate Agreement for Blue Cross and Blue Shield Licensees to the extent theyperform the functions of a business associate or subcontractor to a business associate, as defined by the Business Associate Agreement.-15-EXHIBIT BROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENTSAPPLICABLE TO REGIONAL MEDICARE PART D PRESCRIPTION DRUG PLAN PRODUCTSControlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula:An amount equal to its pro rata share of each Controlling Plan dues payable to BCBSA computed with the addition of the Controlled Affiliate'smembers using the Marks on regional PDP products and related services as reported on the Quarterly Enrollment Report with BCBSA. The payment by eachControlling Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy the requirement of this paragraph, and no separatepayment will be necessary.Amended as of June 14, 2007-16-EXHIBIT 2Membership StandardsPage 1 of 5 PreambleThe Membership Standards apply to all organizations seeking to become or to continue as Regular Members of the Blue Cross and Blue ShieldAssociation. Any organization seeking to become a Regular Member must be found to be in substantial compliance with all Membership Standards at the timemembership is granted and the organization must be found to be in substantial compliance with all Membership Standards for a period of two (2) yearspreceding the date of its application. If Membership is sought by an entity which controls or is controlled by one or more Plans, such compliance shall bedetermined on the basis of compliance by such Plan or Plans.The Regular Member Plans shall have authority to interpret these Standards.A Regular Member Plan that operates as a “Shell Holding Company” is defined as an entity that assumes no underwriting risk and has less than 1%of the consolidated enterprise assets (excludes investments in subsidiaries) and less than 5% of the consolidated enterprise net general and administrativeexpenses.A Regular Member Plan that operates as a “Hybrid Holding Company” is defined as an entity that assumes no underwriting risk and has either morethan 1% of the consolidated enterprise assets (excludes investments in subsidiaries) or more than 5% of the consolidated enterprise net general andadministrative expenses.Standard 1: A Plan shall maintain a governing Board, which shall control the Plan and ensure that the Plan follows appropriate practices of corporategovernance. A Plan's Board shall not be controlled by any special interest group, shall make an annual determination that a majority of its directors areindependent, and shall act in the best interest of its Corporation and its customers. The Board shall be composed of a majority of persons other than providersof health care services, who shall be known as public members. A public member shall not be an employee of or have a financial interest in a health careprovider, nor be a member of a profession which provides health care services. Amended as of March 15, 2007EXHIBIT 2Membership StandardsPage 2 of 5Standard 2: A Plan shall furnish to the Association on a timely and accurate basis reports and records relating to compliance with these Standardsand the License Agreements between the Association and the Plans. Such reports and records are the following:A.BCBSA Membership Information Request;B.Triennial trade name and service mark usage material, including disclosure material under Standard 7;C.Changes in the governance of the Plan, including changes in a Plan's Charter, Articles of Incorporation, or Bylaws, changes in a Plan'sBoard composition, or changes in the identity of the Plan's Principal Officers;D.Quarterly Financial Report, Semi-annual “Health Risk- Based Capital (HRBC) Report” as defined by the NAIC, Annual Budget, AnnualCertified Audit Report, Insurance Department Examination Report, Annual Statement filed with State Insurance Department (with all attachments), Plan,Subsidiary and Affiliate Report; and•Plans that are a Shell Holding Company as defined in the Preamble hereto are required to furnish only a calendar year-end “Health Risk-Based Capital (HRBC) Report” as defined by the NAIC.Amended as of November 17, 2011EXHIBIT 2Membership StandardsPage 3 of 5E.Quarterly Enrollment Report, Quarterly Member Touchpoint Measures Index (MTM) through 12/31/2011, and Semi-annual MTM Indexstarting 1/1/2012 and thereafter.•For purposes of MTM reporting only, a Plan shall file a separate MTM report for each Geographic Market.Standard 3: A Plan shall be operated in a manner that providesreasonable financial assurance that it can fulfill its contractual obligations to its customers.Standard 4: A Plan shall be operated in a manner responsive to customer needs and requirements.Standard 5: A Plan shall effectively and efficiently participate in each national program as from time to time may be adopted by the Member Plans forthe purposes of providing portability of membership between the Plans and ease of claims processing for customers receiving benefits outside of the Plan'sService Area.Such programs are applicable to Blue Cross and Blue Shield Plans, and include:A.Inter-Plan Teleprocessing System (ITS);B.BlueCard Program;C.National Account Programs;D.Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April 14, 2003; andE.Inter-Plan Medicare Advantage Program.Amended as of November 21, 2014EXHIBIT 2Membership StandardsPage 4 of 5Standard 6: In addition to requirements under the national programs listed in Standard 5: Participation in National Programs, a Plan shall take suchaction as required to ensure its financial performance in programs and contracts of an inter-Plan nature or where the Association is a party.Standard 7: A Plan shall make adequate disclosure in contracting with third parties and in disseminating public statements of (i) the structure of theBlue Cross and Blue Shield System,(ii) the independent nature of every Plan, and (iii) the Plan's financial condition.Standard 8: A Plan shall cooperate with the Association's Board of Directors and its Brand Enhancement & Protection Committee in theadministration of the Plan Performance Response Process and in addressing Plan performance problems identified thereunder.Standard 9: A Plan shall obtain a rating of its financial strength from an independent rating agency approved by the Association's Board of Directorsfor such purpose.Standard 10: Notwithstanding any other provision in this License Agreement, during each year, a Plan and its Controlled Affiliate(s) engaged inproviding licensable services (excluding Life Insurance and Charitable Foundation Services) shall use their best efforts to promote and build the value of theBlue Cross Marks.Standard 11: Neither a Plan nor any Larger Controlled Affiliate shall cause or permit an entity other than a Plan or a Licensed Controlled Affiliatethereof to obtain control of the Plan or Larger Controlled Affiliate or to acquire a substantial portion of its assets related to licensable services.Amended as of June 16, 2005EXHIBIT 2Membership StandardsPage 5 of 5Standard 12: No provider network, or portion thereof, shall be rented or otherwise made available to a National Competitor if the Licensed Marks orNames are used in any way with such network.A provider network may be rented or otherwise made available, provided there is no use of the Licensed Marks or Names with respect to the networkbeing rented.Standard 13: Each Plan shall operate in a manner to reasonably: 1) protect the security and confidentiality of Personally Identifiable Information (PII)and Protected Health Information (PHI); 2) protect the Brands from reputational damage; and 3) cooperate with BCBSA and other Plans if a data securityincident or data breach occurs.Amended as of June 18, 2015EXHIBIT 3GUIDELINES WITH RESPECT TO USE OFLICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL ACCOUNTSPage 1 of 31.The strength of the Blue Cross/Blue Cross National Accounts mechanism, and the continued provision of cost effective, quality health carebenefits to National Accounts, are predicated on locally managed provider networks coordinated on a national scale in a manner consistent with effectiveservice to National Account customers and consistent with the preservation of the integrity of the Blue Cross/Blue Shield system and the Licensed Marks.These guidelines shall be interpreted in keeping with such ends.2.A National Account is an entity with employee and/or retiree locations in more than one Plan's Service Area. Unless otherwise agreed, aNational Account is deemed located in the Service Area in which the corporate headquarters of the National Account is located. A local plant, office or divisionheadquarters of an entity may be deemed a separate National Account when that local plant, office or division headquarters 1) has employee locations in morethan one Service Area, and 2) has independent health benefit decision- making authority for the employees working at such local plant, office or divisionheadquarters and for employees working at other locations outside the Service Area. In such a case, the local plant, office or division headquarters is aNational Account that is deemed located in the Service Area in which such local plant, office or division headquarters is located. The Control Plan of a NationalAccount is the Plan in whose Service Area the National Account is located. A participating ("Par") Plan is a Plan in whose Service Area the National Accounthas employee and/or retiree locations, but in which the National Account is not located. In the event that a National Account parent company consolidateshealth benefit-decision making for itself and its wholly-owned subsidiary companies, the parent company and the subsidiary companies shall be considered oneNational Account. The Control Plan for such a National Account shall be the Plan in whose Service Area the parent company headquarters is located.3.The National Account Guidelines enunciated herein below shall be applicable only with respect to the business of new National Accountsacquired after January 1, 1991.4.Control Plans shall utilize National Account identification cards complying with then currently effective BCBSA graphic standards inconnection with all National Accounts business to facilitate administration thereof, to minimize subscriber and provider confusion, and to reflect a commitmentto cooperation among Plans.Amended as of June 12, 2003EXHIBIT 3Page 2 of 35.Disputes among Plans and/or BCBSA as to the interpretation or implementation of these Guidelines or as to other National Accounts issuesshall be submitted to mediation and mandatory dispute resolution as provided in the License Agreement. For two years from the effective date of the LicenseAgreement, however, such disputes shall be subject to mediation only, with the results of such mediation to be collected and reported in order to establishmore definitive operating parameters for National Accounts business and to serve as ground rules for future binding dispute resolution.6.The Control Plan may use the BlueCard Program (as defined by IPPC) to deliver benefits to employees and non-Medicare eligible retirees ina Participating Plan’s service area if an alternative arrangement with the Participating Plan cannot be negotiated. The Participating Plan’s minimum servicingrequirement for those employees and non-Medicare retirees in its service area is to deliver benefits using the BlueCard Program. Account delivery is subject tothe policies, provisions and procedures of the BlueCard Program.7.For provider payments in a Participating Plan’s area (on non-BlueCard claims), payment to the provider may be made by the ParticipatingPlan or the Control Plan at the Participating Plan's option. If the Participating Plan elects to pay the provider, it may not withhold payment of a claim verified bythe Control Plan or its designated processor, and payment must be in conformity with service criteria established by the Board of Directors of BCBSA (or anauthorized committee thereof) to assure prompt payment, good service and minimum confusion with providers and subscribers. The Control Plan, at theParticipating Plan's request, will also assure that measures are taken to protect the confidentiality of the data pertaining to provider reimbursement levels andprofiles.Amended as of June 14, 1996EXHIBIT 3Page 3 of 38.The Control Plan, in its financial agreements with a National Account, is expected to reasonably reflect the aggregate amount of differentialspassed along to the Control Plan by all Participating Plans in a National Account.9.Other than in contracting with health care providers or soliciting such contracts in areas contiguous to a Plan's Service Area in order toserve its subscribers or those of its licensed Controlled Affiliate residing or working in its Service Area, a Control Plan may not use the Licensed Marks and/orName, as a tag line or otherwise, to negotiate directly with providers outside its Service Area.Amended as of March 13, 2003EXHIBIT 4GOVERNMENT PROGRAMS AND CERTAIN OTHER USESPage 1 of 141.A Plan and its licensed Controlled Affiliate may use the Licensed Marks and Name in bidding on and executing a contract to serve aGovernment Program, and in thereafter communicating with the Government concerning the Program. With respect, however, to such contracts entered intoafter the 1st day of January, 1991, the Licensed Marks and Name will not be used in communications or transactions with beneficiaries or providers in theGovernment Program located outside a Plan's Service Area, unless the Plan can demonstrate to the satisfaction of BCBSA's governing body that such arestriction on use of the Licensed Marks and Name will jeopardize its ability to procure the contract for the Government Program. As to both existing and futurecontracts for Government Programs, Plans will discontinue use of the Licensed Marks and Name as to beneficiaries and Providers outside their Service Areaas expeditiously as circumstances reasonably permit. Effective January 1, 1995, except as provided in the first sentence above, all use by a Plan of theLicensed Marks and Name in Government Programs outside of the Plan's Service Area shall be discontinued. Incidental communications outside a Plan'sService Area with resident or former resident beneficiaries of the Plan, and other categories of necessary incidental communications approved by BCBSA, arenot prohibited. For purposes of this Paragraph 1, the term “Government Programs” shall mean Medicare Part A, Medicare Part B and other non-riskgovernment programs.2.In connection with activity otherwise in furtherance of the License Agreement, a Plan and its Controlled Affiliates that are licensed to use theLicensed Marks and Name in its Service Area pursuant to the Controlled Affiliate License Agreements authorized in clauses a) through c) of Paragraph 2 of thePlan’s License Agreement with BCBSA may use the Licensed Marks and Name outside the Plan’s Service Area in the following circumstances which aredeemed legitimate and necessary and not likely to cause consumer confusion:2.1Common Business Communicationsa.sending letterhead, envelopes, and similar items solely for administrative purposes (e.g., not for purposes of marketing, advertising,promoting, selling or soliciting the sale of health care plans and related services);b.distributing business cards other than in marketing and selling;c.advertising in publications or electronic media solely to persons for employment;Amended as of June 19, 2014EXHIBIT 4Page 2 of 142.2Marketing Spillovera.advertising in print, electronic or other media which serve, as a substantial market, the Service Area of the Plan or licensed ControlledAffiliate, provided that no Plan or Controlled Affiliate may advertise outside its Service Area on the national broadcast and cable networks and thatadvertisements in national print media are limited to the smallest regional edition encompassing the Service Area;b.advertising by direct mail where the addressee's zip code plus 4 includes, at least in part, the Plan's Service Area or that of a licensedControlled Affiliate;2.3Provider Contractinga.contracting with health care providers or soliciting such contracts in areas contiguous to the Plan's Service Area in order to serve itssubscribers or those of such licensed Controlled Affiliates residing or working in its service area;b.issuing a small sign containing the legal name or trade name of the Plan or such licensed Controlled Affiliates for display by a provider toidentify the latter as a participating provider of the Plan or Controlled Affiliate;c.negotiating case-specific reimbursement rates with a provider that does not have a contract applicable to a specific member’s servicesrendered or to be rendered with the Licensee (or any of the Licensees in the case of overlapping Service Areas) in whose Service Area the health careprovider is located, so long as(1)the Licensee engaging in the negotiations complies with all applicable Inter-Plan Programs Policies and Provisions and Brand Regulationsrelated to case-specific rate negotiations, and(2)the Licensee (or all Licensees in the case of overlapping Service Areas) in whose Service Area the health care provider is located providesconsent before negotiations commence.Amended as of January 22, 2019EXHIBIT 4Page 3 of 14d.contracting with a pharmacy management organization (“Pharmacy Intermediary”) to gain access to a national or regional pharmacy networkto provide self-administered prescription drugs to deliver a pharmacy benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide, provided,however, that the Pharmacy Intermediary may not use the Licensed Marks or Name in contracting with the pharmacy providers in such network;Amended as of January 22, 2019EXHIBIT 4Page 4 of 14e.contracting with the corporate owner of a national or regional retail pharmacy chain to gain access to the pharmacies in the chain to provideself-administered prescription drugs to deliver a pharmacy benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide, provided that (1)the Plan and the Controlled Affiliate may not contract directly with pharmacists or pharmacy stores outside the Plan’s Service Area, and (2) neither the Plan’s orthe Controlled Affiliate’s name nor the Licensed Marks or Name may be posted or otherwise displayed at or by any pharmacy store outside the Plan’s ServiceArea;f.contracting with a dental management organization (“Dental Intermediary”) to gain access to a national or regional dental network to deliver aroutine dental benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide, provided, however, that the Dental Intermediary may not usethe Licensed Marks or Name in contracting with the dental providers in such network;g.contracting with a vision management organization (“Vision Intermediary”) to gain access to a national or regional vision network to deliver aroutine vision benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide, provided, however, that the Vision Intermediary may not use theLicensed Marks or Name in contracting with the vision providers in such network;h.contracting with an independent clinical laboratory for analysis and clinical assessment of specimens that are collected within the Plan’sService Area;i.contracting with a durable medical equipment or home medical equipment company for durable medical equipment and supplies and homemedical equipment and supplies that are shipped to a location within the Plan’s Service Area;j.contracting with a specialty pharmaceutical company for non- routine biological therapeutics that are ordered by a health care professionallocated within the Plan’s Service Area;EXHIBIT 4Page 5 of 14k.contracting with a company that operates provider sites in the Plan’s Service Area, provided that the contract is solely for services renderedat a site (e.g., hospital, mobile van) that is within the Plan’s Service Area;l.contracting with a company that makes health care professionals available in the Plan’s Service Area (e.g., traveling home health nurse),provided that the contract is solely for services rendered by health care professionals who are located within the Plan’s Service Area.2.4Services to National Accountsa.in conjunction with contracting with a National Account as Control Licensee or Alternate Control Licensee (as those terms are defined in theInter-Plan Programs Policies and Provisions (“IP Policies”)) to offer Blue-branded Health Coverage to the National Account, offering Blue-branded Health andWellness Programs to all members of the National Account, including members who have not enrolled in the Blue-branded Health Coverage (“non-Blue HealthCoverage members”), provided that:i.the Plan and/or licensed Controlled Affiliate has no contact or interaction with providers outside of the Plan’s Service Area, except asspecifically provided in the IP Policies and in2.4 (b); and(i)if in accordance with IP Policies another Licensee is soliciting or servicing under the Brands a local plant, office or division of the accountthat is outside of the Plan’s Service Area, the Plan and/or licensed Controlled Affiliate may not offer Blue-branded Health and Wellness Programs to anyemployees working at such local plant, office or division without the consent of such other Licensee; and(ii)if the Plan and/or licensed Controlled Affiliate provides an information card to the non-Blue Health Coverage members, the card may notdisplay the Symbols in the masthead, must contain a prominent disclosure conveying that it is not a health insurance card, and otherwise must be designed sothat it is dissimilar to a Blue member identification card.Amended as of March 26, 2015EXHIBIT 4Page 6 of 142.4Services to National Accounts (continued)For purposes of this subparagraph a, the following definitionsapply:“Health and Wellness Program” shall mean a program that includes at least one of the following elements or a related element:•Health Risk Assessment and/or Preventive Screenings•Exercise and Fitness Programs•Health and Wellness Events (e.g., attendance at a health fair, a 5K walk)•Nutrition and Weight Management•Health Education (e.g., smoking cessation classes)•Prenatal and Parenting Education•Disease or Chronic Condition ManagementThe above listing is intended to represent examples of the types of programs that may be offered, and other programs, including those offered throughdifferent media such as the internet or telephonically, may also be deemed Health and Wellness programs.“Health Coverage” shall mean providing or administering medical, surgical, hospital, major medical, or catastrophic coverage, or any HMO, PPO,POS or other managed care plan for the foregoing services.b.as part of a Health and Wellness Program that is otherwise compliant with Brand Regulation 4.11.4(a), contracting with a health andwellness organization to gain access to providers to deliver a discrete health and wellness event (“Event”) held at a National Account’s worksite outside of theLicensee’s Service Area, provided that:i.the services delivered at the Event are limited to fingerstick screenings for cholesterol and glucose, seasonal flu immunizations, bloodpressure measurements, body mass index measurements, and other routine screenings, immunizations and measurements; andii.neither such services nor their costs are applied as claims against any benefit plan; andiii.the Event is presented during one or more limited periods during a benefit year and is available to all employees at the worksite.Amended as of March 26, 2015EXHIBIT 4Page 7 of 14c.in conjunction with contracting with a National Account as Control Licensee or Alternate Control Licensee to offer Blue-branded HealthCoverage to the National Account, performing the Eligibility and Enrollment functions of HR administration for all benefit plans offered by the National Accountto its members, including benefit plans that are not underwritten or administered by the Plan, provided that:i.in performing such functions, the Plan and/or licensed Controlled Affiliate does not use the Brands in any communications with health careproviders outside of the Plan’s Service Area, and otherwise limits its use of the Brands outside of the Service Area to communications with the account’smembers, the other benefit plan providers with which the account has contracted and other reasonably necessary communications to perform such functions;andii.if in accordance with IP Policies another Licensee is soliciting or servicing under the Brands a local plant, office or division of the accountthat is outside of the Plan’s Service Area, the Plan and/or licensed Controlled Affiliate may not perform Eligibility and Enrollment functions for employeesworking at such local plant, office or division without the consent of such other Licensee;d.in conjunction with contracting with a National Account as Control Licensee or Alternate Control Licensee to perform or investigate fraud,waste and abuse investigation activities for a non- participating provider in a Par/Host Plan’s service area, as long as the Control/Home Plan is givenpermission to do so by the Par/Host Plan and specific conditions are met in accordance with Inter-Plan Programs and Inter-Plan Medicare Advantage Programpolicies.For purposes of this subparagraph b, the following definitions apply: “Health Coverage” has the meaning set forth in subparagraph 2.4.a.Amended September 27, 2018EXHIBIT 4Page 8 of 14“Eligibility” means services that manage the account’s eligibility data and determine or process determinations relating to eligibility for benefit plansoffered by the account to its employees, including such services as:•monitoring and auditing data to ensure that only entitled individuals are enrolled in each such benefit plan;•review of eligibility documentation (e.g. marriage licenses, birth certificates, student status verification letters, employment records);•identification of key member segments such as over-age dependents, part-time employees, employees reaching certain milestones (e.g.Medicare-eligible, retirees);•termination of coverage for those individuals found to be ineligible for coverage under a benefit plan, and, if applicable, generation of aCOBRA event; and•management of “hour-banking” for union environments in which union members can bank hours to remain eligible for benefits.“Enrollment” means services that enroll eligible individuals and their spouses/dependents or terminate or change their enrollment in the account’sbenefit plans on an ongoing basis and during open enrollment periods, including such services as:•the coordination of each step in open enrollment process from project planning and system set-up to the generation of confirmationstatements;•ongoing enrollment support for new hires and changes due to life events and work status adjustments;•evidence of insurability (EOI) administration for life and disability coverage;•transmission of eligibility/enrollment information to the account’s benefit plan providers;•review and reconciliation of error reports received from the account’s benefit plan providers; and•transmission of information to the account’s payroll system (e.g., benefit deductions, employee demographic data).Amended as of March 26, 2015EXHIBIT 4Page 9 of 142.5Knowledge Sharinga.submitting scholarly articles authored or co-authored by the Plan or Controlled Affiliate or its respective employees for publication in peer-reviewed journals;b.permitting an internal representative of the Licensee (e.g., officer, employee) to speak or present at a conference or symposium outside ofthe Licensee’s Service Area regarding either (i) healthcare financing, administration, delivery or policy, or (ii) topics within the representative’s functionaldiscipline or expertise at the Licensee, for which the event sponsor will issue communications to promote, administer, and/or recap the event that will identifythe Licensee’s representative as a participant. The communications outside of the Licensee’s Service Area that mention the Licensee’s representative shall belimited to materials and digital media provided to attendees, on-site signage, advertising in relevant trade publications, direct mail and email to attendees andprospective attendees, and the sponsor’s website. Participation in any conference or symposium outside of the Licensee’s Service Area may not be for thepurpose of marketing or selling products or services.If the Licensee’s representative wishes to use the Brands in any manner, including use in his/her title, when participating as a speaker or presenteroutside of the Licensee’s Service Area about a topic that is not related to healthcare financing, administration, delivery, or policy, or to topics within therepresentative’s functional discipline or expertise at the Licensee, the Licensee must notify BCBSA and receive prior approval from BCBSA before participating;Amended as of March 26, 2015EXHIBIT 4Page 10 of 142.6Other Usesa.entering into a license agreement between and among BCBSA, the Plan and a debit card issuer located outside the Plan’s Service Area,and entering into a corresponding operating agreement or agreements, in order to offer a debit card bearing the Licensed Marks and Name to eligible personsas defined by the aforementioned license agreement;b.appearing in communications issued by an independent third party to recognize outstanding performance of the Plan or Controlled Affiliateor a member of the Plan’s or Controlled Affiliate’s senior management as part of an established program of the third party for which the Plan has providedinformation to be considered for the recognition, provided that such use complies with regulations of general application specifically prescribed by BCBSA fromtime to time;c.to identify itself as being a joint sponsor of an event, program or activity along with other Plans or such Plans’ licensed Controlled Affiliates,provided that such use complies with regulations of general application specifically prescribed by BCBSA from time to time;d.hosting meetings or events (collectively, “events”) in Washington,D.C. or a Plan’s State Capitol related to policy and business issues in the Licensee’s Service Area, or hosting events in conjunction with theassemblies or conventions of national political parties. Such events may not involve marketing or selling products or services. Use of the Brands outside theLicensee’s Service Area in connection with such events shall be limited to materials and digital media provided to attendees and prospective attendees andonsite signage. For any such events in Washington, D.C. that are open to attendees other than government officials or their staffs, or are briefings open to allCongressional staff, or are otherwise likely to receive media coverage, the Licensee is required to provide advance notice to BCBSA. For events hosted outsideof Washington, D.C. in conjunction with the assemblies or conventions of national political parties, the Licensee is required to provide advance notice to BCBSAand to the local Plan(s);Amended as of March 26, 2015EXHIBIT 4Page 11 of 14e.permitting an affiliate that is not licensed to use the Licensed Marks to identify its corporate relationship with the Plan, provided that such usecomplies with regulations of general application specifically prescribed by BCBSA from time to time.3.In connection with activity otherwise in furtherance of the License Agreement, a Controlled Affiliate that is licensed to use the LicensedMarks and Name pursuant to a Controlled Affiliate License Agreement authorized in clauses d) or e) of Paragraph 2 of the Plan’s License Agreement withBCBSA may use the Licensed Marks and Name outside the Region (as that term is defined in such respective Controlled Affiliate License Agreements) in thefollowing circumstances which are deemed legitimate and necessary and not likely to cause consumer confusion:a.sending letterhead, envelopes, and similar items solely for administrative purposes (e.g., not for purposes of marketing, advertising,promoting, selling or soliciting the sale of health care plans and related services);b.distributing business cards other than in marketing and selling;c.contracting with health care providers or soliciting such contracts in areas contiguous to the Region in order to serve its subscribers residingin the Region, provided that the Controlled Affiliate may not use the names of any of its Controlling Plans in connection with such contracting unless theprovider is located in a geographic area that is also contiguous to such Controlling Plan’s Service Area;d.issuing a small sign containing the legal name or trade name of the Controlled Affiliate for display by a provider to identify the latter as aparticipating provider of the Controlled Affiliate, provided that the Controlled Affiliate may not use the names of any of its Controlling Plans on such signs unlessthe provider is located in a geographic area that is also contiguous to such Controlling Plan’s Service Area;e.advertising in publications or electronic media solely to persons for employment;Amended as of March 26, 2015EXHIBIT 4Page 12 of 14f.advertising in print, electronic or other media which serve, as a substantial market, the Region, provided that the Controlled Affiliate may notadvertise outside its Region on the national broadcast and cable networks and that advertisements in national print media are limited to the smallest regionaledition encompassing the Region, and provided further that any such advertising by the Controlled Affiliate may not reference the name of any of its ControllingPlans unless the respective Controlling Plan is authorized under paragraph 2 of this Exhibit 4 to advertise in such media;g.advertising by direct mail where the addressee's zip code plus 4 includes, at least in part, the Region, provided that such advertising by theControlled Affiliate may not reference the name of any of its Controlling Plans unless the respective Controlling Plan is authorized under paragraph 2 of thisExhibit 4 to send direct mail to such zip code plus 4.h.[Intentionally left blank, pending review by the Inter-Plan Programs Committee of the applicability of the case management rule to suchControlled Affiliates.]i.contracting with a pharmacy management organization (“Pharmacy Intermediary”) to gain access to a national or regional pharmacy networkto provide self-administered prescription drugs to deliver a pharmacy benefit for the Controlled Affiliate’s regional Medicare Advantage PPO or regionalMedicare Part D Prescription Drug members enrolled under the Licensed Marks pursuant to such respective Controlled Affiliate License Agreements, provided,however, that the Pharmacy Intermediary may not use the Licensed Marks or Name in contracting with the pharmacy providers in such network;j.contracting with the corporate owner of a national or regional retail pharmacy chain to gain access to the pharmacies in the chain to provideself-administered prescription drugs to deliver a pharmacy benefit to the Controlled Affiliate’s regional Medicare Advantage PPO or regional Medicare Part DPrescription Drug members enrolled under the Licensed Marks pursuant to such respectiveEXHIBIT 4Page 13 of 14Controlled Affiliate License Agreements, provided that (1) the Controlled Affiliate may not contract directly with pharmacists or pharmacy storesoutside the Region, and (2) neither the Controlled Affiliate’s name nor the Licensed Marks or Name may be posted or otherwise displayed at or by anypharmacy store outside the Region;k.contracting with a dental management organization (“Dental Intermediary”) to gain access to a national or regional dental network to delivera routine dental benefit for the Controlled Affiliate’s regional Medicare Advantage PPO members enrolled under the Licensed Marks pursuant to suchControlled Affiliate License Agreement, provided, however, that the Dental Intermediary may not use the Licensed Marks or Name in contracting with thedental providers in such network;l.contracting with a vision management organization (“Vision Intermediary”) to gain access to a national or regional vision network to deliver aroutine vision benefit for the Controlled Affiliate’s regional Medicare Advantage members enrolled under the Licensed Marks pursuant to such ControlledAffiliate License Agreement, provided, however, that the Vision Intermediary may not use the Licensed Marks or Name in contracting with the vision providersin such network;m.contracting with an independent clinical laboratory for analysis and clinical assessment of specimens that are collected within the ControlledAffiliate’s Region;n.contracting with a durable medical equipment or home medical equipment company for durable medical equipment and supplies and homemedical equipment and supplies that are shipped to a location within the Controlled Affiliate’s Region;o.contracting with a specialty pharmaceutical company for non- routine biological therapeutics that are ordered by a health care professionallocated within the Region;p.contracting with a company that operates provider sites in the Region, provided that the contract is solely for services rendered at a site(e.g., hospital, mobile van) that is within the Region;EXHIBIT 4Page 14 of 14q.contracting with a company that makes health care professionals available in the Region (e.g., traveling home health nurse), provided thatthe contract is solely for services rendered by health care professionals who are located within the Region.4.BCBSA shall retain the right to use the Licensed Marks in conjunction with the Federal Employee Program and with any other nationaloffering made to federal employees pursuant to the Federal Employees Health Benefits Program (FEHBP), including the right to license such use to itsvendors, but only in the following manner.a.the Licensed Marks may only be used by BCBSA with the term “Federal Employee Program”, “Federal”, “FEP”, or similar languageidentifying the program as a benefit program for federal employees;b.the Licensed Marks may not be used by BCBSA with the name(s) of a specific Plan or Plans and;c.any use by BCBSA in conjunction with a new national FEHBP program proposed after the enactment of this amendment will require theapproval of the BCBSA Board of Directors.5.Where required by applicable state or local law or regulation, a Plan or its licensed Controlled Affiliate may submit documents that containthe Brands to, and file forms that contain the Brands with, state or local regulators in a state not included in its Service Area, provided that it gives reasonableadvance notice to the local Plan of its intent to submit such documents or file such forms. Notwithstanding, in no event may a Plan or its licensed ControlledAffiliate use the Brands to register, or to obtain or maintain a license, a certificate of authority, or an equivalent document authorizing it to act as a risk-bearingentity or third party administrator in a state not included in its Service Area. If the local Plan advises BCBSA that it believes its License Agreement has been orwould be violated by any submission or filing, BCBSA shall determine whether such submission or filing is required by state or local law or regulation andviolates the License Agreement, subject to the Plan’s or licensed Controlled Affiliate’s rights to obtain an independent review of such determination underParagraph 9(a) and Exhibit 5 of its License Agreement or Paragraph 8 of the Controlled Affiliate License. For purposes of this paragraph, “local Plan” is definedas each Plan whose Service Area includes all or part of the state in which the foregoing applicable state or local law or regulation has been enacted.Amended as of March 26, 2015EXHIBIT 5Page 1 of 23MEDIATION AND MANDATORY DISPUTE RESOLUTION (MMDR) RULESThe Blue Cross and Blue Shield Plans ("Plans") and the Blue Cross Blue Shield Association ("BCBSA") recognize and acknowledge that the BlueCross and Blue Shield system is a unique nonprofit and for-profit system offering cost effective health care financing and services. The Plans and BCBSAdesire to utilize Mediation and Mandatory Dispute Resolution (“MMDR”) to avoid expensive and time-consuming litigation that may otherwise occur in thefederal and state judicial systems. Even MMDR should be viewed, however, as methods of last resort, all other procedures for dispute resolution having failed.Except as otherwise provided in the License Agreements, the Plans, their Controlled Affiliates and BCBSA agree to submit all disputes to MMDR pursuant tothese Rules and in lieu of litigation.1.Initiation of ProceedingsA.Pre-MMDR EffortsBefore filing a Complaint to invoke the MMDR process, the CEO of a complaining party, or his/her designated representative, shall undertake goodfaith efforts with the other side(s) to try to resolve any dispute.B.ComplaintTo commence a proceeding, the complaining party (or parties) shall provide by certified mail, return receipt requested, a written Complaint to theBCBSA Corporate Secretary (which shall also constitute service on BCBSA if it is a respondent) and to any Plan(s) and/or Controlled Affiliate(s) named therein.The Complaint shall contain:i.identification of the complaining party (or parties) requesting the proceeding;ii.identification of the respondent(s);iii.identification of any other persons or entities who are interested in a resolution of the dispute;iv.a full statement describing the nature of the dispute;v.identification of all of the issues that are being submitted for resolution;Amended as of November 21, 1996EXHIBIT 5Page 2 of 23vi.the remedy sought;vii.a statement as to whether the complaining party (or parties) elect(s) first to pursue Mediation;viii.any request, if applicable, that the matter be handled on an expedited basis and the reasons therefor; andix.a statement signed by the CEO of the complaining party affirming that the CEO has undertaken efforts, or has directed efforts to beundertaken, to resolve the dispute before resorting to the MMDR process.The complaining party (or parties) shall file and serve with the Complaint copies of all documents which the party (or parties) intend(s) to offer at theArbitration Hearing and a statement identifying the witnesses the party (or parties) intend(s) to present at the Hearing, along with a summary of each witness'expected testimony.C.AnswerWithin twenty (20) days after receipt of the Complaint, each respondent shall serve on BCBSA and on the complaining party (or parties);i.a full Answer to the aforesaid Complaint;ii.a statement of any Counterclaims against the complaining party (or parties), providing with respect thereto the information specified inParagraph 1.B., above;iii.a statement as to whether the respondent elects to first pursue Mediation; andiv.any request, if applicable, that the matter be handled on an expedited basis and the reasons therefor.The respondent(s) shall file and serve with the Answer or by the date of the Initial Conference set forth in Paragraph 3.C., below, copies of alldocuments which the respondent(s) intend(s) to offer at the Arbitration Hearing and a statement identifying the witnesses the party (or parties) intend(s) topresent at the Hearing, along with a summary of each witness' expected testimony.Amended as of September 20, 2007EXHIBIT 5Page 3 of 23D.Reply To CounterclaimWithin ten (10) days after receipt of any Counterclaim, the complaining party (or parties) shall serve on BCBSA and on the responding party (orparties), a Reply to the Counterclaim. Such Reply must provide the same information required by Paragraph 1.C., above.2.MediationTo facilitate the mediation of disputes between or among BCBSA, the Plans and/or their Controlled Affiliates, the BCBSA Board has provided forMediation under these Rules. Mediation may be pursued in lieu of or in an effort to obviate the Mandatory Dispute Resolution process, and all parties arestrongly urged, but not required, to exhaust the mediation procedure provided for herein. In the event any party refuses to proceed with Mediation, the partiesshall proceed immediately to Mandatory Dispute Resolution, as provided in Section 3.A.Selection of MediatorsIf all parties agree to pursue Mediation, they shall promptly attempt to agree upon: (i) the number of mediators desired, not to exceed three mediators;and (ii) the selection of experienced mediator(s) from an independent entity to mediate all disputes set forth in the Complaint and Answer (and Counterclaimand Reply, if any). In the event the parties are unable to agree upon the selection or number of mediators, both within five (5) days of the service of the Answeror Reply to Counterclaim, whichever is later, the BCBSA Corporate Secretary shall immediately refer the matter to a nationally recognized professional ADRorganization (such as CPR or JAMS) for mediation by a single mediator to be selected by the ADR organization.B.Binding DecisionBefore the Mediation Hearing described below, the BCBSA Corporate Secretary shall contact the parties to determine whether they wish to be boundby any recommendation of the selected mediator(s) for resolution of the disputes. If all wish to be bound, the Corporate Secretary will send appropriatedocumentation to them for their signatures before the Mediation Hearing begins.Amended as of September 20, 2007EXHIBIT 5Page 4 of 23C.Mediation ProcedureThe Mediator(s) shall apply the mediation procedures and processes provided for herein (not the rules of the ADR organization with which they areaffiliated) and shall promptly advise the parties of a scheduled Mediation Hearing date. Unless a party requests an expedited procedure, or unless all parties tothe proceeding agree to one or more extensions of time, the Mediation Hearing set forth below shall be completed within forty (40) days of BCBSA's receipt ofthe Complaint. The selected mediator(s), unless the parties otherwise agree, shall adhere to the following procedure:i.Each party must be represented by its CEO or other representative who has been delegated full authority to resolve the dispute. However,parties may send additional representatives as they see fit.ii.Each party will be given one-half hour to present its case, beginning with the complaining party (or parties), followed by the other party orparties. The parties are free to structure their presentations as they see fit, using oral statements or direct examination of witnesses. However, neither cross-examination nor questioning of opposing representatives will be permitted. At the close of each presentation, the selected mediator(s) will be given anopportunity to ask questions of the presenters and witnesses. All parties must be present throughout the Mediation Hearing. The selected mediator(s) mayextend the time allowed for each party's presentation at the Mediation Hearing. The selected mediator(s) may meet in executive session, outside thepresence of the parties, or may meet with the parties separately, to discuss the controversy.iii.After the close of the presentations, the parties will attempt to negotiate a settlement of the dispute. If the parties desire, the selectedmediator(s), or any one or more of the selected mediators, will sit in on the negotiations.Amended as of September 20, 2007EXHIBIT 5Page 5 of 23iv.After the close of the presentations, the selected mediator(s) may meet privately to agree upon a recommendation for resolution of thedispute which would be submitted to the parties for their consideration and approval. If the parties have previously agreed to be bound by the results of thisprocedure, this recommendation shall be binding upon the parties.v.The purpose of the Mediation Hearing is to assist the parties to settle their grievances short of mandatory dispute resolution. As a result, theMediation Hearing has been designed to be as informal as possible. Rules of evidence shall not apply. There will be no transcript of the proceedings, and noparty may make a tape recording of the Mediation Hearing.vi.In order to facilitate a free and open discussion, the Mediation proceeding shall remain confidential. A "Stipulation to Confidentiality" whichprohibits future use of settlement offers, all position papers or other statements furnished to the selected mediator(s), and decisions or recommendations in anyMediation proceeding shall be executed by each party.vii.Upon request of the selected mediator(s), or one of the parties, BCBSA staff may also submit documentation at any time during theproceedings.D.Notice of Termination of MediationIf the Mediation cannot be completed within the prescribed or agreed time period due to the lack of cooperation of any party, as determined by theselected mediator(s), or if the Mediation does not result in a final resolution of all disputes at the Mediation Hearing or within ten (10) days after the MediationHearing, any party or any one of the selected mediators shall so notify the BCBSA Corporate Secretary, who shall promptly issue a Notice of Termination ofMediation to all parties, to the selected mediator(s), and to the MDR Administrator. Such notice shall serve to bring the Mediation to an end and to initiateMandatory Dispute Resolution. Upon agreement of all parties and the mediator(s), the Mediation process may continue at the same time the MDR process isinvoked. In such case, the Notice of Termination of Mediation described above serves to initiate the MDR proceeding, but does not terminate mediationproceedings, which may proceed simultaneous with the MDR proceeding.Amended as of September 20, 2007EXHIBIT 5Page 6 of 233.Mandatory Dispute Resolution (MDR)If any party elects not to first pursue Mediation, or if a Notice of Termination of Mediation is issued as set forth in Paragraph 2.D., above, then theunresolved disputes set forth in any Complaint and Answer (and Counterclaim and Reply, if any) shall be subject to mandatory binding arbitration (hereinreferred to as “MDR”).A.MDR AdministratorThe Administrator for purposes of Mandatory Arbitration shall be an independent nationally recognized entity such as CPR or JAMS, specializing inalternative dispute resolution. In the event the parties pursued Mediation with CPR, JAMS or a similar organization, that organization also shall serve as theMDR Administrator, unless all parties notify the BCBSA Corporate Secretary in writing within two (2) days of receiving the Notice of Termination of Mediationthat they wish to pursue MDR with another nationally recognized organization serving as MDR Administrator.In the event the parties (i) did not pursue Mediation, (ii) pursued mediation with a Mediator not affiliated with an ADR organization that offers a panelof arbitrators, or (iii) all parties that pursued Mediation notified the BCBSA Corporate Secretary that they wish to have an MDR Administrator that is differentfrom the organization with which their mediator was affiliated, they shall promptly attempt to agree on a nationally recognized ADR entity that supplies a panelof arbitrators. If they reach such agreement within five (5) days of the Notice of Termination of Mediation or receipt of the Answer or Reply to Counterclaim(whichever is later), the parties shall promptly inform the BCBSA Corporate Secretary of their agreed upon ADR organization. In the event the parties areunable to reach agreement on an MDR Administrator within that timeframe, the BCBSA Corporate Secretary shall immediately refer the matter to CPR, JAMSor a similar organization for MDR.Any person who served as a Mediator shall not serve as an arbitrator for the same or similar dispute for purposes of MDR.B.Rules for MDRThe rules controlling all aspects of MDR shall be exclusively those provided for herein. The rules promulgated or otherwise used by the MDRAdministrator organization shall not apply.Amended as of September 20, 2007EXHIBIT 5Page 7 of 23C.Initial ConferenceWithin seven (7) days after a Notice of Termination has issued or the matter has otherwise been referred to an MDR Administrator, or within five (5)days after the time for filing and serving the Answer or Reply to any Counterclaim (whichever is later) if the parties elect first not to mediate, the parties shallconfer with the Administrator to discuss selecting a dispute resolution panel ("the Panel"). This conference (the “Initial Conference”) may be by telephone. Theparties are encouraged to agree to the composition of the Panel and to present that agreement to the Administrator at the Initial Conference. If the parties donot agree on the composition of the Panel by the time of the Initial Conference, or by any extension thereof agreed to by all parties and the Administrator, thenthe Panel Selection Process set forth in subparagraph D, below, shall be followed.D.Panel Selection ProcessThe Administrator shall designate, prior to the Initial Conference, at least seven potential arbitrators. Each party shall be permitted to strike anydesignee for cause and the Administrator shall determine the sufficiency thereof in its sole discretion. The Administrator will designate a replacement for anydesignee so stricken. Each party shall then be permitted one peremptory strike from the list of designees. The Administrator shall set the dates for exercising allstrikes, which shall be set to encourage the prompt selection of arbitrators.After the parties exercise any designee strikes for cause and their peremptory strike against any designee of their choice, the parties shall each rankthe remaining panel members in order of preference and provide the Administrator, without serving on any other party, their ranked list. The Administrator shallnot disclose any party’s ranked list to members of the panel or to other parties.From the remaining designees, and after considering opportunities to maximize, so far as possible, the collectively stated arbitrator preferencesprovided by the parties on their ranked lists, the Administrator shall select athree member Panel. The Panel Selection Process shall be completed no later thanten (10) days after the Initial Conference.Each Arbitrator shall be compensated at his or her normal hourly rate or, in the absence of an established rate, at a reasonable hourly rate to bepromptly fixed by the Administrator for all time spent in connection with the proceedings and shall be reimbursed for any travel and other reasonable expenses.Amended as of September 20, 2007EXHIBIT 5Page 8 of 23E.Duties Of The ArbitratorsThe Panel shall promptly designate a Presiding Arbitrator for the purposes reflected below, but shall retain the power to review and modify any rulingor other action of said Presiding Arbitrator. Each Arbitrator shall be an independent Arbitrator, shall be governed by the Code of Ethics for Arbitrators inCommercial Disputes and shall at or prior to the commencement of any Arbitration Hearing take an oath to that effect. Each Arbitrator shall promptly disclose inwriting to the Panel and to the parties any circumstances, whenever arising, that might cause doubt as to such Arbitrator's compliance, or ability to comply, withsaid Code of Ethics, and, absent resignation by such Arbitrator, the remaining Arbitrators shall determine in their sole discretion whether the circumstances sodisclosed constitute grounds for disqualification and for replacement. With respect to such circumstances arising or coming to the attention of a party after anArbitrator's selection, a party may likewise request the Arbitrator's resignation or a determination as to disqualification by the remaining Arbitrators. With respectto a sole Arbitrator, the determination as to disqualification shall be made by the Administrator.There shall be no ex parte communication between the parties or their counsel and any member of the Panel.F.Panel's Jurisdiction And AuthorityThe Panel's jurisdiction and authority shall extend to all disputes between or among the Plans, their Controlled Affiliates, and/or BCBSA, except forthose disputes excepted from these MMDR procedures as set forth in the License Agreements.With the exception of punitive or treble damages, the Panel shall have full authority to award the relief it deems appropriate to resolve the parties'disputes, including monetary awards and injunctions, mandatory or prohibitory. The Panel has no authority to award punitive or treble damages except that thePanel may allocate or assess responsibility for punitive or treble damages assessed by another tribunal. Subject to the above limitations, the Panel may, byway of example, but not of limitation:Amended as of September 20, 2007EXHIBIT 5Page 9 of 23i.interpret or construe the meaning of any terms, phrase or provision in any license between BCBSA and a Plan or a Controlled Affiliaterelating to the use of the BLUE CROSS® or BLUE SHIELD® service marks.ii.determine whether BCBSA, a Plan or a Controlled Affiliate has violated the terms or conditions of any license between the BCBSA and aPlan or a Controlled Affiliate relating to the use of the BLUE CROSS® or BLUE SHIELD® service marks.iii.decide challenges as to its own jurisdiction.iv.issue such orders for interim relief as it deems appropriate pending Hearing and Award in any Arbitration.It is understood that the Panel is expected to resolve issues based on governing principles of law, preserving to the maximum extent legally possiblethe continued integrity of the Licensed Marks and the BLUE CROSS/BLUE SHIELD system. The Panel shall apply federal law to all issues which, if asserted inthe United States District Court, would give rise to federal question jurisdiction, 28 U.S.C. § 1331. The Panel shall apply Illinois law to all issues involvinginterpretation, performance or construction of any License Agreement or Controlled Affiliate License Agreement unless the agreement otherwise provides. Asto other issues, the Panel shall choose the applicable law based on conflicts of law principles of the State of Illinois.G.Administrative ConferenceWithin five (5) days of the Panel being selected, the Presiding Arbitrator shall confer with the parties and the other members of the Panel and shallschedule, in writing, a conference in which the parties and the Panel shall participate (the “Administrative Conference”). The Administrative Conference shalltake place no later than fifteen (15) days after the Panel is selected. At the Administrative Conference the parties and the Panel shall discuss the scheduling ofthe Arbitration Hearing and any other matter appropriate to be considered, including but not limited to: any written discovery in the form of requests forproduction of documents or requests to admit facts; the identity of any witness whose deposition a party may desire and a showing of exceptional good causefor the taking of any such deposition; the desirability of bifurcation or other separation of the issues; the need for and the type of record of conferences andhearings, including the need for transcripts; the need for expert witnesses andAmended as of September 20, 2007EXHIBIT 5Page 10 of 23how expert testimony should be presented; the appropriateness of motions to dismiss and/or for full or partial summary judgment; consideration ofstipulations; the desirability of presenting any direct testimony in writing; and the necessity for any on-site inspection by the Panel. If the parties agree, theAdministrative Conference may be by telephone.H.Discoveryi.Requests for Production of Documents: All requests for the production of documents must be served no later than five (5) days after thedate of the Initial Conference. Within twenty (20) days after receipt of a request for production of documents, a party shall (a) serve responses and objections tothe request,(b) produce all responsive, non-privileged documents to the requesting party, and (c) to the extent any responsive documents are withheld on thegrounds of attorney-client privilege or work product, produce a log identifying such documents in the manner specified in Fed. R. Civ. P. 26(b)(5). If, afterreviewing a privilege log, the requesting party believes attorney-client privilege or work product protection was improperly claimed by the producing party withrespect to any document, the requesting party may ask the Presiding Arbitrator to conduct an in-camera inspection of the same. With respect to documentaryand other discovery produced in any MDR proceeding by BCBSA, the fact that a party’s CEO or other senior officers may serve on the BCBSA Board ofDirectors, BCBSA Board Committees or other BCBSA work groups, task forces and the like, shall not be a basis for defeating an otherwise valid claim ofattorney-client privilege or work product protection over such documentary or other discovery materials by BCBSA.ii.Requests for Admissions: Requests for Admissions may be served up to twenty-one (21) days prior to the discovery cut-off set by thePresiding Arbitrator. A party served with Requests For Admissions must respond within twenty (20) days of receipt of said request. The good faith use of andresponse to Requests for Admissions is encouraged, and the Panel shall have full discretion, with reference to the Federal Rules of Civil Procedure, inawarding appropriate sanctions with respect to abuse of the procedure.Amended as of September 20, 2007EXHIBIT 5Page 11 of 23iii.Depositions: As a general rule, the parties will not be permitted to take party or non-party deposition testimony for discovery purposes. ThePresiding Arbitrator, in his or her sole discretion, shall have the authority to permit a party to take such deposition testimony upon a showing of exceptionalgood cause. The parties will be permitted to take de bene esse deposition1 testimony to the fullest extent permitted by law of any witness who cannot becompelled to testify at the Arbitration Hearing. No deposition, for discovery purposes or otherwise, shall exceed three (3) hours, excluding objections andcolloquy of counsel. Depositions may be recorded in any manner recognized by the Federal Rules of Civil Procedure and the parties shall specify in eachnotice of deposition or request for permission to take deposition testimony the manner in which such deposition shall be recorded.iv.Expert witness(es): If a party intends to present the testimony of an expert witness during the oral hearing, it shall provide all other partieswith a written statement setting forth the information required to be provided by Fed. R. Civ. P. 26(a)(2)(B) ten (10) days prior to the discovery cut-off set by the Presiding Arbitrator. If a party intends to present the testimony of a rebuttal expert witnessduring the Arbitration Hearing, it shall provide all other parties with a written statement setting forth the information required to be provided by Fed. R. Civ. P.26(a)(2)(B) within twenty (20) days after the date on which the written statement of the expert witness whose testimony is to be rebutted was produced.v.Discovery cut-off: The Presiding Arbitrator shall determine the date on which the discovery period will end, but the discovery period shallnot exceed thirty (30) days from the date of the Administrative Conference without the agreement of all parties.Amended as of September 20, 20071 As used in these Rules, "de bene esse deposition" means a deposition that is not taken for discovery purposes, but is taken for the purpose ofreading part or all of the deposition transcript into the record at the Arbitration Hearing, to the extent permitted by the Panel, because the witness cannot becompelled to testify at the Arbitration Hearing or has exercised a right provided under these Rules to provide deposition testimony in lieu of testimony at theArbitration Hearing.EXHIBIT 5Page 12 of 23vi.Additional discovery: Any additional discovery will be at the discretion of the Presiding Arbitrator.vii.Discovery Disputes: Any discovery disputes shall be raised by motion to the Presiding Arbitrator, who is authorized to resolve all suchdisputes, and whose resolution will be binding on the parties unless modified by the Arbitration Panel. Prior to raising any discovery dispute with the PresidingArbitrator, the parties shall meet and confer, telephonically or in person, in an attempt to resolve or narrow the dispute. If a party refuses to comply with adecision resolving a discovery dispute, the Panel, in keeping with Fed. R. Civ. P. 37, may refuse to allow that party to support or oppose designated claims ordefenses, prohibit that party from introducing designated matters into evidence or, in extreme cases, decide an issue submitted for resolution adversely to thatparty.viii.Extensions: The time for responding to discovery requests may be extended by the Presiding Arbitrator for good and sufficient causeshown. Any request for such an extension shall be made in writing.I.Panel Suggested Settlement/MediationAt any point during the proceedings, the Panel at the request of any party or on its own initiative, may suggest that the parties explore settlement andthat they do so at or before the conclusion of the Arbitration Hearing, and the Panel shall give such assistance in settlement negotiations as the parties mayrequest and the Panel may deem appropriate. Alternatively, the Panel may direct the parties to endeavor to mediate their disputes as provided above, or toexplore a mini-trial proceeding, or to have an independent party render a neutral evaluation of the parties’ respective positions. The Panel shall enter suchsanctions as it deems appropriate with respect to any party failing to pursue in good faith such Mediation or other alternate dispute resolution methods.Amended as of September 20, 2007EXHIBIT 5Page 13 of 23J.Subpoenas on Third PartiesPursuant to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., and subject to Paragraph 3.G(iii) above, a party may request theissuance of a subpoena on any third party, including but not limited to any third party Blue Plan or any officer, employee or director of a third party Blue Plan, tocompel deposition testimony or the production of documents, and, if good and sufficient cause is shown, the Panel shall issue such a subpoena.K.Arbitration HearingAn Arbitration Hearing will be held within thirty (30) days after the Administrative Conference if no discovery is taken, or within thirty (30) days after theclose of discovery, unless all parties and the Panel agree to extend the Arbitration Hearing date, or unless the parties agree in writing to waive the ArbitrationHearing. The parties may mutually agree on the location of the Arbitration Hearing. If the parties fail to agree, the Arbitration Hearing shall be held in Chicago,Illinois, or at such other location determined by the Presiding Arbitrator to be most convenient to the participants. The Panel will determine the date(s) andtime(s) of the Arbitration Hearing(s) after consultation with all parties and shall provide reasonable notice thereof to all parties or their representatives.L.Arbitration Hearing MemorandaTwenty (20) days prior to the Arbitration Hearing, each party shall submit to the other party (or parties) and to the Panel an Arbitration HearingMemorandum which sets forth the applicable law and any argument as to any relevant issue. The Arbitration Hearing Memorandum will supplement, and notrepeat, the allegations, information and documents contained in or with the Complaint, Answer, Counterclaim and Reply, if any. Ten (10) days prior to theArbitration Hearing, each party shall submit to each other party a list of all expert and fact witnesses (but not including rebuttal fact witness) that such partyintends to have testify at the Arbitration Hearing and a brief summary of the testimony each such witness is expected to give. In addition, no later than five (5)days prior to the Arbitration, each party may submit to each other party and to the Panel a Response Arbitration Hearing Memorandum which sets forth anyresponse to another party's Arbitration Hearing Memorandum.Amended as of September 20, 2007EXHIBIT 5Page 14 of 23M.Notice For TestimonyTen (10) days prior to the Arbitration Hearing, any party may serve a Notice on any other party (or parties) requesting the attendance at the ArbitrationHearing of any officer, employee or director of the other party (or parties) for the purpose of providing noncumulative testimony. If a party fails to produce one ofits officers, employees or directors whose noncumulative testimony during the Arbitration Hearing is reasonably requested by an adverse party, the Panel mayrefuse to allow that party to support or oppose designated claims or defenses, prohibit that party from introducing designated matters into evidence or, inextreme cases, decide an issue submitted for mandatory dispute resolution adversely to that party; provided, however, that a party may refuse to produce adirector to testify if, within two (2) days of receiving a notice requesting the attendance of such director at the Arbitration Hearing, the party agrees to make thedirector available for a de bene esse deposition at a mutually convenient time at any location within fifty (50) miles of the director’s primary residence chosen bythe party requesting the director’s testimony. This Rule may not be used for the purpose of burdening or harassing any party, and the Presiding Arbitrator mayimpose such orders as are appropriate so as to prevent or remedy any such burden or harassment.Pursuant to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., twenty (20) days or more prior to the Arbitration Hearing, a partymay request the issuance of a subpoena on any third party, including but not limited to any third party Blue Plan, BCBSA or any officer, employee or director ofa third party Blue Plan or BCBSA for the purpose of providing noncummulative testimony at the Arbitration Hearing, and, if good and sufficient cause is shown,the Panel shall issue such a subpoena; provided however, that a director of a third party Blue Plan or BCBSA may refuse to testify if, within two (2) days ofreceiving a subpoena requesting the attendance of such director at the Arbitration Hearing, the director agrees to make him/herself available for a de beneesse deposition at a mutually convenient time at any location within fifty(50) miles of the director’s primary residence chosen by the party requesting the director’s testimony. Each Blue Plan agrees to waive, on its ownbehalf and on behalf of its directors and officers, any objection it otherwise might have to any such subpoena based on service, venue or extraterritoriality.Amended as of September 20, 2007EXHIBIT 5Page 15 of 23N.Arbitration Hearing Proceduresi.Attendance at Arbitration Hearing: Any person having a direct interest in the proceeding is entitled to attend the Arbitration Hearing. ThePresiding Arbitrator shall otherwise have the power to require the exclusion of any witness, other than a party or other essential person, during the testimony ofany other witness. It shall be discretionary with the Presiding Arbitrator to determine the propriety of the attendance of any other person.ii.Confidentiality: The Panel and all parties shall maintain the privacy of the Arbitration Proceeding. The parties and the Panel shall treat theArbitration Hearing and any discovery or other proceedings or events related thereto, including any award resulting therefrom, as confidential except asotherwise necessary in connection with a judicial challenge to or enforcement of an award or unless otherwise required by law.iii.Stenographic Record: Any party, or if the parties do not object, the Panel, may request that a stenographic or other record be made of anyArbitration Hearing or portion thereof. The costs of the recording and/or of preparing the transcript shall be borne by the requesting party and by any party whoreceives a copy thereof. If the Panel requests a recording and/or a transcript, the costs thereof shall be borne equally by the parties.iv.Oaths: The Panel may require witnesses to testify under oath or affirmation administered by any duly qualified person and, if requested byany party, shall do so.v.Order of Arbitration Hearing: An Arbitration Hearing shall be opened by the recording of the date, time, and place of the ArbitrationHearing, and the presence of the Panel, the parties, and their representatives, if any. The Panel may, at the beginning of the Arbitration Hearing, ask forstatements clarifying the issues involved.Amended as of September 20, 2007EXHIBIT 5Page 16 of 23Unless otherwise agreed, the complaining party (or parties) shall then present evidence to support their claim(s). The respondent(s) shall then presentevidence supporting their defenses and Counterclaims, if any. The complaining party (or parties) shall then present evidence supporting defenses to theCounterclaims, if any, and rebuttal.Witnesses for each party shall submit to questions by adverse parties and/or the Panel.The Panel has the discretion to vary these procedures, but shall afford a full and equal opportunity to all parties for the presentation of any materialand relevant evidence.vi.Evidence: The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the Panelmay deem necessary to an understanding and resolution of the dispute. Unless good cause is shown, as determined by the Panel or agreed to by all otherparties, no party shall be permitted to offer evidence at the Arbitration Hearing which was not disclosed prior to the Arbitration Hearing by that party. The Panelmay receive and consider the evidence of witnesses by affidavit upon such terms as the Panel deems appropriate.The Panel shall be the judge of the relevance and materiality of the evidence offered, and conformity to legal rules of evidence, other thanenforcement of the attorney-client privilege and the work product protection, shall not be necessary. The Federal Rules of Evidence shall be considered by thePanel in conducting the Arbitration Hearing but those rules shall not be controlling. All evidence shall be taken in the presence of the Panel and all of theparties, except where any party is in default or has waived the right to be present.Settlement offers by any party in connection with Mediation or MDR proceedings, decisions or recommendations of the selected mediators, and aparty's position papers or statements furnished to the selected mediators shall not be admissible evidence or considered by the Panel without the consent of allparties.EXHIBIT 5Page 17 of 23vii.Closing of Arbitration Hearing: The Presiding Arbitrator shall specifically inquire of all parties whether they have any further proofs tooffer or witnesses to be heard. Upon receiving negative replies or if he or she is satisfied that the record is complete, the Presiding Arbitrator shall declare theArbitration Hearing closed with an appropriate notation made on the record. Subject to being reopened as provided below, the time within which the Panel isrequired to make the award shall commence to run, in the absence of contrary agreement by the parties, upon the closing of the Arbitration Hearing.With respect to complex disputes, the Panel may, in its sole discretion, defer the closing of the Arbitration Hearing for a period of up to thirty (30) daysafter the presentation of proofs in order to permit the parties to submit post-hearing briefs and argument, as the Panel deems appropriate, prior to making anaward.For good cause, the Arbitration Hearing may be reopened for up to thirty (30) days on the Panel's initiative, or upon application of a party, at any timebefore the award is madeO.AwardsAn Award must be in writing and shall be made promptly by the Panel and, unless otherwise agreed by the parties or specified by law, no later thanthirty (30) days from the date of closing the Arbitration Hearing. If all parties so request, the Award shall contain findings of fact and conclusions of law. TheAward, and all other rulings and determinations by the Panel, may be by a majority vote.Parties shall accept as legal delivery of the Award the placing of the Award or a true copy thereof in the mail addressed to a party or its representativeat its last known address or personal service of the Award on a party or its representative.Awards are binding only on the parties to the Arbitration and are not binding on any non-parties to the Arbitration and may not be used or cited asprecedent in any other proceeding.Amended as of September 20, 2007EXHIBIT 5Page 18 of 23After the expiration of twenty (20) days from initial delivery, the Award (with corrections, if any) shall be final and binding on the parties, and the partiesshall undertake to carry out the Award without delay.Proceedings to confirm, modify or vacate an Award shall be conducted in conformity with and controlled by the Federal Arbitration Act. 9 U.S.C. § 1,et seq.P.Return of DocumentsWithin sixty (60) days after the Award and the conclusion of any judicial proceedings with respect thereto, each party and the Panel shall return anydocuments produced by any other party, including all copies thereof. If a party receives a discovery request in any other proceeding which would require it toproduce any documents produced to it by any other party in a proceeding hereunder, it shall not produce such documents without first notifying the producingparty and giving said party reasonable time to respond, if appropriate, to the discovery request.4.MiscellaneousA.Expedited ProceduresAny party to a Mediation may direct a request for an expedited Mediation Hearing to the Chairman of the Mediation Committee, to the selectedMediators, and to all other parties at any time. The Chairman of the Mediation Committee, or at his or her direction, the then selected Mediators, shall grant anyrequest which is supported by good and sufficient reasons. If such a request is granted, the Mediation shall be completed within as short a period aspracticable, as determined by the Chairman of the Mediation Committee or, at his or her direction, the then selected Mediators.Any party to an Arbitration may direct a request for expedited proceedings to the Administrator, to the Panel, and to all other parties at any time. TheAdministrator, or the Presiding Arbitrator if the Panel has been selected, shall grant any such request which is supported by good and sufficient reasons. Ifsuch a request is granted, the Arbitration shall be completed within as short a time as practicable, as determined by the Administrator and/or the PresidingArbitrator.Amended as of September 20, 2007EXHIBIT 5Page 19 of 23B.Temporary or Preliminary Injunctive ReliefAny party may seek temporary or preliminary injunctive relief with the filing of a Complaint or at any time thereafter. If such relief is sought prior to thetime that an Arbitration Panel has been selected, then the Administrator shall select a single Arbitrator who is a lawyer who has no interest in the subjectmatter of the dispute, and no connection to any of the parties, to hear and determine the request for temporary or preliminary injunction. If such relief is soughtafter the time that an Arbitration Panel has been selected, then the Arbitration Panel will hear and determine the request. The request for temporary orpreliminary injunctive relief will be determined with reference to the temporary or preliminary injunction standards set forth in Fed. R. Civ. P. 65.C.Defaults and Proceedings in the Absence of a PartyWhenever a party fails to comply with the MDR Rules in a manner deemed material by the Panel, the Panel shall fix a reasonable time for complianceand, if the party does not comply within said period, the Panel may enter an Order of default or afford such other relief as it deems appropriate.Arbitration may proceed in the event of a default or in the absence of any party who, after due notice, fails to be present or fails to obtain anextension. An Award shall not be made solely on the default or absence of a party, but the Panel shall require the party who is present to submit such evidenceas the Panel may require for the making of findings, determinations, conclusions, and Awards.D.NoticeEach party shall be deemed to have consented that any papers, notices, or process necessary or proper for the initiation or continuation of aproceeding under these rules or for any court action in connection therewith may be served on a party by mail addressed to the party or its representative at itslast known address or by personal service, in or outside the state where the MDR proceeding is to be held.The Corporate Secretary and the parties may also use facsimile transmission, telex, telegram, or other written forms of electronic communication togive the notices required by these rules.EXHIBIT 5Page 20 of 23E.ExpensesThe expenses of witnesses shall be paid by the party causing or requesting the appearance of such witnesses. All expenses of the MDR proceeding,including compensation, required travel and other reasonable expenses of the Panel, and the cost of any proof produced at the direct request of the Panel,shall be borne equally by the parties and shall be paid periodically on a timely basis, unless they agree otherwise or unless the Panel in the Award assessessuch expenses, or any part thereof against any party (or parties). In exceptional cases, the Panel may award reasonable attorneys' fees as an item of expense,and the Panel shall promptly determine the amount of such fees based on affidavits or such other proofs as the Panel deems sufficient.F.Disqualification or Disability of A Panel MemberIn the event that any Arbitrator of a Panel with more than one Arbitrator should become disqualified, resign, die, or refuse or be unable to perform ordischarge his or her duties after the commencement of MDR but prior to the rendition of an Award, and the parties are unable to agree upon a replacement, theremaining Panel member(s):i.shall designate a replacement, subject to the right of any party to challenge such replacement for cause.ii.shall decide the extent to which previously held hearings shall be repeated.If the remaining Panel members consider the proceedings to have progressed to a stage as to make replacement impracticable, the parties mayagree, as an alternative to the recommencement of the Mandatory Dispute Resolution process, to resolution of the dispute by the remaining Panel members.In the event that a single Arbitrator should become disqualified, resign, die, or refuse or be unable to perform or discharge his or her duties after thecommencement of MDR but prior to the rendition of an Award, and the parties are unable to agree upon a replacement, the Administrator shall appoint asuccessor, subject to the right of any party to challenge such successor for cause, and the successor shall decide the extent to which previously heldproceedings shall be repeated.EXHIBIT 5Page 21 of 23G.Extensions of TimeSubject to the provisions of Paragraph 3.H.(viii.), any time limit set forth in these Rules may be extended upon agreement of the parties and approvalof: (1) the Mediator if the proceeding is then in Mediation; (2) the Administrator if the proceeding is in Arbitration, but no Arbitration Panel has been selected; or(3) the Arbitration Panel, if the proceeding is in Arbitration and the Arbitration Panel has been selected.H.InterventionThe Plans, their Controlled Affiliates, and BCBSA, to the extent subject to MMDR pursuant to their License Agreements, shall have the right to moveto intervene in any pending Arbitration. A written motion for intervention shall be made to: (1) the Administrator, if the proceeding is in Arbitration, but noArbitration Panel has been selected; or (2) the Arbitration Panel, if the proceeding is in Arbitration and the Arbitration Panel has been selected. The writtenmotion for intervention shall be delivered to the BCBSA Corporate Secretary (which shall also constitute service on the BCBSA if it is a respondent) and to anyPlan(s) and/or Controlled Affiliate(s) which are parties to the proceeding. Any party to the proceeding can submit written objections to the motion to intervene.The motion for intervention shall be granted upon good cause shown. Intervention also may be allowed by stipulation of the parties to the Arbitrationproceeding. Intervention shall be allowed upon such terms as the Arbitration Panel decides.I.BCBSA Assistance in Resolution of DisputesThe resources and personnel of the BCBSA may be requested by any member Plan at any time to try to resolve disputes with another Plan.J.Neutral EvaluationThe parties can voluntarily agree at any time to have an independent party render a neutral evaluation of the parties’ respective positions.Amended as of September 20, 2007EXHIBIT 5Page 22 of 23K.Recovery of Attorney Fees and Expensesi.Motions to CompelNothwithstanding any other provisions of these Rules, any Party subject to the License Agreements (for purposes of this Section K and all of its sub-sections only hereinafter referred to collectively and individually as a “Party”) that initiates a court action or administrative proceeding solely to compeladherence to these Rules shall not be determined to have violated these Rules by initiating such action or proceeding.ii.Recovery of Fees, Expenses and CostsThe Arbitration Panel may, in its sole discretion, award a Party its reasonable attorneys’ fees, expenses and costs associated with a filing to compeladherence to these Rules and/or reasonable attorneys’ fees, expenses and costs incurred in responding to an action filed in violation of these Rules; provided,however, that neither fees, expenses, nor costs shall be awarded by the Arbitration Panel if the Party from which the award is sought can demonstrate to theArbitration panel, in its sole discretion, that it did not violate these Rules or that it had reasonable grounds for believing that its action did not violate theseRules.iii.Requests for ReimbursementFor purposes of this Section K, any Party may request reimbursement of fees, expenses and/or costs by submitting said request in writing to theArbitration Panel at any time before an award is delivered pursuant Paragraph to 3.O above with a copy to the Party from which reimbursement is sought,explaining why it is entitled to such reimbursement. The Party from which reimbursement is sought shall have twenty (20) days to submit a response to suchrequest to the Arbitration Panel with a copy to the Party seeking reimbursement.Amended as of September 20, 2007EXHIBIT 5Page 23 of 23L.Calculation of Time and DeadlinesIn computing any period of time prescribed or allowed under these rules, the day of the act or event from which the designated period of time beginsto run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday, in which event theperiod runs until the end of the next day which is not one of the aforementioned days. When the period of time prescribed is less than six (6) days, intermediateSaturdays, Sundays and legal holidays shall be excluded in the computation. As used in this rule, “legal holiday” includes New Year’s Day, Martin Luther King,Jr. Day, Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day and any otherday appointed as a holiday by the President or the Congress of the United States.Amended as of September 20, 2007Exhibit 10.12BLUE SHIELD LICENSE AGREEMENT(Includes revisions, if any, adopted by Member Plans through their November 21, 2019 meeting)This agreement by and between Blue Cross and Blue Shield Association ("BCBSA") and The Blue Shield Plan, known as (the"Plan").PreambleWHEREAS, the Plan and/or its predecessor(s) in interest (collectively the "Plan") had the right to use the BLUE SHIELD andBLUE SHIELD Design service marks (collectively the "Licensed Marks") for health care plans in its service area, which was essentiallylocal in nature;WHEREAS, the Plan was desirous of assuring nationwide protection of the Licensed Marks, maintaining uniform quality controlsamong Plans, facilitating the provision of cost effective health care services to the public and otherwise benefiting the public;WHEREAS, to better attain such ends, the Plan and the predecessor of BCBSA executed the Agreement(s) Relating to theCollective Service Mark "Blue Shield"; andWHEREAS, BCBSA and the Plan desire to supercede said Agreement(s) to reflect their current practices and to assure thecontinued integrity of the Licensed Marks and of the BLUE SHIELD system;NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:Exhibit 10.12Agreement1.BCBSA hereby grants to the Plan, upon the terms and conditions of this License Agreement (“Agreement” or “PrimaryLicense Agreement”), the right to use BLUE SHIELD in its trade and/or corporate name (the "Licensed Name"), and the right to use theLicensed Marks, in the sale, marketing and administration of health care plans and related services in the Service Area set forth anddefined in paragraph 5 below. As used herein, health care plans and related services shall include acting as a nonprofit health care plan, afor-profit health care plan, or mutual health insurer operating on a not-for-profit or for-profit basis, under state law; financing access tohealth care services; when working with a bank that holds the relevant license to use the Licensed Name and Marks, offering: (i) tax-favored savings accounts for medical expenses and means for accessing such accounts, such as debit cards or checks, that are providedsolely to support access to such tax-favored savings accounts, all pursuant to such license, or (ii) prepaid rewards cards that are providedfor completion of a wellness program, all pursuant to such license; providing health care management and administration; administering,but not underwriting, non-health portions of Workers’ Compensation Insurance; delivering health care services, except hospital services (asdefined in the Guidelines to Membership Standards Applicable to Regular Members); and performing the Eligibility and Enrollmentfunctions of HR administration for all benefit plans offered by a group account to its members, including benefit plans not provided by thePlan, provided that the Plan has contracted to provide Health Coverage under the Licensed Marks to the account (as the terms “HealthCoverage”, “Eligibility” and “Enrollment” are defined in Exhibit 4, Paragraph 2.t.).2.The Plan may use the Licensed Marks and Name in connection with the offering of: i) health care plans and relatedservices in the Service Area through Controlled Affiliates, provided that each such Controlled Affiliate is separately licensed to use theLicensed Marks and Name under the terms and conditions contained in the Agreement attached as Exhibit 1 hereto (the "ControlledAffiliate License Agreement"); and ii) insurance coverages offered by life insurers under the applicable law in the Service Area, other thanthose which the Plan may offer in its own name, provided through Controlled Affiliates, provided that each such Controlled Affiliate isseparately licensed to use the Licensed Marks and Name under the terms and conditions contained in the Agreement attached as Exhibit1A hereto (the "Controlled Affiliate License Agreement Applicable to Life Insurance Companies") or the Agreement attached as Exhibit 1A1hereto (the “Controlled Affiliate Trademark License Agreement for Life and Disability Insurance Products”) and further provided that theoffering of such services does not and will not dilute or tarnish the unique value of the Licensed Marks and Name; and iii) administrationand underwriting of Workers’ Compensation Insurance Controlled Affiliates, provided that each such Controlled Affiliate is separatelylicensed to use the Licensed Marks and Name under the terms and conditions contained in the Agreement attached as Exhibit 1 hereto(the “Controlled Affiliate License”); and iv) regional Medicare Advantage PPO Products in cooperation with one or more other Plansthrough jointly-held Controlled Affiliates, provided that each such Controlled Affiliate is separately licensed to use the Licensed Marks andName under the terms and conditions contained in the Agreement attached as Exhibit 1B hereto (the “Controlled Affiliate LicenseAgreement Applicable to Regional Medicare Advantage PPO Products”); and v) regional Medicare Part D Prescription Drug Plan productsin cooperation with one or more other Plans through jointly-held Controlled Affiliates, provided that each such Controlled Affiliate isseparately licensed to use the Licensed Marks and Name under the terms and conditions contained in the Agreement attached as Exhibit1C hereto (the “Controlled Affiliate License Agreement Applicable to Regional Medicare Part D Prescription Drug Plan Products”). As usedherein, a Controlled Affiliate is defined as an entity organized and operated in such a manner that it is subject to the bona fide control of aPlan or Plans and, if the entity meets the standards of Paragraph 2a.B but not Paragraph 2a.A, the entity, its owners, and persons withAmended as of September 19, 2014Exhibit 10.12authority to select or appoint members or board members, other than a Plan or Plans, have received written approval of BCBSA. Absentwritten approval by BCBSA of an alternative method of control, bona fide control shall have the meaning set forth in Paragraphs 2a. and2b.2a. With respect to the Controlled Affiliate Licenses authorized in clausesi)through iii) of Paragraph 2, bona fide control shall mean that a Plan (the “Sponsoring Plan”) authorized to use the Licensed Marksin the Service Area of the Controlled Affiliate pursuant to this Primary License Agreement with BCBSA must have:A.The legal authority, directly or indirectly through wholly-owned subsidiaries: (a) to select members of the ControlledAffiliate's governing body having more than 50% voting control thereof; (b) to exercise control over the policy andoperations of the Controlled Affiliate; (c) to prevent any change in the articles of incorporation, bylaws or other establishingor governing documents of the Controlled Affiliate with which the Sponsoring Plan do not concur. In addition, theSponsoring Plan directly or indirectly through wholly-owned subsidiaries shall own more than 50% of anyfor-profit Controlled Affiliate, provided that in instances where the Sponsoring Plan formed a publicly traded ControlledAffiliate Licensee and such publicly traded Controlled Affiliate Licensee owns and controls other Controlled AffiliateLicensees, the Sponsoring Plan directly or indirectly shall own and control more than 50% of any Controlled Affiliate that isindirectly owned and controlled by the publicly traded Controlled Affiliate Licensee; orB.The legal authority directly or indirectly through wholly-owned subsidiaries(a)to select members of the Controlled Affiliate's governing body having not less than 50% voting control thereof;(b) to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate with which the Sponsoring Plan do not concur; (c) to exercise control over the policy and operations ofthe Controlled Affiliate at least equal to that exercised by persons or entities (jointly or individually) other than theSponsoring Plan. Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing orgoverning documents must also require written approval by the Sponsoring Plan before the Controlled Affiliate can:1.Change its legal and/or trade name;2.Change the geographic area in which it operates;3.Change any of the types of businesses in which it engages;4.Create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising inthe ordinary course of business;5.Sell any assets, except for sales in the ordinary course of business or sales of equipment no longer usefulor being replaced;6.Make any loans or advances except in the ordinary course of business;Amended as of March 26, 2015-2-Exhibit 10.127.Enter into any arrangement or agreement with any party directly or indirectly affiliated with any of theowners of the Controlled Affiliate or persons or entities with the authority to select or appoint members orboard members of the Controlled Affiliate, other than the Sponsoring Plan or other Plans (excludingowners of stock holdings of under 5% in a publicly traded Controlled Affiliate);8.Conduct any business other than under the Licensed Marks and Name;9.Take any action that the Sponsoring Plan or BCBSA reasonably believes will adversely affect theLicensed Marks or Names.In addition, the Sponsoring Plan directly or indirectly through wholly owned subsidiaries shall own at least 50% of any for-profitControlled Affiliate, provided that in instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licenseeand such publicly traded Controlled Affiliate Licensee owns and controls other Controlled Affiliate Licensees, the SponsoringPlan directly or indirectly shall own and control at least 50% of any Controlled Affiliate that is indirectly owned and controlled bythe publicly traded Controlled Affiliate Licensee; orC.With respect to a Controlled Affiliate that is 100% controlled by Plans including the Sponsoring Plan and which offerssolely Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/or Special Need Plans products andservices, the legal authority by the Sponsoring Plan together with such other Plans (a) to select all members of theControlled Affiliate’s governing body; (b) to prevent any change in the articles of incorporation, bylaws, or otherestablishing or governing documents of the Controlled Affiliate; (c) to exercise control over the policy and operations ofthe Controlled Affiliate. In addition, the Sponsoring Plan and such other Plans shall own 100% of any for-profitControlled Affiliate, with the Sponsoring Plan and such other Plans each having an ownership interest. Such 100%control and ownership by Plans shall be direct or, if indirect, solely through affiliates that are licensed to use marksowned by BCBSA. Further, the Sponsoring Plan and such other Plans shall execute the “Addendum to ControlledAffiliate License” attached as Exhibit B-1 to Exhibit 1 attached hereto; orAmended as of June 20, 2019Exhibit 10.12D.With respect to a Controlled Affiliate that is 100% controlled by a Sponsoring Plan which on a Blue-branded basis, offerssolely a Basic Medicare Part D Prescription Drug product, the legal authority by the Sponsoring Plan (a) to select allmembers of the Controlled Affiliate’s governing body; (b) to prevent any change in the articles of incorporation, bylaws orother establishing or governing documents of the Controlled Affiliate; (c) to exercise control over the policy andoperations of the Controlled Affiliate. In addition, the Sponsoring Plan shall own 100% of any for-profit ControlledAffiliate. Such 100% control and ownership by the Plan shall be direct or, if indirect, solely through affiliates that arelicensed to use marks owned by BCBSA. Further, the Sponsoring Plan and Participating Plan as defined on theControlled Affiliate License Agreement shall execute the “Addendum to Controlled Affiliate License” attached as ExhibitB-2 to Exhibit 1 attached hereto.E.With respect to a Controlled Affiliate that operates as a clinic, the legal authority by the Sponsoring Plan to exercisecontrol over the policy and operations of the Controlled Affiliate as defined in Exhibit 1, Standard 1(E) and theGuidelines to Administer Standard 1 (E). In addition, if the clinic is for-profit, the Sponsoring Plan shall own at least 50%of the Controlled Affiliate and prevent any change in the articles of incorporation, bylaws or other establishingdocuments of the Controlled Affiliate with which the Sponsoring Plan does not concur.2b. With respect to the Controlled Affiliate License Agreements authorized in clauses iv) and v) of Paragraph 2, bona fide controlshall mean that the Controlled Affiliate is organized and operated in such a manner that it meets the following requirements:A.The Controlled Affiliate is owned or controlled by two or more Plans authorized to use the Licensed Marks pursuant tothis License Agreement with BCBSA (for purposes of this subparagraph A. through subparagraph C., the “Controlling Plans”); andAmended as of June 20, 2019-2a-Exhibit 10.12B.Each Controlling Plan is authorized pursuant to this Agreement to use the Licensed Marks in a geographic area in theRegion (as that term is defined in such Controlled Affiliate License Agreements) and every geographic area in theRegion is so licensed to at least one of the Controlling Plans; andC.The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries (a) to selectmembers of the Controlled Affiliate’s governing body having not less than 100% voting control thereof; (b) to preventany change in the articles of incorporation, bylaws or other establishing or governing documents of the ControlledAffiliate with which the Controlling Plans do not concur; and (c) to exercise control over the policy and operations of theControlled Affiliate. Notwithstanding anything to the contrary in (a) through (c) of this subparagraph E., the ControlledAffiliate’s establishing or governing documents must also require written approval by each of the Controlling Plansbefore the Controlled Affiliate can:1.Change its legal and/or trade names;2.Change the geographic area in which it operates (except such approval shall not be required with respectto business of the Controlled Affiliate conducted under the Licensed Marks within the Service Area of oneof the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSAsponsored by such Controlling Plan);3.Change any of the type(s) of businesses in which it engages (except such approval shall not be requiredwith respect to business of the Controlled Affiliate conducted under the Licensed Marks within theService Area of one of the Controlling Plans pursuant to a separate controlled affiliate license agreementwith BCBSA sponsored by such Controlling Plan);4.Take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect theLicensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly- owned subsidiaries shall own 100% of any for-profitControlled Affiliate.Amended as of June 20, 2019(the next page is 3)-2b-Exhibit 10.123.With respect to a Controlled Affiliate that is not licensed to use the Licensed Marks and Name, the Plan may, incommunications that contain the Licensed Marks or Name, indicate its corporate relationship to the Affiliate and permit such Affiliate toindicate its corporate relationship to the Plan, solely in the circumstances, style and manner specified by BCBSA from time-to-time inregulations of general application consistent with the avoidance of confusion or mistake or the dilution or tarnishment of the LicensedMarks and Name. No rights are hereby created in any Controlled Affiliate to use the Licensed Marks or Name in its own name or otherwise.4.The Plan recognizes the importance of a comprehensive national network of independent BCBSA licensees which arecommitted to strengthening the Licensed Marks and Name. The Plan further recognizes that its actions within its Service Area may affectthe value of the Licensed Marks and Name nationwide. The Plan agrees(a) to maintain in good standing its membership in BCBSA; (b) promptly to pay its dues to BCBSA, said dues to represent the royalties forthis License Agreement; (c) materially to comply with all applicable laws; (d) to comply with the Membership Standards Applicable toRegular Members of BCBSA, a current copy of which is attached as Exhibit 2 hereto; and (e) reasonably to permit BCBSA, upon a written,good faith request and during reasonable business hours, to inspect the Plan's books and records necessary to ascertain complianceherewith. As to other Plans and third parties, BCBSA shall maintain the confidentiality of all documents and information furnished by thePlan pursuant hereto, or pursuant to the Membership Standards, and clearly designated by the Plan as containing proprietary informationof the Plan.5.The rights hereby granted are exclusive to the Plan within the geographical area(s) served by the Plan on June 30, 1972,and/or as to which the Plan has been granted a subsequent license, which is hereby defined as the "Service Area," except that BCBSAreserves the right to use the Licensed Marks in said Service Area, and except to the extent that said Service Area may overlap areasserved by one or more other licensed Blue Shield Plans as of said date or subsequent license, as to which overlapping areas the rightshereby granted are nonexclusive as to such other Plan or Plans only.Amended as of June 19, 2014-3-Exhibit 10.126.Except as expressly provided by BCBSA with respect to National Accounts, Government Programs and certain othernecessary and collateral uses, the current rules and regulations governing which are attached as Exhibit 3 and Exhibit 4 hereto, and arecontained in other documents referenced herein, or as expressly provided herein, the Plan may not use the Licensed Marks and Nameoutside the Service Area or in connection with other goods and services, nor may the Plan use the Licensed Marks or Name in a mannerwhich is intended to transfer in the Service Area the goodwill associated therewith to another mark or name. Nothing herein shall beconstrued to prevent the Plan from engaging in lawful activity anywhere under other marks and names not confusingly similar to theLicensed Marks and Name, provided that engaging in such activity does and will not dilute or tarnish the unique value of the LicensedMarks and Name. In addition to any and all remedies available hereunder, BCBSA may impose monetary fines on the Plan for the Plan’suse of the Licensed Marks and Names outside the Service Area, and provided that the procedure used in imposing a fine is consistent withprocedures specifically prescribed by BCBSA from time to time in regulations of general application. In the case of regional MedicareAdvantage PPO and regional Medicare Part D Prescription Drug Plan products offered by consenting and participating Plans in a regionthat includes the Service Areas, or portions thereof, of more than one Plan, such fine may be imposed jointly on the consenting andparticipating Plans for use of the Licensed Marks and Name in any geographic area of the region in which a Plan having exclusive rights tothe Licensed Marks and Name does not consent to and participate in such offering, provided that the basis for imposition of such fine isconsistent with rules specifically prescribed by BCBSA from time to time in regulations of general application.7.The Plan agrees that it will display the Licensed Marks and Name only in such form, style and manner as shall bespecifically prescribed by BCBSA fromtime-to-time in regulations of general application in order to prevent impairment of the distinctiveness of the Licensed Marks and Name andthe goodwill pertaining thereto. The Plan shall cause to appear on all materials on or in connection with which the Licensed Marks or Nameare used such legends, markings and notices as BCBSA may reasonably request in order to give appropriate notice of service mark orother proprietary rights therein or pertaining thereto.8.BCBSA agrees that: (a) it will not grant any other license effective during the term of this License Agreement for the useof the Licensed Marks or Name which is inconsistent with the rights granted to the Plan hereunder; and (b) it will not itself use the LicensedMarks in derogation of the rights of the Plan or in a manner to deprive the Plan of the full benefits of this License Agreement, provided thatBCBSA shall have the right to use the Licensed Marks in conjunction with any national offering under the Federal Employees HealthBenefits Program in the manner set forth in Exhibit 4, Paragraph 4 (including subparagraphs) to this License Agreement. The Plan agreesthat it will not attack the title of BCBSA in and to the Licensed Marks or Name or attack the validity of the Licensed Marks or of this LicenseAgreement. The Plan further agrees that all use by it of the Licensed Marks and Name or any similar mark or name shall inure to the benefitof BCBSA, and the Plan shall cooperate with BCBSA in effectuating the assignment to BCBSA of any service mark or trademarkregistrations of the Licensed Marks or any similar mark or name held by the Plan or a Controlled Affiliate of the Plan, all or any portion ofwhich registration consists of the Licensed Marks.Amended as of November 16, 2006-3a-Exhibit 10.129.(a). Should the Plan fail to comply with the provisions of paragraphs 2-4, 6, 7 and/or 12, and not cure such failure withinthirty (30) days of receiving written notice thereof (or commence curing such failure within such thirty day period and continue diligentefforts to complete the curing of such failure if such curing cannot reasonably be completed within such thirty day period), BCBSA shallhave the right to issue a notice that the Plan is in a state of noncompliance. Except as to the termination of a Plan's License Agreement orthe merger of two or more Plans, disputes as to noncompliance, and all other disputes between or among BCBSA, the Plan, other Plansand/or Controlled Affiliates, shall be submitted promptly to mediation and mandatory dispute resolution pursuant to the rules and regulationsof BCBSA, a current copy of which is attached as Exhibit 5 hereto, and shall be timely presented and resolved. The mandatory disputeresolution panel shall have authority to issue orders for specific performance and assess monetary penalties. If a state of noncompliance asaforesaid is undisputed by the Plan or is found to exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSAshall have the right to seek judicial enforcement of the License Agreement. Except, however, as provided in paragraphs 9(d)(iii), 15(a)(i)-(viii), and 15(a)(x) below, no Plan's license to use the Licensed Marks and Name may be finally terminated for any reason without theaffirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans.(b).Notwithstanding any other provision of this License Agreement, a Plan's license to use the Licensed Marks andName may be forthwith terminated by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weightedvote of all the Plans at a special meeting expressly called by BCBSA for the purpose on ten (10) days written notice to the Plan advising ofthe specific matters at issue and granting the Plan an opportunity to be heard and to present its response to Member Plans for: (i) failure tocomply with any minimum capital or liquidity requirement under the Membership Standard on Financial Responsibility; or (ii) impendingfinancial insolvency; or (iii) the pendency of any action instituted against the Plan seeking its dissolution or liquidation or its assets orseeking appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business or seeking the declarationor establishment of a trust for any of its propertyof business, unless this License Agreement has been earlier terminatedunder paragraph 15(a); or (iv) such other reason as is determined in good faith immediately and irreparably to threaten the integrity andreputation of BCBSA, the Plans and/or the Licensed Marks.Amended as of March 16, 2006-4-Exhibit 10.12(c).To the extent not otherwise provided therein, neither: (i) the Membership Standards Applicable to RegularMembers of BCBSA; nor (ii) the rules and regulations governing Government Programs and certain other uses; nor (iii) the rules andregulations governing mediation and mandatory dispute resolution, may be amended unless and until each such amendment is firstadopted by the affirmative vote of three-fourths of the Plans and of three-fourths of the total then current weighted vote of all the Plans.The rules and regulations governing National Accounts and other national programs required by the Membership Standards Applicable toRegular Members of BCBSA (Exhibit 2) are contained, in addition to those set forth in Exhibit 3, in the following documents, as amendedfrom time to time: (1) the Inter-Plan Programs Policies and Provisions; (2) Inter-Plan Medicare Advantage Program Policies and Provisions.The voting requirements specified in rules and regulations governing such national programs may not be amended unless and until eachsuch amendment is first adopted by the affirmative vote of three-fourths of the Plans and of three-fourths of the total then current weightedvote of all the Plans.Amended as of November 21, 2014-4a-Exhibit 10.12conditions:(d).The Plan may operate as a for-profit company on the following(i)The Plan shall discharge all responsibilities which it has to the Association and to other Plans by virtue of this Agreement and thePlan's membership in BCBSA.(ii)The Plan shall not use the licensed Marks and Name, or any derivative thereof, as part of its legal name or any symbol used toidentify the Plan in any securities market. The Plan shall use the Licensed Marks and Name as part of its trade name within its service area forthe sale, marketing and administration of health care and related services in the service area.(iii)The Plan's license to use the Licensed Marks and Name shall automatically terminate effective: (a) thirty days after the Planknows, or there is an SEC filing indicating that, any Institutional Investor, has become the Beneficial Owner of securities representing 10% ormore of the voting power of the Plan (“Excess Institutional Voter”), unless such Excess Institutional Voter shall cease to be an Excess InstitutionalVoter prior to such automatic termination becoming effective; (b) thirty days after the Plan knows, or there is an SEC filing indicating that, anyNoninstitutional Investor has become the Beneficial Owner of securities representing 5% or more of the voting power of the Plan (“ExcessNoninstitutional Voter”) unless such Excess Noninstitutional Voter shall cease to be an Excess Noninstitutional Voter prior to such automatictermination becoming effective; (c) thirty days after the Plan knows, or there is an SEC filing indicating that, any Person has become theBeneficial Owner of 20% or more of the Plan’s then outstanding common stock or other equity securities which (either by themselves or incombination) represent an ownership interest of 20% or more pursuant to determinations made under paragraph 9(d)(iv) below (“ExcessOwner”), unless such Excess Owner shall cease to be an Excess Owner prior to such automatic termination becoming effective; (d) ten businessdays after individuals who at the time the Plan went public constituted the Board of Directors of the Plan (together with any new directors whoseelection to the Board was approved by a vote of 2/3 of the directors then still in office who were directors at the time the Plan went public orwhose election or nomination was previously so approved) (the "Continuing Directors") cease for any reason to constitute a majority of the Boardof Directors; or (e) ten business days after the Plan consolidates with or merges with or into any person or conveys, assigns, transfers or sells allor substantially all of its assets to any person other than a merger in which the Plan is the surviving entity and immediately after which merger,no person is an Excess Institutional Voter, an Excess Noninstitutional Voter or an Excess Owner: provided that, if requested by the affected Planin a writing received by BCBSA prior to such automatic terminationAmended as of September 17, 1997-5-Exhibit 10.12becoming effective, the provisions of this paragraph 9(d)(iii) may be waived, in whole or in part, upon the affirmative voteof a majority of the disinterested Plans and a majority of the total then current weighted vote of the disinterested Plans.Any waiver so granted may be conditioned upon such additional requirements (including but not limited to imposing newand independent grounds for termination of this License) as shall be approved by the affirmative vote of a majority of thedisinterested Plans and a majority of the total then current weighted vote of the disinterested Plans. If a timely waiverrequest is received, no automatic termination shall become effective until the later of: (1) the conclusion of the applicabletime period specified in paragraphs 9(d)(iii)(a)-(d) above, or (2) the conclusion of the first Member Plan meeting afterreceipt of such a waiver request.In the event that the Plan's license to use the Licensed Marks and Name is terminated pursuant to this Paragraph 9(d)(iii),the license may be reinstated in BCBSA’s sole discretion if, within 30 days of the date of such termination, the Plandemonstrates that the Person referred to in clause (a), (b) or (c) of the preceding paragraph is no longer an ExcessInstitutional Voter, an Excess Noninstitutional Voter or an Excess Owner.(iv)The Plan shall not issue any class or series of security other than (i) shares of common stock havingidentical terms or options or derivatives of such common stock, (ii) non-voting, non-convertible debt securities or (iii) suchother securities as the Plan may approve, provided that BCBSA receives notice at least thirty days prior to the issuance ofsuch securities, including a description of the terms for such securities, and BCBSA shall have the authority to determinehow such other securities will be counted in determining whether any Person is an Excess Institutional Voter, ExcessNoninstitutional Voter or an Excess Owner.(v)For purposes of paragraph 9(d)(iii), the following definitions shall apply:(a)"Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and ineffect on November 17, 1993 (the "Exchange Act").(b)A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own"any securities:Amended as of September 17, 1997-5a-Exhibit 10.12(i)which such Person or any of such Person's Affiliates or Associates beneficially owns,directly or indirectly;(ii)which such Person or any of such Person's Affiliates or Associates has (A) the right toacquire(whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement orunderstanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or (B)the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed theBeneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arisessolely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, andin accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable onSchedule 13D under the Exchange Act (or any comparable or successor report); or(iii)which are beneficially owned, directly or indirectly, by any other Person (or any Affiliateor Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has anyagreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group memberswith respect to a bona fide public offering of securities) relating to the acquisition, holding, voting (except to the extent contemplated by theproviso to (b)(ii)(B) above) or disposing of any securities of the Plan.Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with referenceto a Person's Beneficial Ownership of securities of the Plan, shall mean the number of such securities then issued and outstandingtogether with the number of such securities not then actually issued and outstanding which such Person would be deemed to ownbeneficially hereunder.(c)A Person shall be deemed an “Institutional Investor” if (but only if) such Person (i) is an entity or group identifiedin the SEC’s Rule 13d-1(b)(1)(ii) as constituted on June 1, 1997, and (ii) every filing made by such Person with the SEC under Regulation13D-G (or any successor Regulation) with respect to such Person’s Beneficial Ownership of Plan securities shall have contained acertification identical to the one required by item 10 of SEC Schedule 13G as constituted on June 1, 1997.(d)“Noninstitutional Investor” means any Person who is not an Institutional Investor.(e)Person" shall mean any individual, firm, partnership, corporation, trust, association, joint venture or other entity,and shall include any successor (by merger or otherwise) of such entity.Amended as of September 17, 1997-5b-(The next page is page 6)Exhibit 10.1210.This License Agreement shall remain in effect: (a) until terminated as provided herein; or (b) until this and all such otherLicense Agreements are terminated by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weightedvote of all the Plans; (c) until terminated by the Plan upon eighteen(18) months written notice to BCBSA or upon a shorter notice period approved by BCBSA in writing at its sole discretion.11.Except as otherwise provided in paragraph 15 below or by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans, or unless this and all such other License Agreements are simultaneouslyterminated by force of law, the termination of this License Agreement for any reason whatsoever shall cause the reversion to BCBSA of allrights in and to the Licensed Marks and Name, and the Plan agrees that it will promptly discontinue all use of the Licensed Marks andName, will not use them thereafter, and will promptly, upon written notice from BCBSA, change its corporate name so as to eliminate theLicensed Name therefrom.12.The license hereby granted to Plan to use the Licensed Marks and Name is and shall be personal to the Plan solicensed and shall not be assignable by any act of the Plan, directly or indirectly, without the written consent of BCBSA. Said license shallnot be assignable by operation of law, nor shall Plan mortgage or part with possession or control of this license or any right hereunder, andthe Plan shall have no right to grant any sublicense to use the Licensed Marks and Name.13.BCBSA shall maintain appropriate service mark registrations of the Licensed Marks and BCBSA shall take such lawfulsteps and proceedings as may be necessary or proper to prevent use of the Licensed Marks by any person who is not authorized to usethe same. Any actions or proceedings undertaken by BCBSA under the provisions of this paragraph shall be at BCBSA's sole cost andexpense. BCBSA shall have the sole right to determine whether or not any legal action shall be taken on account of unauthorized use ofthe Licensed Marks, such right not to be unreasonably exercised. The Plan shall report any unlawful usage of the Licensed Marks toBCBSA in writing and agrees, free of charge, to cooperate fully with BCBSA's program of enforcing and protecting the service mark rights,trade name rights and other rights in the Licensed Marks.14.The Plan hereby agrees to save, defend, indemnify and hold BCBSA And any other Plan(s) harmless from and againstall claims, damages, liabilities and Costs of every kind, nature and description which may arise as a result of the activities of the Plan or ofany hospital, medical group, clinic or other provider of health services that is owned or controlled directly or indirectly by Plan. BCBSAhereby agrees to save, defend, indemnify and hold the Plan and any other Plan(s) harmless from and against all claims, damages,liabilities and costs of every kind, nature and description which may arise exclusively and directly as a result of the activities of BCBSA.Amended as of June 21, 2012-6-Exhibit 10.1215.(a). This Agreement shall automatically terminate upon the occurrence of any of the following events: (i) a voluntarypetition shall be filed by the Plan or by BCBSA seeking bankruptcy, reorganization, arrangement with creditors or other relief under thebankruptcy laws of the United States or any other law governing insolvency or debtor relief, or (ii) an involuntary petition or proceeding shallbe filed against the Plan or BCBSA seeking bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcylaws of the United States or any other law governing insolvency or debtor relief and such petition or proceeding is consented to oracquiesced in by the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon which the petition or other documentcommencing the proceeding is served upon the Plan or BCBSA respectively, or (iii) an order for relief is entered against the Plan orBCBSA in any case under the bankruptcy laws of the United States, or the Plan or BCBSA is adjudged bankrupt or insolvent (as that termis defined in the Uniform Commercial Code as enacted in the state of Illinois) by any court of competent jurisdiction, or (iv) the Plan orBCBSA makes a general assignment of its assets for the benefit of creditors, or (v) any government or any government official, office,agency, branch, or unit assumes control of the Plan or delinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action isbrought by the Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee,receiver or other custodian for any of its property or business, or (vii) an action is instituted by any governmental entity or officer against thePlan or BCBSA seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interim trustee, receiver or othercustodian for any of its property or business and such action is consented to or acquiesced in by the Plan or BCBSA or is not dismissedwithin one hundred thirty (130) days of the date upon which the pleading or other document commencing the action is served upon thePlan or BCBSA respectively, provided that if the action is stayed or its prosecution is enjoined, the one hundred thirty (130) day period istolled for the duration of the stay or injunction, and provided further, that the Association’s Board of Directors may toll or extend the 130 dayperiod at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any of the Plan's or BCBSA'sproperty or business is appointed, or the Plan or BCBSA is ordered dissolved or liquidated, or (ix) the Plan shall fail to pay its dues andshall not cure such failure within thirty (30) days of receiving written notice thereof, or (x) if, due to regulatory action, the Plan together withany applicable Controlled Affiliate becomes unable to do business using the Names and Marks in any State or portion thereof included inits Service Area, provided that: (i) automatic termination shall not occur prior to the exhaustion by any such Plan of its rights to appeal orchallenge such regulatory action; and (ii) in the event the Plan is licensed to do business using the Names and Marks in multiple States orportions of States, the termination of its License Agreement shall be solely limited to the State(s) or portions thereof in which the regulatoryaction applies. By not appealing or challenging such regulatory action within the time prescribed by law or regulation, and in any event nolater than 120 days after such action is taken, a Plan shall be deemed to have exhausted its rights to appeal or challenge, and automatictermination shall proceed.-7-Exhibit 10.12Notwithstanding any other provision of this Agreement, a declaration or arequest for declaration of the existence of a trust over any of the Plan’s or BCBSA’s property or business shall not in itself be deemed toconstitute or seek appointment of a trustee, interim trustee, receiver or other custodian for purposes of subparagraphs 15(a)(vii) and (viii) ofthis Agreement.Amended as of March 26, 2015-7a-Exhibit 10.12(a).BCBSA, or the Plans (as provided and in addition to the rights conferred in Paragraph 10(b) above), mayterminate this Agreement immediately upon written notice upon the occurrence of either of the following events: (a) the Plan or BCBSAbecomes insolvent (as that term is defined in the Uniform Commercial Code enacted in the state of Illinois), or (b) any final judgmentagainst the Plan or BCBSA remains unsatisfied or unbonded of record for a period of sixty (60) days or longer.(b).If this License Agreement is terminated as to BCBSA for any reason stated in subparagraphs 15(a) and (b)above, the ownership of the Licensed Marks shall revert to each of the Plans.(c).Upon termination of this License Agreement or any Controlled Affiliate License Agreement of a LargerControlled Affiliate, as defined in Exhibit 1 to this License Agreement, the following conditions shall apply, except that, in the event of apartial termination of this Agreement pursuant to Paragraph 15 (a)(x)(ii) of this Agreement, the notices, national account listing, paymentand audit right listed below shall be applicable solely with respect to the geographic area for which the Plan’s license to use the LicensedNames and Marks is terminated:(i)The terminated entity shall send a notice through theU.S. mails, with first class postage affixed, to all individual and group customers, providers, brokers andagents of products or services sold, marketed, underwritten or administered by the terminated entity or itsControlled Affiliates under the Licensed Marks and Name. The form and content of the notice shall bespecified by BCBSA and shall, at a minimum, notify the recipient of the termination of the license, theconsequences thereof, and instructions for obtaining alternate products or services licensed by BCBSA,subject to any conflicting state law and state regulatory requirements. This notice shall be mailed within 15days after termination or, if termination is pursuant to paragraph 10(d) of this Agreement, within 15 daysafter the written notice to BCBSA described inparagraph 10(d).(ii)The terminated entity shall deliver to BCBSA within five days of a request by BCBSA a listing of nationalaccounts in which the terminated entity is involved (in a Control, Participating or Servicing capacity),identifying the national account and the terminated entity's role therein. For those accounts where theterminated entity is the Control Plan, the Plan must also indicate the Participating and Servicing Plans inthe national account syndicate.Amended as of June 16, 2005-8-Exhibit 10.12(iii)Unless the cause of termination is an event stated in paragraph 15(a) or (b) above respecting BCBSA, thePlan and its Licensed Controlled Affiliates shall be jointly liable for payment to BCBSA of an amount equalto the Re-Establishment Fee (described below) multiplied by the number of Licensed Enrollees of theterminated entity and its Licensed Controlled Affiliates; provided that if any other Plan is permitted byBCBSA to use marks or names licensed by BCBSA in the Service Area established by this Agreement,the Re- Establishment Fee shall be multiplied by a fraction, the numerator of which is the number ofLicensed Enrollees of the terminated entity and its Licensed Controlled Affiliates and the denominator ofwhich is the total number of Licensed Enrollees in the Service Area. The Re-Establishment Fee shall beindexed to a base fee of $80. The Re-Establishment Fee through December 31, 2005 shall be $80. TheRe-Establishment Fee for calendar years after December 31, 2005 shall be adjusted on January 1 of eachcalendar year up to and including January 1, 2010 and shall be the base fee multiplied by 100% plus thecumulative percentage increase or decrease in the Plans’ gross administrative expense (standard BCBSAdefinition) per Licensed Enrollee since December 31, 2004. The adjustment shall end on January 1, 2011,at which time the Re-Establishment Fee shall be fixed at the then-current amount and no longerautomatically adjusted. For example, if the Plans’ gross administrative expense per Licensed Enrollee was$278.60, $285.00 and $290.00 for calendar year end 2004, 2005 and 2006, respectively, the January 1,2007 Re-Establishment Fee would be $83.27 (100% of the base fee plus $1.84 for calendar year 2005and$1.43 for calendar year 2006). Licensed Enrollee means each and every person and covered dependentwho is enrolled as an individual or member of a group receiving products or services sold, marketed oradministered under marks or names licensed by BCBSA as determined at the earlier of (a) the end of thelast fiscal year of the terminated entity which ended prior to termination or (b) the fiscal year which endedbefore any transactions causing the termination began. Notwithstanding the foregoing, the amountpayable pursuant to this subparagraph (d)(iii) shall be due onlyAmended as of June 16, 2005-8a-Exhibit 10.12to the extent that, in BCBSA's opinion, it does not cause the net worth of the Plan to fall below 100% of theHealth Risk-Based Capital formula or its equivalent under any successor formula, as set forth in theapplicable financial responsibility standards established by BCBSA (provided such equivalent is approvedfor purposes of this sub paragraph by the affirmative vote of three-fourths of the Plans and three-fourths ofthe total then current weighted vote of all the Plans), measured as of the date of termination and adjustedfor the value of any transactions not made in the ordinary course of business. This payment shall not bedue in connection with transactions exclusively by or among Plan or their affiliates, includingreorganizations, combinations or mergers, where the BCBSA Board of Directors determines that thelicense termination does not result in a material diminution in the number of Licensed Enrollees or theextent of their coverage. At least 50% of the Re-Establishment Fee shall be awarded to the Plan (or Plans)that receive the new license(s) for the service area(s) at issue; provided, however, that such award shallnot become due or payable until all disputes, if any, regarding the amount of and BCBSA’s right to suchRe-Establishment Fee have been finally resolved; and provided further that the award shall be based onthe final amount actually received by BCBSA. The Board of Directors shall adopt a resolution which it mayamend from time to time that shall govern BCBSA’s use of its portion of the award. In the event that theterminated entity’s license is reinstated by BCBSA or is deemed to have remained in effect withoutinterruption by a court of competent jurisdiction, BCBSA shall reimburse the Plan (and/or its LicensedControlled Affiliates, as the case may be) for payments made under this subparagraph only to the extentthat such payments exceed the amounts due to BCBSA pursuant to subparagraph 15(d)(vi) and any costsassociated with reestablishing the Service Area, including any payments made by BCBSA to a Plan orPlans (or their Licensed Controlled Affiliates) for purposes of replacing the terminated entity.(iv)The terminated entity shall comply with all financial settlement procedures set forth in BCBSA’s LicenseTermination Contingency Plan, as amended from time to time and shall work diligently and in good faithwithAmended as of June 16, 2005-8b-Exhibit 10.12BCBSA, any Alternative Control Licensee or Replacement Licensee and any existing or potential newaccount for Blue-branded products and services to minimize the disruption of termination, and honor, tothe fullest extent possible, the desire of accounts to continue to receive or obtain Blue-branded productsand services through a new Licensee (“Transition”).Such diligence and good faith on the part of the terminated entity shall include, but not be limited to: (a)working cooperatively with BCBSA to protect the Names and Marks from potential harm; (b) cooperatingwith BCBSA’s use of the Names and Marks in the terminated entity’s former service area during thetermination and Transition; (c) transmitting, upon the request of an existing Blue account or of BCBSAwith consent and on behalf of an existing Blue account, all member and account-data relating to theFederal Employee Program to BCBSA, and all member and account data relating to other programs to anAlternative Control Licensee or Replacement Licensee; (d) working with BCBSA and the AlternativeControl or Replacement Licensee with respect to potential new Blue accounts headquartered in theterminated entity’s former service area; (e) continuing to service Blue accounts during the Transition; (f)continuing to comply with National Programs, Federal Employee Program and NASCO policies andprocedures and all voluntary BCBSA programs, policies and performance standards, such as Away FromHome Care, including being responsible for payment of all penalties for non-compliance duly levied inconformity with the License Agreements, Membership Standards, or the Federal Employee Programagreements, that may arise during the Transition; (g) maintaining and providing access to its providernetworks, as defined by Federal Employee Program agreements and National Account Program Policiesand Provisions, and Inter-Plan Programs Policies and Provisions, and making those networks anddiscounts available to members and providers who participate in National Programs and the FederalEmployee Program during the Transition; (h) maintaining its technical connections and processingcapabilities during the Transition; and (i) working diligently to conclude all financial settlements andaccount reconciliations as negotiated in the termination transition agreement.Amended as of November 16, 2006-8c-Exhibit 10.12(v)Notwithstanding any other provision in this Agreement, BCBSA shall have the right, with the approval ofits Board of Directors, to assess additional fines against the terminated entity during the Transition in theevent it fails to maintain and provide access to provider networks as defined by Federal EmployeeProgram agreements, National Account Program Policies and Provisions, and Inter-Plans ProgramsPolicies and Provisions, and/or pass on applicable discounts. Such fines shall be in addition to any otherassessments, fees or liquidated damages payable herein, or under existing policies and programs andshall be imposed to make whole BCBSA and/or the Plans. Terminated entity shall pay any such fines toBCBSA no later than 30 days after they are approved by the Board of Directors.(vi)BCBSA shall have the right to examine and audit and/or hire at terminated entity’s expense a third-partyauditor to examine and audit the books and records of the terminated entity and its Licensed ControlledAffiliates to verify compliance with the terms and requirements of this paragraph 15(d).(vii)Subsequent to termination of this Agreement, the terminated entity and its affiliates, agents, andemployees shall have an ongoing and continuing obligation to protect all BCBSA and Blue Licensee datathat was acquired or accessed during the period this Agreement was in force, including but not limited toall confidential processes, pricing, provider, discount and other strategic and competitively sensitiveinformation (“Blue Information”) from disclosure, and shall not, either alone or with another entity, disclosesuch Blue Information or use it in any manner to compete without the express written permission ofBCBSA.(viii)As to a breach of 15 (d) (i), (ii), (iii), (iv), (vi), or (vii) the parties agree that the obligations are immediatelyenforceable in a court of competent jurisdiction. As to a breach of 15 (d) (i), (ii), (iv), (vi), or (vii) by thePlan, the parties agree there is no adequate remedy at law and BCBSA is entitled to obtain specificperformance.Amended as of November 16, 2006-8d-Exhibit 10.12(ix)In the event that the terminated entity’s license is reinstated by BCBSA or is deemed to have remained ineffect without interruption by a court of competent jurisdiction, the Plan and its Licensed ControlledAffiliates shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by BCBSA inconnection with the termination and the reinstatement or court action, and any associated legalproceedings, including but not limited to: outside legal fees, consulting fees, public relations fees,advertising costs, and costs incurred to develop, lease or establish an interim provider network. Anyamount due to BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board ofDirectors in its sole discretion.(e).BCBSA shall be entitled to enjoin the Plan or any related party in a court of competent jurisdiction from entry into anytransaction which would result in a termination of this License Agreement unless the License Agreement has been terminated pursuant toparagraph 10 (d) of this Agreement upon the required six (6) month written notice.(f).BCBSA acknowledges that it is not the owner of assets of the Plan.Amended as of June 16, 2006-8e-Exhibit 10.1216.This Agreement supersedes any and all other agreements between the parties with respect to the subject matter herein, andcontains all of the covenants and agreements of the parties as to the licensing of the Licensed Marks and Name. This Agreementmay be amended only by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted voteof all the Plans as officially recorded by the BCBSA Corporate Secretary.17.If any provision or any part of any provision of this Agreement is judicially declared unlawful, each and every other provision, orany part of any provision, shall continue in full force and effect notwithstanding such judicial declaration.18.No waiver by BCBSA or the Plan of any breach or default in performance on the part of BCBSA or the Plan or any other licenseeof any of the terms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default inperformance of said terms, covenants or conditions.19a.All notices provided for hereunder shall be in writing and shall be sent in duplicate by regular mail to BCBSA or the Plan at theaddress currently published for each by BCBSA and shall be marked respectively to the attention of the President and, if any, theGeneral Counsel, of BCBSA or the Plan.19b.Except as provided in paragraphs 9(b), 9(d)(iii), 15(a), and 15(b) above, this Agreement may be terminated for a breach only uponat least 30 days’ written notice to the Plan advising of the specific matters at issue and granting the Plan an opportunity to be heardand to present its response to the Member Plans.19c.For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue CrossLicense Agreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shallvote together. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (ifany) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all othervotes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans,the requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (roundedto the nearest whole number, with 0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weightedvotes in favor of the question; or (ii) three (3) of the Plans fail to cast weighted votes in favor of the question. Notwithstanding theforegoing provision, if there are thirty-nine(39) Plans, the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted voteunless four (4) or more Plans fail to cast weighted votes in favor of the question.Amended as of June 16, 2006-8f-(The next page is page 9)Exhibit 10.1220.Nothing herein contained shall be construed to constitute the parties hereto as partners or joint venturers, or either as the agent ofthe other, and Plan shall have no right to bind or obligate BCBSA in any way, nor shall it represent that it has any right to do so.BCBSA shall have no liability to third parties with respect to any aspect of the business, activities, operations, products, or servicesof the Plan.21.This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Illinois.IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signature writtenbelow.BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy Title Date Plan:By Title Date -9-Exhibit 10.12EXHIBIT 1BLUE SHIELDCONTROLLED AFFILIATE LICENSE AGREEMENT(Includes revisions adopted by Member Plans through their November 21, 2019 meeting)This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and (“Controlled Affiliate"), a ControlledAffiliate of the Blue ShieldPlan, known as signatory hereto.("Plan" or “Sponsoring Plan”), which is also a PartyWHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service marks;WHEREAS, Plan and Controlled Affiliate desire that the latter be entitled to use the BLUE SHIELD and BLUE SHIELD Designservice marks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE SHIELD in a trade name("Licensed Name");NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the LicensedMarks and Name in connection with, and only in connection with: (i) health care plans and related services, as defined in BCBSA's LicenseAgreement with Plan, and administering the non-health portion of workers’ compensation insurance, and (ii) underwriting the indemnityportion of workers’ compensation insurance, provided that Controlled Affiliate’s total premium revenue comprises less than 15 percent ofthe Sponsoring Plan’s net subscription revenue.This grant of rights is non-exclusive and is limited to the Service Area served by the Plan. Subject to Paragraph 3A(3) of this Agreement,Controlled Affiliate may use the Licensed Marks and Name in its legal name on the following conditions: (i) the legal name must beapproved in advance, in writing, by BCBSA; (ii) Controlled Affiliate shall not do business outside the Service Area under any name or mark;and (iii) Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part of any name or symbol used toidentify itself in any securities market, unless such Controlled Affiliate is a not-for-profit company which may use the Licensed Marks andName, or an approved derivative therefor, to identify itself in debt securities markets. Controlled Affiliate may use the Licensed Marks andName in its Trade Name only with the prior, written, consent of BCBSA.Amended as of March 26, 2015-1-Exhibit 10.122.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and furtheragrees to be bound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees to comply with all applicable federal, state and local laws.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by Plan or byBCBSA) a report or reports to Plan and BCBSA demonstrating Controlled Affiliate's compliance with the requirements of this Agreementincluding but not limited to the quality control provisions of this paragraph and the attached Exhibit A.D.Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to- time, upon reasonable notice, review and inspectthe manner and method of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.E.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that theSponsoring Plan has:(1)The legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 50% voting control thereof; and(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate with which the Sponsoring Plan does not concur; and(c)to exercise control over the policy and operations of the Controlled Affiliate at least equal to that exercised by persons orentities (jointly or individually) other than the Sponsoring Plan; andNotwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must alsorequire written approval by the Sponsoring Plan before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates;(iii)change any of the type(s) of businesses in which it engages;Amended as of September 19, 2014-2-Exhibit 10.12(iv)create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in theordinary course of business;(v)sell any assets, except for sales in the ordinary course of business or sales of equipment no longer useful orbeing replaced;(vi)make any loans or advances except in the ordinary course of business;(vii)enter into any arrangement or agreement with any party directly or indirectly affiliated with any of the owners orpersons or entities with the authority to select or appoint members or board members of the Controlled Affiliate,other than the Sponsoring Plan or other Plans (excluding owners of stock holdings of under 5% in a publiclytraded Controlled Affiliate);(viii)conduct any business other than under the Licensed Marks and Name;(ix)take any action that Sponsoring Plan or BCBSA reasonably believes will adversely affect the Licensed Marks andName.In addition, the Sponsoring Plan directly or indirectly through wholly owned subsidiaries shall own at least 50% of any for-profit ControlledAffiliate, provided that in instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licensee and such publiclytraded Controlled Affiliate Licensee owns and controls other Controlled Affiliate Licensees, the Sponsoring Plan directly or indirectly shallown and control at least 50% of any Controlled Affiliate that is indirectly owned and controlled by the publicly traded Controlled AffiliateLicensee.Or(2)The legal authority directly or indirectly through wholly-owned subsidiaries;(a)to select members of the Controlled Affiliate’s governing body having more than 50% voting control thereof and to:(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate with which the Sponsoring Plan do not concur; andc)to exercise control over the policy and operations of the Controlled Affiliate.Amended as of March 26, 2015-3-Exhibit 10.12In addition, the Sponsoring Plan directly or indirectly through wholly-owned subsidiaries shall own more than 50% of any for-profitControlled Affiliate, provided that in instances where the Sponsoring Plan formed a publicly traded Controlled Affiliate Licensee and suchpublicly traded Controlled Affiliate Licensee owns and controls other Controlled Affiliate Licensees, the Sponsoring Plan directly or indirectlyshall own and control more than 50% of any Controlled Affiliate that is indirectly owned and controlled by the publicly traded ControlledAffiliate Licensee.Or(3)With respect to a Controlled Affiliate that is 100% controlled by Plans including the Sponsoring Plan and which offers solelyMedicaid, Medicare Advantage PPO, Medicare Advantage HMO and/or Special Need Plans products and services, the Sponsoring Planhas the legal authority together with such other Plans:(a)to select all members of the Controlled Affiliate’s governing body; and(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate; and(c)to exercise control over the policy and operations of the Controlled Affiliate.In addition, the Sponsoring Plan and such other Plans shall own 100% of any for-profit Controlled Affiliate, with the Sponsoring Plan andsuch other Plans each having an ownership interest. Such control and ownership by Plans must be direct or, if indirect, solely throughaffiliates that are licensed to use marks owned by BCBSA. Further, the Sponsoring Plan and such other Plans shall execute a separateAddendum to Controlled Affiliate License Agreement attached hereto as Exhibit B-1 for each product noted in Paragraph 2E(3) that islicensed to use the Marks.Or(4)With respect to a Controlled Affiliate that is 100% controlled by a Sponsoring Plan which on a Blue-branded basis offers solely aBasic Medicare Part D Prescription Drug product, the Sponsoring Plan has the legal authority:(a)to select all members of the Controlled Affiliate’s governing body; and(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate; and(c)to exercise control over the policy and operations of the Controlled Affiliate.Amended June 20, 20194Exhibit 10.12In addition, the Sponsoring Plan shall own 100% of any for-profit Controlled Affiliate. Such 100% control and ownership by Sponsoring Planmust be direct or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA, Further, the Participating Plan asdefined in Exhibit B-2 and the Sponsoring Plan shall execute the Addendum to Controlled Affiliate License Agreement attached hereto asExhibit B-2.Or(5)With respect to a Controlled Affiliate that is operating as a clinic, absent an alternative method of control approved in writing byBCBSA, the Sponsoring Plan shall have bonafide operational control over the Controlled Affiliate as specified in Exhibit A, Standard 1 (E)and the Guidelines to Administer Standard 1 (E). In addition, if the clinic is for-profit, the Sponsoring Plan shall own at least 50% of theControlled Affiliate and prevent any change in the articles of incorporation, bylaws or other establishing documents of the Controlled Affiliatewith which it does not concur.3.FOR-PROFIT, PUBLICLY TRADED LICENSEESA.The Controlled Affiliate may operate as a for-profit publicly traded company on the following conditions:(1)The Controlled Affiliate shall discharge all responsibilities which it has to the Association and to other Plans by virtue ofthis Agreement.(2)The Controlled Affiliate shall provide 90 days advance written notice to BCBSA prior to the initial filing with the SEC.(3)The Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part of its legal nameor any symbol used to identify the Controlled Affiliate in any securities market. The Controlled Affiliate shall use the LicensedMarks and Name as part of its trade name within its service area for the sale, marketing and administration of health care andrelated services in the service area.(4)The Controlled Affiliate’s license to use the Licensed Marks and Name shall automatically terminate effective: (a) thirtydays after the Controlled Affiliate knows, or there is an SEC filing indicating that, any Institutional Investor, has become theBeneficial Owner of securities representing 10% or more of the voting power of the Controlled Affiliate (“Excess InstitutionalVoter”), unless such Excess Institutional Voter shall cease to be an Excess Institutional Voter prior to such automatic terminationbecoming effective; (b) thirty days after the Controlled Affiliate knows, or there is an SEC filing indicating that, any NoninstitutionalInvestor, other than a Plan or Plans or Controlled Affiliate licensee or licensees has become the Beneficial Owner of securitiesrepresenting 5% or more of the voting power of the Controlled Affiliate (“Excess Noninstitutional Voter”) unless such ExcessNoninstitutional Voter shall cease to be an Excess Noninstitutional Voter prior to such automatic termination becoming effective;(c) thirty days afterAmended as of June 29, 2019-5-Exhibit 10.12the Controlled Affiliate knows, or there is an SEC filing indicating that, any Person has become the Beneficial Owner, other than aPlan or Plans or Controlled Affiliate licensee or licensees, of 20% or more of the Controlled Affiliate’s then outstanding commonstock or other equity securities which (either by themselves or in combination) represent an ownership interest of 20% or morepursuant to determinations made under Paragraph 3A(4) below (“Excess Owner”), unless such Excess Owner shall cease to be anExcess Owner prior to such automatic termination becoming effective; (d) ten business days after individuals who at the time theControlled Affiliate went public constituted the Board of Directors of the Controlled Affiliate (together with any new directors whoseelection to the Board was approved by a vote of 2/3 of the directors then still in office who were directors at the time the ControlledAffiliate went public or whose election or nomination was previously so approved) (the “Continuing Directors”) cease for anyreason to constitute a majority of the Board of Directors; or (e) ten business days after the Controlled Affiliate consolidates with ormerges with or into any person or conveys, assigns, transfers or sells all or substantially all of its assets to any person other than amerger in which the Sponsoring Plan is the surviving entity and immediately after which merger, no person is an ExcessInstitutional Voter, an Excess Noninstitutional Voter or an Excess Owner: provided that, if requested by the affected ControlledAffiliate in a writing received by BCBSA prior to such automatic termination becoming effective, the provision of this paragraph3A(4) may be waived, in whole or in part, upon the affirmative vote of a majority of the disinterested Plans and a majority of thetotal then current weighted vote of the disinterested Plans. Any waiver so granted may be conditioned upon such additionalrequirements (including but not limited to imposing new and independent grounds for termination of this License) as shall beapproved by the affirmative vote of a majority of the disinterested Plans and a majority of the total then current weighted vote of thedisinterested Plans. If a timely waiver request is received, no automatic termination shall become effective until the later of: (1) theconclusion of the applicable time period specified in paragraphs 3A(4)(a)-(d) above, or (2) the conclusion of the first Member Planmeeting after receipt of such a waiver request.In the event that the Controlled Affiliate’s license, or any other license, to use the Licensed Marks and Name is terminatedpursuant to Paragraph 3A(4), the license may be reinstated in BCBSA’s sole discretion if, within 30 days of the date of suchtermination, the Controlled Affiliate demonstrates that the Person referred to in clause (a), (b) or (c) of the preceding paragraph isno longer an Excess Institutional Voter, an Excess Noninstitutional Voter or an Excess Owner.(5)The Controlled Affiliate shall not issue any class or series of security other than (i) shares of common stock havingidentical terms or options or derivatives of such common stock, (ii) non-voting, non-convertible debt securities, or (iii) such othersecurities as the Controlled Affiliate may approve, provided that BCBSA receives notice at least thirty days prior to the issuance ofsuch securities, including a description of the terms for such securities, and BCBSA shall have the authority to determine how suchother securities will be counted in determining whether any Person is an Excess Institutional Voter, Excess Noninstitutional Voteror an Excess Owner.Amended as of March 26, 2015-6-Exhibit 10.12(6)For purposes of paragraph 3(A) above, the following definitions shall apply:(i)“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rulesand Regulations under the Securities Exchange Act of 1934, as amended and in effect on November 17, 1993 (the “ExchangeAct”).(ii)A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” any securities:(1)which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly;(2)which such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether suchright is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, orupon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or (B) the right to vote pursuant to anyagreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or tobeneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from arevocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and inaccordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable onSchedule 13D under the Exchange Act (or any comparable or successor report); or(3)which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof)with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding(other than customary agreements with and between underwriters and selling group members with respect to a bona fide publicoffering of securities) relating to the acquisition, holding, voting (except to the extent contemplated by the proviso to (ii)2(B) above)or disposing of any securities of the Controlled Affiliate.Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase “then outstanding”, when used withreference to a Person’s Beneficial Ownership of securities of the Controlled Affiliate, shall mean the number of such securities thenissued and outstanding together with the number of such securities not then actually issued and outstanding which such Personwould be deemed to own beneficially hereunder.Amended as of March 26, 2015-7-Exhibit 10.12(iii)A Person shall be deemed an “Institutional Investor” if (but only if) such Person (i) is an entity or group identified in theSEC’s Rule 13d-1(b)(1)(ii) as constituted on June 1, 1997, and (ii) every filing made by such Person with the SEC under Regulation 13D-G(or any successor Regulation) with respect to such Person’s Beneficial Ownership of Plan securities shall have contained a certificationidentical to the one required by item 1 of SEC Schedule 13G as constituted on June 1, 1997.(iv)“Noninstitutional Investor” means any Person who is not an Institutional Investor.(v)“Person” shall mean any individual, firm, partnership, corporation, trust, association, joint venture or other entity, andshall include any successor (by merger or otherwise) of such entity.4.SERVICE MARK USEA.Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licenseeswhich are committed to strengthening the Licensed Marks and Name. The Controlled Affiliate further recognizes that its actions within itsService Area may affect the value of the Licensed Marks and Name nationwide.B.Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but notlimited to use of such symbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules(generally applicable to Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued fromtime-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of the Licensed Marks and Name by Controlled Affiliate shallinure to the benefit of BCBSA.C.Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or isintended to transfer in the Service Area the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage inactivity that may dilute or tarnish the unique value of the Licensed Marks and Name.D.If Controlled Affiliate meets the standards of 2E(1) but not 2E(2) above and any of Controlled Affiliate's advertising orpromotional material is reasonably determined by BCBSA and/or the Plan to be in contravention of rules and regulations governing the useof the Licensed Marks and Name, Controlled Affiliate shall for ninety(1)days thereafter obtain prior approval from BCBSA of advertising and promotional efforts using the Licensed Marks and Name,approval or disapproval thereof to be forthcoming within five (5) business days of receipt of same by BCBSA or its designee. In alladvertising and promotional efforts, Controlled Affiliate shall observe the Service Area limitations applicable to Plan.Amended as of March 26, 2015-8-Exhibit 10.12E.Notwithstanding any other provision in the Plan’s License Agreement with BCBSA or in this Agreement, ControlledAffiliate shall use its best efforts to promote and build the value of the Licensed Marks and Name.5.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation oflaw or otherwise, the rights granted hereunder and any such act shall be voidable at the sole option of Plan or BCBSA. This Agreementand all rights and duties hereunder are personal to Controlled Affiliate.6.INFRINGEMENTControlled Affiliate shall promptly notify Plan and Plan shall promptly notify BCBSA of any suspected acts of infringement, unfaircompetition or passing off thatmay occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not be entitled to require Plan or BCBSA to take anyactions or institute any proceedings to prevent infringement, unfair competition or passing off by third parties. Controlled Affiliate agrees torender to Plan and BCBSA, without charge, all reasonable assistance in connection with any matter pertaining to the protection of theLicensed Marks and Name by BCBSA.7.LIABILITY INDEMNIFICATIONControlled Affiliate and Plan hereby agree to save, defend, indemnify and hold BCBSA harmless from and against all claims,damages, liabilities and costs of every kind, nature and description (except those arising solely as a result of BCBSA's negligence) that mayarise as a result of or related to: (i) Controlled Affiliate's rendering of services under the Licensed Marks and Name; or (ii) the activities ofany hospital, medical group, clinic or other provider of health services that is owned or controlled directly or indirectly by Plan or ControlledAffiliate.8.LICENSE TERMA.Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1)year and shall be automatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.B.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that:(i) the Plan ceases to be authorized to use the Licensed Marks and Name; or (ii) pursuant to Paragraph 15(a)(x) of the Blue Cross LicenseAgreement the Plan ceases to be authorized to use the Licensed Names and Marks in the geographic area served by the ControlledAffiliate provided, however, that if the Controlled Affiliate is serving more than one State or portions thereof, the termination of thisAgreement shall beAmended as of March 26, 2015-9-Exhibit 10.12limited to the State(s) or portions thereof in which the Plan’s license to use the Licensed Marks and Names is terminated. By not appealingor challenging such regulatory action within the time prescribed by law or regulation, and in any event no later than 120 days after suchaction is taken, a Plan shall be deemed to have exhausted its rights to appeal or challenge, and automatic termination shall proceed.C.Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may beforthwith terminated by the Plan or the affirmative vote of the majority of the Board of Directors of BCBSA present and voting at a specialmeeting expressly called by BCBSA for the purpose on ten (10) days written notice to the Plan advising of the specific matters at issue andgranting the Plan an opportunity to be heard and to present its response to the Board for: (1) failure to comply with any applicable minimumcapital or liquidity requirement under the quality control standards of this Agreement; or (2) failure to comply with the "Organization andGovernance" quality control standard of this Agreement; or (3) impending financial insolvency; or (4) for a Smaller Controlled Affiliate (asdefined in Exhibit A), failure to comply with any of the applicable requirements of Standards 2, 3, 4, 5 or 7 of attached Exhibit A; or (5) thependency of any action instituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking appointment ofa trustee, interim trustee, receiver or other custodian for any of its property or business or seeking the declaration or establishment of atrust for any of its property or business, unless this Controlled Affiliate License Agreement has been earlier terminated under paragraph8(E); or (6) failure by a Controlled Affiliate that meets the standards of 2E(1) but not 2E(2) above to obtain BCBSA's written consent to achange in the identity of any owner, in the extent of ownership, or in the identity of any person or entity with the authority to select orappoint members or board members, provided that as to publicly traded Controlled Affiliates this provision shall apply only if the changeaffects a person or entity that owns at least 5% of the Controlled Affiliate's stock before or after the change; or (7) such other reason as isdetermined in good faith immediately and irreparably to threaten the integrity and reputation of BCBSA, the Plans, any other licenseeincluding Controlled Affiliate and/or the Licensed Marks and Name.D.Except as otherwise provided in Paragraphs 8(B), 8(C) or 8(E) herein, should Controlled Affiliate fail to comply with theprovisions of this Agreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure withinsuch thirty day period and continue diligent efforts to complete the cure if such curing cannot reasonably be completed within such thirtyday period) BCBSA or the Plan shall have the right to issue a notice that the Controlled Affiliate is in a state of noncompliance. If a stateof noncompliance as aforesaid is undisputed by the Controlled Affiliate or is found to exist by a mandatory dispute resolution panel and isuncured as provided above, BCBSA shall have the right to seek judicial enforcement of the Agreement or to issue a notice of terminationthereof. Notwithstanding any other provisions of this Agreement, any disputes as to the termination of this License pursuant toParagraphs 8(B), 8(C) or 8(E) of this Agreement shall not be subject to mediation and mandatory dispute resolution. All other disputesbetween BCBSA, the Plan and/or Controlled Affiliate shall be submitted promptly to mediation and mandatory disputeAmended as of March 26, 2015-10-Exhibit 10.12resolution. The mandatory dispute resolution panel shall have authority to issue orders for specific performance and assess monetarypenalties. Except, however, as provided in Paragraphs 8(B) and 8(E) of this Agreement, this license to use the Licensed Marks and Namemay not be finally terminated for any reason without the affirmative vote of a majority of the present and voting members of the Board ofDirectors of BCBSA.E.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that:(1)Controlled Affiliate shall no longer comply with item 2(E) above;(2)Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to paragraph 10 hereof, which are theroyalties for this License Agreement, are more than sixty (60) days in arrears to BCBSA; or(3)Any of the following events occur: (i) a voluntary petition shall be filed by Controlled Affiliate seeking bankruptcy,reorganization, arrangement withcreditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or (ii) aninvoluntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy, reorganization, arrangement with creditorsor other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief and such petition orproceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed within sixty (60) days of the date upon which thepetition or other document commencing the proceeding is served upon the Controlled Affiliate, or (iii) an order for relief is entered againstControlled Affiliate in any case under the bankruptcy laws of the United States, or Controlled Affiliate is adjudged bankrupt or insolvent asthose terms are defined in the Uniform Commercial Code as enacted in the State of Illinois by any court of competent jurisdiction, or (iv)Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v) any government or any government official,office, agency, branch, or unit assumes control of Controlled Affiliate or delinquency proceedings (voluntary or involuntary) are instituted, or(vi) an action is brought by Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee,interim trustee, receiver or other custodian for any of its property or business, or(i)an action is instituted by any governmental entity or officer against Controlled Affiliate seeking its dissolution or liquidation of itsassets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business and suchaction is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one hundred thirty (130) days of the date uponwhich the pleading or other document commencing the action is served upon the Controlled Affiliate, provided that if the action is stayed orits prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of the stay or injunction, and provided further,that the Association’s Board of Directors may toll or extend the 130 day period at any time prior to its expiration, or (viii) a trustee, interimtrustee, receiver or other custodian for any of Controlled Affiliate's property or business is appointed or the Controlled Affiliate is ordereddissolved or liquidated. Notwithstanding any other provision of this Agreement, a declaration or a request for declaration of the existence ofa trust over any of the Controlled Affiliate’s property or business shall not in itself be deemed toAmended as of March 26, 2015-11-Exhibit 10.12constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for purposes of subparagraphs 8(E)(3)(vii) and (viii)of this Agreement.(4)The for-profit, publicly traded Controlled Affiliate is terminated pursuant to Paragraph 3A(4) of this Agreement. In whichcase, the licenses of any controlled Affiliates directly or indirectly owned by the terminated for profit, publiclytraded Controlled Affiliate also shall immediately terminate as provided for in paragraph 3A(4) of this AgreementF.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediatelydiscontinue all use of the Licensed Marks and Name, including any use in its trade name.G.Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers that it is no longer alicensee of BCBSA and, if directed by the Association’s Board of Directors, shall provide instruction on how the customer can contactBCBSA or a designated licensee to obtain further information on securing coverage. The notification required by this paragraph shall be inwriting and in a form approved by BCBSA. The BCBSA shall have the right to audit the terminated entity's books and records to verifycompliance with this paragraph.H.In the event this Agreement terminates pursuant to 8(b) hereof, or in the event the Controlled Affiliate is a LargerControlled Affiliate (as defined in Exhibit A), upon termination of this Agreement, the provisions of Paragraph 8.G. shall not apply and thefollowing provisions shall apply, except that, in the event of a partial termination of this Agreement pursuant to Paragraph 8(B)(ii) of thisAgreement, the notices, national account listing, payment, and audit right listed below shall be applicable solely with respect to thegeographic area for which the Plan’s license to use the Licensed Names and Marks is terminated:(1)The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to allindividual and group customers, providers, brokers and agents of products or services sold, marketed, underwritten or administered by theControlled Affiliate under the Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall, at aminimum, notify the recipient of the termination of the license, the consequences thereof, and instructions for obtaining alternate productsor services licensed by BCBSA, subject to any conflicting state law and state regulatory requirements. This notice shall be mailed within 15days after termination.(2)The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a listing of nationalaccounts in which the Controlled Affiliate is involved (in a control, participating or servicing capacity), identifying the national account andthe Controlled Affiliate’s role therein.Amended as of March 26, 2015-12-Exhibit 10.12(3)Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or (b) of the Plan’slicense agreement with BCBSA to use the Licensed Marks and Name, the Controlled Affiliate, the Plan, and any other Licensed ControlledAffiliates of the Plan shall be jointly liable for payment to BCBSA of an amount equal to the Re-Establishment Fee (described below)multiplied by the number of Licensed Enrollees of the Controlled Affiliate; provided that if any other Plan is permitted by BCBSA to usemarks or names licensed by BCBSA in the Service Area established by this Agreement, the Re-Establishment Fee shall be multiplied by afraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the Plan, and any other LicensedControlled Affiliates and the denominator of which is the total number of Licensed Enrollees in the Service Area.The Re-Establishment Fee shall be indexed to a base fee of $80. The Re-Establishment Fee through December 31, 2005 shall be $80.The Re-Establishment Fee for calendar years after December 31, 2005 shall be adjusted on January 1 of each calendar year up to andincluding January 1, 2010 and shall be the base fee multiplied by 100% plus the cumulative percentage increase or decrease in the Plans’gross administrative expense (standard BCBSA definition) per Licensed Enrollee since December 31, 2004. The adjustment shall end onJanuary 1, 2011, at which time the Re-Establishment Fee shall be fixed at the then-current amount and no longer automatically adjusted.For example, if the Plans’ gross administrative expense per Licensed Enrollee was $278.60, $285.00 and $290.00 for calendar year end2004, 2005 and 2006, respectively, the January 1, 2007 Re-Establishment Fee would be $83.27 (100% of base fee plus $1.84 for calendaryear 2005 and $1.43 for calendar year 2006. Licensed Enrollee means each and every person and covered dependent who is enrolled asan individual or member of a group receiving products or services sold, marketed or administered under marks or names licensed byBCBSA as determined at the earlier of (i) the end of the last fiscal year of the terminated entity which ended prior to termination or (ii) thefiscal year which ended before any transactions causing the termination began. Notwithstanding the foregoing, the amount payablepursuant to this subparagraph H. (3) shall be due only to the extent that, in BCBSA’s opinion, it does not cause the net worth of theControlled Affiliate, the Plan or any other Licensed Controlled Affiliates of the Plan to fall below 100% of the Health Risk-Based Capitalformula, or its equivalent under any successor formula, as set forth in the applicable financial responsibility standards established byBCBSA (provided such equivalent is approved for purposes of this sub paragraph by the affirmative vote of three-fourths of the Plans andthree-fourths of the total then current weighted vote of all the Plans); measured as of the date of termination, and adjusted for the value ofany transactions not made in the ordinary course of business. This payment shall not be due in connection with transactions exclusively byor among Plans or their affiliates, including reorganizations, combinations or mergers, where the BCBSA Board of Directors determinesthat the license termination does not result in a material diminution in the number of Licensed Enrollees or the extent of their coverage. Atleast 50% of the Re-Establishment Fee shall be awarded to the Plan (or Plans) that receive the new license(s) for the service area(s) atissue; provided, however, that such award shall not become due or payable until all disputes, if any, regarding the amount of and BCBSA’sright to such Re-Establishment Fee have been finally resolved; and providedAmended as of March 26, 2015-13-Exhibit 10.12further that the award shall be based on the final amount actually received by BCBSA. The Board of Directors shall adopt a resolutionwhich it may amend from time to time that shall govern BCBSA’s use of its portion of the award. In the event that the Controlled Affiliate’slicense is reinstated by BCBSA or is deemed to have remained in effect without interruption by a court of competent jurisdiction, BCBSAshall reimburse the Controlled Affiliate (and/or the Plan or its other Licensed Controlled Affiliates, as the case may be) for payments madeunder this subparagraph 8.H.(3) only to the extent that such payments exceed the amounts due to BCBSA pursuant to paragraph 8.M. andany cost associated with reestablishing the Service Area, including any payments made by BCBSA to a Plan or Plans (or their LicensedControlled Affiliates) for purposes of replacing the Controlled Affiliate.(4)BCBSA shall have the right to examine and audit and/or hire at terminated entity’s expense a third party auditorto examine and audit the books and records of the Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan toverify compliance with this paragraph 8.H.(5)Subsequent to termination of this Agreement, the terminated entity and its affiliates, agents, and employeesshall have an ongoing and continuing obligation to protect all BCBSA and Blue Licensee data that was acquired or accessed during theperiod this Agreement was in force, including but not limited to all confidential processes, pricing, provider, discount and other strategic andcompetitively sensitive information (“Blue Information”) from disclosure, and shall not, either alone or with another entity, disclose suchBlue Information or use it in any manner to compete without the express written permission of BCBSA.(6)As to a breach of 8.H.(1), (2), (3), (4) or (5) the parties agree that the obligations are immediately enforceable ina court of competent jurisdiction. As to a breach of 8.H.(1), (2) or (4) by the Controlled Affiliate, the parties agree there is no adequateremedy at law and BCBSA is entitled to obtain specific performance.I.This Agreement shall remain in effect until terminated by the Controlled Affiliate or the Plan upon not less thaneighteen (18) months written notice to the Association or upon a shorter notice period approved by BCBSA in writing at its sole discretion,or until terminated as otherwise provided herein. The Plan’s right to terminate without cause upon such notice is unfettered and may beexercised in the Plan’s sole discretion.J.In the event the Controlled Affiliate is a Smaller Controlled Affiliate (as defined in Exhibit A), the ControlledAffiliate agrees to be jointly liable for the amount described in H.3.and M. hereof upon termination of the BCBSA license agreement of anyLarger Controlled Affiliate of the Plan.K.BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdictionfrom entry into any transaction which would result in a termination of this Agreement unless the Plan’s license from BCBSA to use theLicensed Marks and Names has been terminated pursuant to 10(d) of the Plan’s license agreement upon the required 18 months writtennotice.Amended as March 26, 2015-14-Exhibit 10.12L.BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.M.In the event that the Plan has more than 50 percent voting control of the Controlled Affiliate under Paragraph2(E)(2) above and is a Larger Controlled Affiliate (as defined in Exhibit A), then the vote called for in Paragraphs 8(C) and 8(D) above shallrequire the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans.N.In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed to haveremained in effect without interruption by a court of competent jurisdiction, the Controlled Affiliate, the Plan, and any other LicensedControlled Affiliates of the Plan shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by BCBSA in connection withthe termination and the reinstatement or court action, and any associated legal proceedings, including but not limited to: outside legal fees,consulting fees, public relations fees, advertising costs, and costs incurred to develop, lease or establish an interim provider network. Anyamount due to BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board of Directors in its sole discretion.9.DISPUTE RESOLUTIONThe parties agree that any disputes between them or between or among either of them and one or more Plans or ControlledAffiliates of Plans that use in any manner the Blue Shield and Blue Shield Marks and Name are subject to the Mediation and MandatoryDispute Resolution process attached to and made a part of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibit 5as amended from time- to-time, which documents are incorporated herein by reference as though fully set forth herein.10.LICENSE FEEControlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit C.11.JOINT VENTURENothing contained in the Agreement shall be construed as creating a joint venture, partnership, agency or employment relationshipbetween Plan and Controlled Affiliate or between either and BCBSA.12.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressedin duplicate to the last known address of each other party, marked respectively to the attention of its President and, if any, its GeneralCounsel.Amended as of March 26, 2015-15-Exhibit 10.1213.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement mayonly be amended by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all thePlans as officially recorded by the BCBSA Corporate Secretary.14.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect theremaining obligations of the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition solong as the effect of such substitution is to provide the parties with the benefits of this Agreement.15.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of theterms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of saidterms, covenants or conditions.15A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue Cross LicenseAgreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together.For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as aBlue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Planshall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall be deemedsatisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (rounded to the nearest whole number, with 0.5 ormultiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3) of thePlans fail to cast weighted votes in favor of the question.Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans, the requirement of an affirmative three-fourths weighted voteshall be deemed satisfied with a lesser weighted vote unless four (4) or more Plans fail to cast weighted votes in favor of the question.Amended as of March 26, 2015-16-Exhibit 10.12THIS PAGE IS INTENTIONALLY BLANK.Exhibit 10.1216.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.17.HEADINGSThe headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of lastsignature written below.Controlled Affiliate:By: Date: Plan:By: Date: BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: Date: Amended as of March 26, 2015-17-Exhibit 10.12EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDSNovember 2019 PREAMBLEFor purposes of definition:•A "smaller Controlled Affiliate:" (1) comprises less than fifteen percent (15%) of Sponsoring Plan's and its licensed Controlled Affiliates' totalmember enrollment (as reported on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating anentity seeking licensure as licensed);* or (2) underwrites the indemnity portion of workers’ compensation insurance and has total premiumrevenue less than 15 percent of the Sponsoring Plan’s net subscription revenue.•A "larger Controlled Affiliate" comprises fifteen percent (15%) or more of Sponsoring Plan's and its licensed Controlled Affiliates' total memberenrollment (as reported on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an entityseeking licensure as licensed.)*Changes in Controlled Affiliate status:If any Controlled Affiliate's status changes regarding: its Plan ownership level, its risk acceptance or direct delivery of medical care, the ControlledAffiliate shall notify BCBSA within thirty (30) days of such occurrence in writing and come into compliance with the applicable standards within six(6) months.If a smaller Controlled Affiliate’s health and workers’ compensation administration business reaches or surpasses fifteen percent (15%) of the totalmember enrollment of the Sponsoring Plan and licensed Controlled Affiliates, the Controlled Affiliate shall:Amended as of September 19, 2014-18-Exhibit 10.12EXHIBIT A (continued)1.Within thirty (30) days, notify BCBSA of this fact in writing, including evidence that the Controlled Affiliate meets the minimum liquidity andcapital (BCBSA “Health Risk-Based Capital (HRBC)” as defined by the NAIC and state-established minimum reserve) requirements of thelarger Controlled Affiliate Financial Responsibility standard; and2.Within six (6) months after reaching or surpassing the fifteen percent (15%) threshold, demonstrate compliance with all license requirementsfor a larger Controlled Affiliate.If a Controlled Affiliate that underwrites the indemnity portion of workers’ compensation insurance receives a change in rating or proposed changein rating, the Controlled Affiliate shall notify BCBSA within 30 days of notification by the external rating agency.*For purposes of this calculation, The numerator equals:Applicant Controlled Affiliate's member enrollment, as defined in BCBSA's Quarterly Enrollment Report (excluding rider and freestandingcoverage).The denominator equals:Numerator PLUS Sponsoring Plan and all other licensed Controlled Affiliates' member enrollment, as reported in BCBSA's Quarterly EnrollmentReport (excluding rider and freestanding coverage).Amended as of September 19, 2014-19-Exhibit 10.12EXHIBIT A (continued)STANDARDS FOR LICENSED CONTROLLED AFFILIATESEach licensed controlled affiliate shall be subject to certain standards as determined below:1.What percent of the licensed controlled affiliate is controlled by the Sponsoring Plan and other Plans?More than 50% bySponsoring PlanòStandard 1A, 450% by SponsoringPlanòStandard 1B, 4100% Plan Control butless than 50%Sponsoring PlanControl and it offerssolely Medicaid,Medicare AdvantagePPO, MedicareAdvantage HMO and/orSpecial Need Plansproducts and servicesòStandard 1C, 4100% Sponsoring Plan controland on a Blue- branded basis,it only offers Basic MedicarePart D Prescription Drug PlanproductòStandard 1D, 4At least 50% by SponsoringPlan or operational Control bySponsoring Plan and it solelyoperates as a Clinic as definedin Standard 1E. òStandard 1E, 4IN ADDITION,2.Is risk being assumed? Yes No ÷Controlled Affiliateunderwrites anyindemnity portion ofworkers’ compensationinsurance òStandards 7A-7E, 11 òControlled Affiliatecomprises < 15% of totalmember enrollment ofSponsoring Plan and itslicensed affiliates, anddoes not underwrite theindemnity portion ofworkers’ compensationinsurance òStandard 2(Guidelines 1.1,1.2)and Standard 11 øControlled Affiliatecomprises > 15% of totalmember enrollment ofSponsoring Plan and itslicensed affiliates, anddoes not underwrite theindemnity portion ofworkers’ compensationinsurance òStandard 6H ÷Controlled Affiliatecomprises < 15% oftotal memberenrollment ofSponsoring Plan and itslicensed affiliates òStandard 2(Guidelines 1.1,1.3)and Standard 11 òControlled Affiliate comprises > 15% of totalmember enrollment of Sponsoring Plan andits licensed affiliates òStandard 6HIN ADDITION,3.Is medical care being directly provided as a staff model HMO?Yes òStandard 3ANo òStandard 3B-20- Amended as of June 20, 2019Exhibit 10.12EXHIBIT A (continued)STANDARDS FOR LICENSED CONTROLLED AFFILIATESEach licensed controlled affiliate shall be subject to certain standards as determined below:IN ADDITION,4.Is the licensed controlled affiliate operating as a Clinic, as defined in Standard 1(E)?5.If the controlled affiliate has health or workers’ compensation administration business, does such business comprise 15% or more of thetotal member enrollment of Plan and its licensed Controlled Affiliates?Yes No òStandards 6A-6J ÷Controlled Affiliate is not aformerprimary licensee and is notsubject to Standard 1(C) òStandards 5,8,9B,10,11 ÷Controlled Affiliate is a former primarylicenseeòStandards 5,8,9A,10,11 øControlled Affiliate is not aformer primary licensee andis subject to Standard 1(C) òStandards 5,8,9B,11Amended as of June 20, 2019-21-Exhibit 10.12EXHIBIT A (continued)Standard 1 - Organization and Governance1A.) The Standard for more than 50% Plan control is:A Controlled Affiliate shall be organized and operated in such a manner that a Plan authorized to use the Licensed Marks in theService Area of the Controlled Affiliate pursuant to the separate Primary License Agreement with BCBSA has the legal authority,directly or indirectly through wholly-owned subsidiaries: 1) to select members of the Controlled Affiliate’s governing body having morethan 50% voting control thereof; and 2) to prevent any change in the articles of incorporation, bylaws or other establishing or governingdocuments of the Controlled Affiliate with which the Sponsoring Plan do not concur; and 3) to exercise control over the policy andoperations of the Controlled Affiliate. In addition, the Sponsoring Plan directly or indirectly through wholly-owned subsidiaries shall ownmore than 50% of any for-profit Controlled Affiliate.1B.) The Standard for 50% Plan control is:A Controlled Affiliate shall be organized and operated in such a manner that a Plan authorized to use the Licensed Marks in theService Area of the Controlled Affiliate pursuant to the separate Primary License Agreement with BCBSA has the legal authority,directly or indirectly through wholly-owned subsidiaries:1)to select members of the Controlled Affiliate’s governing body having not less than 50% voting control thereof; and2)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the ControlledAffiliate with which the Sponsoring Plan do not concur; and3)to exercise control over the policy and operations of the Controlled Affiliate at least equal to that exercised by persons orentities (jointly or individually) other than the Sponsoring Plan.Amended September 19, 2014-22-Exhibit 10.12EXHIBIT A (continued)Notwithstanding anything to the contrary in 1) through 3) hereof, the Controlled Affiliate’s establishing or governing documents mustalso require written approval by the Sponsoring Plan before the Controlled Affiliate can:◦change the geographic area in which it operates◦change its legal and/or trade names◦change any of the types of businesses in which it engages◦create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in the ordinarycourse of business◦sell any assets, except for sales in the ordinary course of business or sales of equipment no longer useful or beingreplaced◦make any loans or advances except in the ordinary course of business◦enter into any arrangement or agreement with any party directly or indirectly affiliated with any of the owners orpersons or entities with the authority to select or appoint members or board members of the Controlled Affiliate, otherthan the Sponsoring Plan or other Plans (excluding owners of stock holdings of under 5% in a publicly tradedControlled Affiliate)◦conduct any business other than under the Licensed Marks and Name◦take any action that the Sponsoring Plan or BCBSA reasonably believes will adversely affect the Licensed Marks andName.In addition, the Sponsoring Plan directly or indirectly through wholly-owned subsidiaries shall own at least 50% of any for-profitControlled Affiliate.Amended September 27, 2018-23-Exhibit 10.121C.) The Standard for a Controlled Affiliate that offers solely Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/orSpecial Need Plans products and service and has100% Plan control but less than 50% Sponsoring Plan Control:A Controlled Affiliate shall be organized and operated in such a manner that (i) it offers solely Medicaid, Medicare Advantage PPO,Medicare Advantage HMO and/or Special Need Plans products and services; and (ii) a Plan authorized to use the Licensed Marks inthe Service Area of the Controlled Affiliate pursuant to the separate Primary License Agreement with BCBSA (the “Sponsoring Plan,)has the legal authority together with Other Plans:1)to select all members of the Controlled Affiliate’s governing body; and2)to prevent any change in the articles of incorporation, bylaws, or other establishing or governing documents of the ControlledAffiliate; and3)to exercise control over the policy and operations of the Controlled Affiliate.In addition, the Sponsoring Plan and such other Plans shall own 100% of any for- profit Controlled Affiliate, with the Sponsoring Planand such other Plans each having an ownership interest. Such 100% control and ownership by Plans shall be direct or, if indirect,solely through affiliates that are licensed to use marks owned by BCBSA. Further, the Sponsoring Plan and such other Plans shallexecute the Addendum to Controlled Affiliate License.1D). The Standard for a Controlled Affiliate that on a Blue-branded basis, only offers a Basic Medicare Part D Prescription Drugproduct and has 100% Plan control is:A Controlled Affiliate shall be organized and operated in such a manner that (i) on a Blue-branded basis, it only offers a BasicMedicare Part D Prescription Drug product; and (ii) the Sponsoring Plan has the legal authority:1)to select all members of the Controlled Affiliate’s governing body; and2)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the ControlledAffiliate; and3)to exercise control over the policy and operations of the Controlled Affiliate.In addition, the Sponsoring Plan shall own 100% of any for-profit Controlled Affiliate. Such 100% control and ownership by SponsoringPlan must be direct or, if indirect, solely through affiliates that are licensed to use marks owned by BCBSA.Further, the Sponsoring Plan and Participating Plan shall execute the Addendum to Controlled Affiliate License.-24-Exhibit 10.121E). The Standard for a Controlled Affiliate that operates as a Clinic and the Sponsoring Plan has control of the Clinic is:A Controlled Affiliate shall be organized in such a manner that it operates as a Clinic and Sponsoring Plan exercises operationalcontrol over the Controlled Affiliate.In addition, if the Clinic is for-profit, the Sponsoring Plan shall own at least 50% of the Controlled Affiliate and prevent any change inthe articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate.Amended June 20, 2019-25-Exhibit 10.12EXHIBIT A (continued)Standard 2 - Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractualobligations to its customers. If a risk-assuming Controlled Affiliate ceases operations for any reason, Blue Cross and/or Blue CrossPlan coverage will be offered to all Controlled Affiliate subscribers without exclusions, limitations or conditions based on health status.If a nonrisk-assuming Controlled Affiliate ceases operations for any reason, Sponsoring Plan will provide for services to its customers.The requirements of the preceding two sentences shall apply to all lines of business unless a line of business is specially exemptedfrom the requirement(s) by the BCBSA Board of Directors.Standard 3 - State Licensure/Certification3A.)The Standard for a Controlled Affiliate that employs, owns or contracts on a substantially exclusive basis for medical servicesis:A Controlled Affiliate shall maintain unimpaired licensure or certification for its medical care providers to operate under applicable statelaws.3B.)The Standard for a Controlled Affiliate that does not employ, own or contract on a substantially exclusive basis for medicalservices is:A Controlled Affiliate shall maintain unimpaired licensure or certification to operate under applicable state laws.3C.)The Standard for a Controlled Affiliate that operates as a Clinic as defined in Standard 1(E) is:A Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.Standard 4 - Certain DisclosuresA Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of 1) thestructure of the Blue Cross and Blue Shield System; and 2) the independent nature of every licensee; and 3) the Controlled Affiliate'sfinancial condition.Amended as of June 20, 2019-26-Exhibit 10.12EXHIBIT A (continued)Standard 5 - Reports and Records for Certain Smaller Controlled AffiliatesFor a smaller Controlled Affiliate that does not underwrite the indemnity portion of workers’ compensation insurance, the Standard is:A Controlled Affiliate and/or its Sponsoring licensed Plan shall furnish, on a timely and accurate basis, reports and records relating tothese Standards and the License Agreements between BCBSA and Controlled Affiliate.Standard 6 - Other Standards for Larger Controlled Affiliates Standards 6(A) - (I) that follow apply to larger Controlled Affiliates.Standard 6(A): Board of DirectorsA Controlled Affiliate Governing Board shall act in the interest of its Corporation in providing cost-effective health care services to itscustomers. A Controlled Affiliate shall maintain a governing Board, which shall control the Controlled Affiliate, composed of a majorityof persons other than providers of health care services, who shall be known as public members. A public member shall not be anemployee of or have a financial interest in a health care provider, nor be a member of a profession which provides health careservices.Standard 6(B): Responsiveness to CustomersA Controlled Affiliate shall be operated in a manner responsive to customer needs and requirements.Standard 6(C): Participation in National ProgramsA Controlled Affiliate shall effectively and efficiently participate in each national program as from time to time may be adopted by theMember Plans for the purposes of providing portability of membership between the licensees and ease of claims processing forcustomers receiving benefits outside of the Controlled Affiliate's Service Area.Amended as of September 19, 2014-27-Exhibit 10.12EXHIBIT A (continued)Standard 6(C): Participation in National Programs (continued) Such programs are applicable to licensees, and include:1.BlueCard Program;2.Inter-Plan Teleprocessing System (ITS);3.National Account Programs;4.Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April 14, 2003; and5.Inter-Plan Medicare Advantage Program.Standard 6(D): Financial Performance RequirementsIn addition to requirements under the national programs listed inStandard 6C: Participation in National Programs, a Controlled Affiliate shall take such action as required to ensure its financialperformance in programs and contracts of an inter-licensee nature or where BCBSA is a party.Standard 6(E): Cooperation with Plan Performance Response ProcessA Controlled Affiliate shall cooperate with BCBSA's Board of Directors and its Brand Enhancement & Protection Committee in theadministration of the Plan Performance Response Process and in addressing Controlled Affiliate performance problems identifiedthereunder.Standard 6(F): Independent Financial RatingA Controlled Affiliate shall obtain a rating of its financial strength from an independent rating agency approved by BCBSA's Board ofDirectors for such purpose.Standard 6(G): Local and National Best EffortsNotwithstanding any other provision in the Plan’s License Agreement with BCBSA or in this License Agreement, during each year, aControlled Affiliate shall use its best efforts to promote and build the value of the Blue Shield Mark.Amended as of November 21, 2014-28-Exhibit 10.12EXHIBIT A (continued)Standard 6(H): Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractualobligations to its customers.Standard 6(I): Reports and RecordsA Controlled Affiliate shall furnish to BCBSA on a timely and accurate basis reports and records relating to compliance with theseStandards and the License Agreements between BCBSA and Controlled Affiliate. Such reports and records are the following:A)BCBSA Controlled Affiliate Licensure Information Request; andB)Triennial trade name and service mark usage material, including disclosure material; andC)Changes in the ownership and governance of the Controlled Affiliate, including changes in its charter, articles ofincorporation, or bylaws, changes in a Controlled Affiliate's Board composition, or changes in the identity of theControlled Affiliate's Principal Officers, and changes in risk acceptance, contract growth, or direct delivery of medicalcare; andD)Semi-annual “Health Risk-Based Capital (HRBC) Report” as defined by the NAIC, Annual Certified Audit Report,Insurance Department Examination Report, Annual Statement filed with State Insurance Department (with allattachments), andAmended as of November 17, 2011-29-Exhibit 10.12EXHIBIT A (continued)Standard 6(J): Control by Unlicensed Entities ProhibitedNo Controlled Affiliate shall cause or permit an entity other than a Plan or a Licensed Controlled Affiliate thereof to obtain control of theControlled Affiliate or to acquire a substantial portion of its assets related to licensable services.Standard 7 - Other Standards for Risk-Assuming Workers’ Compensation Controlled AffiliatesStandards 7(A) - (E) that follow apply to Controlled Affiliates that underwrite the indemnity portion of workers’ compensation insurance.Standard 7 (A): Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractualobligations to its customers.Standard 7(B): Reports and RecordsA Controlled Affiliate shall furnish, on a timely and accurate basis, reports and records relating to compliance with these Standards andthe License Agreements between BCBSA and the Controlled Affiliate. Such reports and records are the following:A.BCBSA Controlled Affiliate Licensure Information Request; andB.Triennial trade name and service mark usage materials, including disclosure materials; andC.Annual Certified Audit Report, Annual Statement as filed with the State Insurance Department (with all attachments), AnnualNAIC’s Risk-Based Capital Worksheets for Property and Casualty Insurers; andD.Quarterly Estimated Risk-Based Capital for Property and Casualty Insurers, Insurance Department Examination Report; andAmended as of November 17, 2011-30-Exhibit 10.12EXHIBIT A (continued)E.Notification of all changes and proposed changes to independent ratings within 30 days of receipt and submission of a copy of allrating reports; andF.Changes in the ownership and governance of the Controlled Affiliate including changes in its charter, articles of incorporation, orbylaws, changes in a Controlled Affiliate’s Board composition, Plan control, state license status, operating area, the ControlledAffiliate’s Principal Officers or direct delivery of medical care.Standard 7(C): Loss PreventionA Controlled Affiliate shall apply loss prevention protocol to both new and existing business.Standard 7(D): Claims AdministrationA Controlled Affiliate shall maintain an effective claims administration process that includes all the necessary functions to assureprompt and proper resolution of medical and indemnity claims.Standard 7(E): Disability and Provider ManagementA Controlled Affiliate shall arrange for the provision of appropriate and necessary medical and rehabilitative services to facilitate earlyintervention by medical professionals and timely and appropriate return to work.Amended as of November 16, 2000-31-Exhibit 10.12EXHIBIT A (continued)Standard 8 - Cooperation with Controlled Affiliate License Performance Response Process ProtocolA Controlled Affiliate and its Sponsoring Plan shall cooperate with BCBSA’s Board of Directors and its Brand Enhancement &Protection Committee in the administration of the Controlled Affiliate License Performance Response Process Protocol (ALPRPP) andin addressing Controlled Affiliate compliance problems identified thereunder.Standard 9(A) - Participation in National Programs by Smaller Controlled Affiliates that were former Primary LicenseesA smaller controlled affiliate that formerly was a Primary Licensee shall effectively and efficiently participate in certain nationalprograms from time to time as may be adopted by Member Plans for the purposes of providing ease of claims processing forcustomers receiving benefits outside of the Controlled Affiliate’s service area and be subject to certain relevant financial and reportingrequirements.A.National program requirements include:•BlueCard Program;•Inter-Plan Teleprocessing System (ITS);•National Account Programs.B.Financial Requirements include:•Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial Responsibility; or•A financial guarantee covering the Controlled Affiliate’s Inter-Plan Programs obligations in a form, and from aguarantor, acceptable to BCBSA.Amended as of November 21, 2014-32-Exhibit 10.12EXHIBIT A (continued)Standard 9(A) - Participation in National Programs by Smaller Controlled Affiliates that were former Primary LicenseesC.Reporting requirements include:•The Semi-annual Health Risk-Based Capital (HRBC) Report.Amended as of June 13, 2002-33-Exhibit 10.12Exhibit A (continued)Standard 9(B) - Participation in National Programs by Smaller Controlled AffiliatesA smaller controlled affiliate shall participate in national programs in accordance with BlueCard and other relevant Policies andProvisions shall effectively and efficiently participate in national programs from time to time as may be adopted by Member Plans forthe purposes of providing ease of claims processing for customers receiving benefits outside of the controlled affiliate’s service areaand be subject to certain relevant financial and reporting requirements.A.National program requirements include:•BlueCard Program;•Inter-Plan Teleprocessing System (ITS);•National Account Programs.B.Financial Requirements include:•Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial Responsibility; or•A financial guarantee covering the Controlled Affiliate’s Inter-Plan Programs obligations in a form, and from a guarantor,acceptable to BCBSA.Amended as of June 20, 2013-34-Exhibit 10.12EXHIBIT A (continued)Standard 10 - Participation in Inter-Plan Medicare Advantage ProgramA smaller controlled affiliate for which this standard applies pursuant to the Preamble section of Exhibit A of the Controlled Affiliate LicenseAgreement shall effectively and efficiently participate in certain national programs from time to time as may be adopted by Member Plansfor the purposes of providing ease of claims processing for customers receiving benefits outside of the controlled affiliate’s service area.National program requirements include:A.Inter-Plan Medicare Advantage Program.Standard 11: Participation in Master Business Associate Agreement by Smaller Controlled Affiliate LicenseesEffective April 14, 2003, all smaller controlled affiliates shall comply with the terms of the Business Associate Agreement for Blue Crossand Blue Shield Licensees to the extent they perform the functions of a business associate or subcontractor to a business associate, asdefined by the Business Associate Agreement.Amended as of September 19, 2014-35-Exhibit 10.12EXHIBIT B-1ADDENDUM TO CONTROLLED AFFILIATE LICENSE TO BE EXECUTED BY CONTROLLED AFFILIATES LICENSED UNDERCONTROLLED AFFILIATE LICENSE STANDARD 1C.ADDENDUM TO CONTROLLED AFFILIATE LICENSEThis Addendum is made to that certain Blue Shield Controlled Affiliate License Agreement executed by and among Blue Cross and BlueShield Association (“Licensor”), (“Controlled Affiliate Licensee”) and (“Sponsoring Plan”) dated the day of , (“Agreement”). The parties to this Addendum are Licensor, Controlled AffiliateLicensee, Sponsoring Plan, and the undersigned other Plans (‘Other Plans”). This Addendum is made and shall be deemed effective as ofthe date of the Agreement.WHEREAS, the Sponsoring Plan asserts that it can serve the Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/orSpecial Need Plans market in its Service Area more efficiently and with less risk through an enterprise jointly owned and controlled withother Plans than through a wholly owned and Controlled Affiliate Licensee;WHEREAS, in such circumstance Controlled Affiliate License Standard 1C permits the licensing of a Controlled Affiliate that is less than50% owned and controlled by the Sponsoring Plan but which is 100% owned and controlled by Plans including the Sponsoring Plan,subject to certain conditions;WHEREAS, one such condition is that the Sponsoring Plan and all such other owning and controlling Plans enter into this Addendum;NOW THEREFORE, for good and valuable consideration, including the promises and covenants set forth herein, the parties agree asfollows:1.This Addendum is limited to [identify product name].2.The Sponsoring Plan shall participate operationally in Controlled Affiliate’s business that is conducted under the Licensed Marks.The parties understand that participation may take many forms, one of which should be providing a network of providers in theService Area of the Controlled Affiliate for the Medicaid, Medicare Advantage PPO, Medicare Advantage HMO and/or SpecialNeed Plans services being offered under the Agreement and being involved in network development and provider engagementfunctions.3.Each of the Other Plans agrees that (i) it will cooperate fully with the Sponsoring Plan and BCBSA as needed to enableSponsoring Plan and Controlled Affiliate Licensee to meet their obligations to Licensor under the Agreement and all associatedrules and regulations of Licensor, including the Brand Regulations, (ii) it-36-Exhibit 10.12will not take any action, either individually or jointly with any of the Other Plans, that would cause Sponsoring Plan or ControlledAffiliate Licensee to violate the Agreement, and (iii) it will not fail to take any action, either individually or jointly with any of theOther Plans, where such failure would cause Sponsoring Plan or Controlled Affiliate Licensee to violate the Agreement.4.Each of the Other Plans acknowledges that it has reviewed the Agreement and understands that Sponsoring Plan has the right toterminate the Agreement without cause upon notice as provided in Paragraph 8 of the Agreement, and that such right is unfetteredand may be exercised by Sponsoring Plan in its sole discretion.WHEREFORE, by signing below the parties agree to be bound to the terms stated herein. BLUE CROSS BLUE SHIELD ASSOCIATIONBy: [Controlled Affiliate Licensee]By: [Sponsoring Plan]By: [Other Plan 1]By: [Other Plan 2]By: Amended as of September 27, 2018-37-Exhibit 10.12EXHIBIT B-2ADDENDUM TO CONTROLLED AFFILIATE LICENSE TO BE EXECUTED BY CONTROLLED AFFILIATES LICENSED UNDERCONTROLLED AFFILIATE LICENSE STANDARD 1D.ADDENDUM TO CONTROLLED AFFILIATE LICENSEThis Addendum is made to that certain Blue Shield Controlled Affiliate License Agreement executed by and among Blue Cross and BlueShield Association (“Licensor”), (“Controlled Affiliate Licensee”), (“Sponsoring Plan”) and (“Participating Plan”) dated the day of , (“Agreement”).WHEREAS, the Participating Plan is defined as the Plan that holds the Primary License with BCBSA to use the Service Marks in theService Area where the Controlled Affiliate will use the Service Marks;WHEREAS, the Participating Plan asserts that it can offer a lower cost Basic Medicare Part D Prescription Drug Plan product moreefficiently in the Participating Plan’s Service Area through the Controlled Affiliate Licensee;WHEREAS, the Controlled Affiliate shall only use the Service Marks inside of the Participating Plan(s) Service Area subject to eachParticipating Plan signing a separate Addendum;WHEREAS, in such circumstance Controlled Affiliate License Standard 1D permits the licensing of a Controlled Affiliate that is 100%owned and controlled by a Sponsoring Plan, subject to certain conditions;WHEREAS, one such condition is that the Sponsoring Plan, Controlled Affiliate and the Participating Plan enter into this Addendum;NOW THEREFORE, for good and valuable consideration, including the promises and covenants set forth herein, the parties agree asfollows:1.The Participating Plan shall participate in Controlled Affiliate’s business that is conducted under the Licensed Marks. The partiesunderstand that the Participating Plan shall conduct sales support and marketing of the Controlled Affiliate’s Basic Medicare Part DPrescription Drug Plan product offered in the Participating Plan’s Service Area. Any other form of participation shall requireBCBSA’s written approval.2.Participating Plan agrees that (i) it will cooperate fully with the Sponsoring Plan and BCBSA as needed to enable Sponsoring Planand38Exhibit 10.12Controlled Affiliate Licensee to meet their obligations to Licensor under the Agreement and all associated rules and regulations ofLicensor, including the Brand Regulations, (ii) it will not take any action that would cause Sponsoring Plan or Controlled AffiliateLicensee to violate the Agreement, and (iii) it will not fail to take any action, either individually or jointly with the Sponsoring Plan orControlled Affiliate Licensee, where such failure would cause Sponsoring Plan or Controlled Affiliate Licensee to violate theAgreement.3.The Controlled Affiliate Licensee shall only use the Licensed Marks authorized by the Participating Plan in connection with theBasic Medicare Part D Prescription Drug Plan product offered in the Participating Plan’s Service Area.4.The Sponsoring Plan and Controlled Affiliate acknowledge that it has reviewed the Agreement and understands that ParticipatingPlan has the right to terminate this Agreement: (i) immediately upon the expiration or termination of the Plan ParticipationAgreement by and between Participating Plan and Controlled Affiliate upon written notice to the Sponsoring Plan, ControlledAffiliate Licensee and Licensor, or (ii) without cause upon 18 months written notice to the Sponsoring Plan, Controlled AffiliateLicensee and Licensor, and that such right is unfettered and may be exercised by Participating Plan in its sole discretion. In theevent that Participating Plan and Controlled Affiliate fail to execute the Plan Participation Agreement by (Date), ParticipatingPlan may terminate this Agreement immediately upon notice to Sponsoring Plan, Controlled Affiliate Licensee and Licensor.5.This Agreement and all of Controlled Affiliate Licensee's rights hereunder shall immediately terminate without any further action byany party or entity in the event that the Sponsoring Plan or Participating Plan ceases to be authorized to use the Licensed Marksand Name.WHEREFORE, by signing below the parties agree to be bound to the terms stated herein.BLUE CROSS BLUE SHIELD ASSOCIATIONBy: [Controlled Affiliate Licensee]By: [Sponsoring Plan]By: [Participating Plan]By: Amended March 17, 201639Exhibit 10.12EXHIBIT CROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENTControlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula:FOR RISK PRODUCTS:For Controlled Affiliates not underwriting the indemnity portion of workers’ compensation insurance:An amount equal to its pro rata share of Sponsoring Plan's dues payable to BCBSA computed with the addition of the Controlled Affiliate'smembers using the Marks on health care plans and related services as reported on the Quarterly Enrollment Report with BCBSA. Thepayment by Sponsoring Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy the requirement of thisparagraph, and no separate payment will be necessary.For Controlled Affiliates underwriting the indemnity portion of workers’ compensation insurance:An amount equal to 0.35 percent of the gross revenue per annum of Controlled Affiliate arising from products using the marks; plus, anannual fee of $5,000 per license for a Controlled Affiliate subject to Standard 7.Amended as of September, 19, 2014-40-Exhibit 10.12EXHIBIT C (continued)FOR NONRISK PRODUCTS:For third-party administrative business, an amount equal to its pro rata share of Sponsoring Plan’s dues payable to BCBSA computed withthe addition of the Controlled Affiliate’s members using the Marks on health care plans and related services as reported on the QuarterlyEnrollment Report with BCBSA. The payment by Sponsoring Plan of its dues to BCBSA, including that portion described in this paragraph,will satisfy the requirement of this paragraph, and no separate payment will be necessary.For non-third party administrative business (e.g., case management, provider networks, etc.), an amount equal to 0.24 percent of the grossrevenue per annum of Controlled Affiliate arising from products using the marks; plus:1)An annual fee of $5,000 per license for a Controlled Affiliate subject to Standard 6 D.2)An annual fee of $2,000 per license for all other Controlled Affiliates.The foregoing shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® License are issued to the same ControlledAffiliate. In the event that any license period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under thisformula will be calculated, billed and paid in arrears.Amended as of September 19, 2014-41-Exhibit 10.12EXHIBIT 1ACONTROLLED AFFILIATE LICENSE AGREEMENT APPLICABLE TO LIFE INSURANCE COMPANIES(Includes revisions adopted by Member Plans through their November 21, 2019 meeting)This agreement by and among Blue Cross and Blue Shield Association ("BCBSA") ("Controlled Affiliate"), a ControlledAffiliate of the Blue Shield Plan(s), known as ("Plan").WHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service marks;WHEREAS, the Plan and the Controlled Affiliate desire that the latter be entitled to use the BLUE SHIELD and BLUE SHIELD Designservice marks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE SHIELD in a trade name("Licensed Name");NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to the Controlled Affiliate the exclusive right touse the licensed Marks and Names in connection with and only in connection with those life insurance and related services authorizedby applicable state law, other than health care plans and related services (as defined in the Plan's License Agreements with BCBSA)which services are not separately licensed to Controlled Affiliate by BCBSA, in the Service Area served by the Plan, except thatBCBSA reserves the right to use the Licensed Marks and Name in said Service Area, and except to the extent that said Service Areamay overlap the area or areas served by one or more other licensed Blue Shield Plans as of the date of this License as to whichoverlapping areas the rights hereby granted are non-exclusive as to such other Plan or Plans and their respective Licensed ControlledAffiliates only.Controlled Affiliate cannot use the Licensed Marks or Name outside the Service Area or in its legal or trade name; provided, however,that if and only for so long as Controlled Affiliate also holds a Blue Shield Affiliate License Agreement applicable to health care plansand related services, Controlled Affiliate may use the Licensed Marks and Name in its legal and trade name according to the terms ofsuch license agreement.Amended as of June 12, 2003-1-Exhibit 10.122.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in relation to the sale, marketing and rendering ofauthorized products and further agrees to be bound by the conditions regarding quality control shown in Exhibit A as it may be amendedby BCBSA from time-to-time.B.Controlled Affiliate agrees that Plan and/or BCBSA may, fromtime-to-time, upon reasonable notice, review and inspect the manner and method of Controlled Affiliate's rendering of service and use ofthe Licensed Marks and Name.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by Plan or byBCBSA) a report to Plan and BCBSA demonstrating Controlled Affiliate's compliance with the requirements of this Agreement including butnot limited to the quality control provisions of Exhibit A.D.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner that it is subject tothe bona fide control of a Plan or Plans. Absent written approval by BCBSA of an alternative method of control, bona fide control shallmean the legal authority, directly or indirectly through wholly-owned subsidiaries: (a) to select members of the Controlled Affiliate'sgoverning body having not less than 51% voting control thereof; (b) to exercise operational control with respect to the governance thereof;and (c) to prevent any change in its articles of incorporation, bylaws or other governing documents deemed inappropriate. In addition, aPlan or Plans shall own at least 51% of any for-profit Controlled Affiliate. If the Controlled Affiliate is a mutual company, the Plan or itsdesignee(s) shall have and maintain, in lieu of the requirements of items(a)and (c) above, proxies representing 51% of the votes at any meeting of the policyholders and shall demonstrate that there is noreason to believe this such proxies shall be revoked by sufficient policyholders to reduce such percentage below 51%.3.SERVICE MARK USEControlled Affiliate shall at all times make proper service mark use of the Licensed Marks, including but not limited to use of suchsymbols or words as BCBSA shall specify to protect the Licensed Marks, and shall comply with such rules (applicable to all ControlledAffiliates licensed to use the Marks) relative to service mark use, as are issued from time-to-time by BCBSA. If there is any public referenceto the affiliation between the Plan and the Controlled Affiliate, all of the Controlled Affiliate's licensed services in the Service Area of thePlan shall be rendered under the Licensed Marks. Controlled Affiliate recognizes and agrees that all use of the Licensed Marks byControlled Affiliate shall inure to the benefit of BCBSA.-2-Exhibit 10.124.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, therights granted hereunder and any such act shall be voidable at the option of Plan or BCBSA. This Agreement and all rights and dutieshereunder are personal to Controlled Affiliate.5.INFRINGEMENTSControlled Affiliate shall promptly notify Plan and BCBSA of any suspected acts of infringement, unfair competition or passing offwhich may occur in relation to the Licensed Marks. Controlled Affiliate shall not be entitled to require Plan or BCBSA to take any actions orinstitute any proceedings to prevent infringement, unfair competition or passing off by third parties. Controlled Affiliate agrees to render toPlan and BCBSA, free of charge, all reasonable assistance in connection with any matter pertaining to the protection of the LicensedMarks by BCBSA.6.LIABILITY INDEMNIFICATIONControlled Affiliate hereby agrees to save, defend, indemnify and hold Plan and BCBSA harmless from and against all claims,damages, liabilities and costs of every kind, nature and description which may arise as a result of Controlled Affiliate's rendering of healthcare services under the Licensed Marks.7.LICENSE TERMThe license granted by this Agreement shall remain in effect for a period of one (1) year and shall be automatically extended foradditional one (1) year periods upon evidence satisfactory to the Plan and BCBSA that Controlled Affiliate meets the then applicable qualitycontrol standards, unless one of the parties hereto notifies the other party of the termination hereof at least sixty (60) days prior toexpiration of any license period.This Agreement may be terminated by the Plan or by BCBSA for cause at any time provided that Controlled Affiliate has beengiven a reasonable opportunity to cure and shall not effect such a cure within thirty (30) days of receiving written notice of the intent toterminate (or commence a cure within such thirty day period and continue diligent efforts to complete the cure if such curing cannotreasonably be completed within such thirty day period). By way of example and not for purposes of limitation, Controlled Affiliate's failure toabide by the quality control provisions of Paragraph 2, above, shall be considered a proper ground for cancellation of this Agreement.-3-Exhibit 10.12This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately terminate without any further action by any partyor entity in the event that:A.Controlled Affiliate shall no longer comply with Standard No. 1 (Organization and Governance) of Exhibit A or, followingan opportunity to cure, with the remaining quality control provisions of Exhibit A, as it may be amended from time-to-time; orB.Plan ceases to be authorized to use the Licensed Marks; orC.Appropriate dues for Controlled Affiliate pursuant to item 8 hereof, which are the royalties for this License Agreement aremore than sixty (60) days in arrears to BCBSA.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all useof the Licensed Marks including any use in its trade name.In the event of any disagreement between Plan and BCBSA as to whether grounds exist for termination or as to any other term orcondition hereof, the decision of BCBSA shall control, subject to provisions for mediation or mandatory dispute resolution in effect betweenthe parties.Upon termination of this Agreement, Licensed Controlled Affiliate shall immediately notify all of its customers that it is no longer alicensee of the Blue Cross and Blue Shield Association and provide instruction on how the customer can contact the Blue Cross and BlueShield Association or a designated licensee to obtain further information on securing coverage. The written notification required by thisparagraph shall be in writing and in a form approved by the Association. The Association shall have the right to audit the terminated entity'sbooks and records to verify compliance with this paragraph.8.DUESControlled Affiliate will pay to BCBSA a fee for this license in accordance with the following formula:•An annual fee of five thousand dollars ($5,000) per license, plus•.05% of gross revenue per year from branded group products, plus•.5% of gross revenue per year from branded individual products plus•.14% of gross revenue per year from branded individual annuity products.-4-Exhibit 10.12The foregoing percentages shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® license are issued to thesame entity. In the event that any License period is greater or less than one (1) year, any amounts due shall be prorated. Royalties underthis formula will be calculated, billed and paid in arrears.Plan will promptly and timely transmit to BCBSA all dues owed by Controlled Affiliate as determined by the above formula and if Plan shallfail to do so, Controlled Affiliate shall pay such dues directly.9.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employmentrelationship between Plan and Controlled Affiliate or between either and BCBSA.9A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue CrossLicense Agreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall votetogether. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (if any) that itholds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all other votes of the Plans,the Plan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall bedeemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (rounded to the nearest whole number,with0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3)of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans,the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or morePlans fail to cast weighted votes in favor of the question.10.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed induplicate to the last known address of each other party, marked respectively to the attention of its President and, if any, its GeneralCounsel.Amended as of November 20, 1997-5-Exhibit 10.1211.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement mayonly be amended by a writing executed by all parties.12.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such finding shall in no way effect theremaining obligations of the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition solong as the effect of such substitution is to provide the parties with the benefits of this Agreement.13.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of the Controlled Affiliate or any other licensee of any ofthe terms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of saidterms, covenants or conditions.14.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.Amended as of June 16, 2005-6-Exhibit 10.12IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signature writtenbelow.BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: _ Date: _Controlled AffiliateBy: _ Date: _PlanBy: _ Date: _-7-Exhibit 10.12EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS LIFE INSURANCE COMPANIESPage 1 of 2PREAMBLEThe standards for licensing Life Insurance Companies (Life and Health Insurance companies, as defined by state statute) are establishedby BCBSA and are subject to change from time-to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4)of the total weighted vote of all Plans. Each Licensed Plan is required to use a standard controlled affiliate license form provided by BCBSAand to cooperate fully in assuring that the licensed Life Insurance Company maintains compliance with the license standards.An organization meeting the following standards shall be eligible for a license to use the Licensed Marks within the service area of itssponsoring Licensed Plan to the extent and the manner authorized under the Controlled Affiliate License applicable to Life InsuranceCompanies and the principal license to the Plan.Standard 1 - Organization and GovernanceThe LIC shall be organized and operated in such a manner that it is controlled by a licensed Plan or Plans which have, directly or indirectly:1) not less than 51% of the voting control of the LIC; and 2) the legal ability to prevent any change in the articles of incorporation, bylaws orother establishing or governing documents of the LIC with which it does not concur; and 3) operational control of the LIC.If the LIC is a mutual company, the Plan or its designee(s) shall have and maintain, in lieu of the requirements of items 1 and 2 above,proxies representing at least 51% of the votes at any policyholder meeting and shall demonstrate that there is no reason to believe suchproxies shall be revoked by sufficient policyholders to reduce such percentage below 51%.Standard 2 - State LicensureThe LIC must maintain unimpaired licensure or certificate of authority to operate under applicable state laws as a life and health insurancecompany in each state in which the LIC does business.-1-Exhibit 10.12EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS LIFE INSURANCE COMPANIESPage 2 of 2Standard 3 - Records and ExaminationThe LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a timely and accurate basis, such records and reports regardingthe LIC as may be required in order to establish compliance with the license agreement. The LIC and its sponsoring licensed Plan(s) shallpermit BCBSA to examine the affairs of the LIC and shall agree that BCBSA's board may submit a written report to the chief executiveofficer(s) and the board(s) of directors of the sponsoring Plan(s).Standard 4 - MediationThe LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA mediation and mandatory dispute resolution processes, inlieu of a legal action between or among another licensed controlled affiliate, a licensed Plan or BCBSA.Standard 5 - Financial ResponsibilityThe LIC shall maintain adequate financial resources to protect its customers and meet its business obligations.Standard 6 - Cooperation with Affiliate License Performance Response Process ProtocolThe LIC and its Sponsoring Plan(s) shall cooperate with BCBSA’s Board of Directors and its Brand Enhancement & Protection Committeein the administration of the Affiliate License Performance Response Process Protocol (ALPRPP) and in addressing LIC complianceproblems identified thereunder.-2-Exhibit 10.12Exhibit 1A1CONTROLLED AFFILIATETRADEMARK LICENSE AGREEMENTFOR LIFE AND DISABILTY INSURANCE PRODUCTSThis Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and , (“Life and Disability ControlledAffiliate”) which is a company offering life and disability insurance products owned and controlled by , , ( individually, “Sponsoring Plan” and when referred to collectively, “Sponsoring Plans”).Whereas, BCBSA is the owner of the BLUE CROSS and BLUE SHIELD word and design service marks and any derivatives thereof(“Licensed Marks”);Whereas, each Sponsoring Plan is licensed separately by BCBSA to use one or more of the Licensed Marks in a particular ServiceArea;Whereas, the Sponsoring Plans and the Life and Disability Controlled Affiliate desire that the latter be entitled to use the appropriateLicensed Marks in connection with life and disability insurance products in some or all of such Sponsoring Plans’ Service Areas and inthe Service Areas of other Regular Member Plans, as defined in the BCBSA By-laws, (“Blue Plans”) consistent with the terms of thisAgreement.NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSEA.Subject to the terms and conditions of this Agreement, BCBSA hereby grants to the Life and Disability ControlledAffiliate the limited right to use the Licensed Marks in connection with and only in connection with the following life and disabilityinsurance products authorized by state law: (1) Group: Term Life, Long Term Disability, Whole Life, Benefit Life, Universal Life; (2)Individual: Term Life, Whole Life, Dependent Life, Spouse Life; (3)Other: Disability Income, Short Term Disability, Long Term Disability, Income Replacement; and (4) such other life and disabilityproducts approved by BCBSA in writing (“Licensed Products”) in the Service Areas served by the Sponsoring Plans or in the ServiceArea or Areas of one or more other licensed Blue Plans, provided that such Blue Plans have consented to such use as authorized bythis Agreement. Life and Disability Controlled Affiliate may not use the Licensed Marks in its legal or trade name.-1-Exhibit 10.12B.Notwithstanding that the license granted to Life and Disability Controlled Affiliate is a license to use all of theLicensed Marks, Life and Disability Controlled Affiliate may only use those of the Licensed Marks in the Service Area of a SponsoringPlan or other consenting Blue Plan as described below that such Plan is authorized to use as a Blue Plan pursuant to its separatelicense agreements with BCBSA.C.Life and Disability Controlled Affiliate may use the Licensed Marks in the Service Areas of Sponsoring Plans orin the Service Area of a Blue Plan that is not a signatory to this Agreement only after such Sponsoring Plan(s) or non-signatory BluePlan consents to such use by executing a written consent in substantially the same form as the Consent Agreement attached asExhibit B.D.The following provisions apply with respect to Consent Agreements once such agreements have been fully andproperly executed:(1)All sales, marketing and advertising materials developed by and proposed for use by Life and DisabilityControlled Affiliate in the Service Area of Sponsoring Plan or consenting Blue Plan (hereinafter, such consenting SponsoringPlan or consenting Blue Plan collectively referred to “Consenting Plan(s)”) must clearly identify the Consenting Plan (forexample, a statement on such materials that reads “This product is offered with the cooperation of Blue Cross and/or BlueShield of [Geography]”);(2)To the extent the Consenting Plan has separate divisions or other Affiliates that use the Licensed Marks indistinct geographic areas within its Service Area, consent obtained under this Agreement may be limited to one or more ofsuch specific geographic areas as specified by the Consenting Plan in its signed Consent Agreement. For purposes of thisentire Agreement, all references to the Service Area of a Sponsoring Plan, Blue Plan or Consenting Plan may include theentire Service Area or a distinct geographic area within such Service Area as specified in this Section 1 D (2);(3)Where BCBSA has licensed two or more Blue Plans to use the same Licensed Marks in the same ServiceArea, in addition to the requirements set forth in Section D (1) above, the sales, marketing and advertising materialsreferenced in such section above must be communicated to the Consenting Plan’s existing and prospective accounts throughor with the approval of such Consenting Plan, and the personnel of such Consenting Plan must actively participate in all salesand marketing activities conducted by Life and Disability Controlled Affiliate in the same Service Area, including participatingin meetings (whether in- person or via telephone, video or internet conference) with both existing and prospective accounts ofthe Consenting Plan;-2-Exhibit 10.12(4)Life and Disability Controlled Affiliate shall be entitled to use in a Service Area only those Licensed Marks thatthe Consenting Plan has been granted by BCBSA the license to use under its Blue Plan license agreements (for example, if aConsenting Plan is licensed to use only the Blue Cross Marks in its Service Area, the materials used by Life and DisabilityControlled Affiliate in that Service Area may only contain or reference the Blue Cross Marks and not the Blue Shield Marks).(5)If a Consent Agreement is terminated, Life and Disability Controlled Affiliate shall, unless BCBSA and theConsenting Plan agree in their sole discretion to a phase out in writing, immediately (i) cease all use of the Licensed Marks,including in connection with any and all sales and marketing of the Licensed Products in the Service Area where consent hasbeen terminated, and (ii) notify its customers that it is no longer a licensee and provide instruction on how the customer cancontact BCBSA or a designated licensee to obtain further information on securing coverage. The notification required by thisparagraph shall be in writing and in form approved by BCBSA.2.QUALITY CONTROLA.Life and Disability Controlled Affiliate agrees to use the Licensed Marks only in relation to the sale, marketingand administration of the Licensed Products and further agrees to be bound by the conditions regarding quality control shown inExhibit A and the Guidelines to Administer the Standards for Trademark License Agreement for Life and Disability Insurance Productsattached thereto.B.Life and Disability Controlled Affiliate agrees that BCBSA may, from time-to-time, upon reasonable notice, reviewand inspect the manner and method of Life and Disability Controlled Affiliate's rendering of service and use of the Licensed Marks.C.Life and Disability Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonablyrequired by BCBSA) a report to BCBSA demonstrating Life and Disability Controlled Affiliate's compliance with the requirements of thisAgreement including but not limited to the quality control provisions of Exhibit A.D.As used herein, a Life and Disability Controlled Affiliate is defined as: An entity organized and operated in sucha manner that it is 100% owned and controlled by Sponsoring Plans. Absent written approval by BCBSA of an alternative method ofcontrol, control shall mean the legal authority, directly or indirectly through wholly-owned subsidiaries: (a) to select members of the Lifeand Disability Controlled Affiliate's governing body having not less than 100% voting control thereof; (b) to exercise operational controlwith respect to the governance-3-Exhibit 10.12thereof; and (c) to prevent any change in its articles of incorporation, bylaws or other governing documents deemed inappropriate. Inaddition, a Sponsoring Plan or Plans shall own at least 100% of any for profit Life and Disability Controlled Affiliate.3.SERVICE MARK USELife and Disability Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and shallensure all uses of the Licensed Marks comply with the BCBSA Brand Regulations, as amended by BCBSA from time to time. Life andDisability Controlled Affiliate recognizes and agrees that all use of the Licensed Marks by Life and Disability Controlled Affiliate shallinure to the benefit of BCBSA.4.SUBLICENSING AND ASSIGNMENTThe license hereby granted to Life and Disability Controlled Affiliate to use the Licensed Marks is and shall be personal toLife and Disability Controlled Affiliate and shall not be assignable by any act of the Life and Disability Controlled Affiliate, directly orindirectly, without the written consent of BCBSA. Said license shall not be assignable by operation of law, nor shall Life and DisabilityControlled Affiliate mortgage or part with possession or control of this license or any right hereunder, and the Life and DisabilityControlled Affiliate shall have no right to grant any sublicense to use the Licensed Marks.5.INFRINGEMENTSLife and Disability Controlled Affiliate shall promptly notify BCBSA of any suspected acts of infringement, unfaircompetition or passing off which may occur in relation to the Licensed Marks. Life and Disability Controlled Affiliate shall not be entitledto require BCBSA to take any actions or institute any proceedings to prevent infringement, unfair competition or passing off by thirdparties. Life and Disability Controlled Affiliate agrees to render to BCBSA, free of charge, all reasonable assistance in connection withany matter pertaining to the protection of the Licensed Marks by BCBSA. BCBSA shall have sole control of the defense and resolutionof any claim of infringement brought or threatened by others.6.LIABILITY INDEMNIFICATIONLife and Disability Controlled Affiliate hereby agrees to save, defend, indemnify and hold BCBSA harmless from andagainst all claims, damages, liabilities and costs of every kind, nature and description which may arise as a result of Life and DisabilityControlled Affiliate's conduct.-4-Exhibit 10.127.LICENSE TERMA.The license granted by this Agreement shall remain in effect for a period of one (1) year and shall beautomatically extended for additional one (1) year periods, unless either BCBSA or Life and Disability Controlled Affiliate notifies theother party in writing of the termination hereof at least sixty (60) days prior to expiration of any license period.B.This Agreement may be terminated by BCBSA for cause at any time provided that Life and Disability ControlledAffiliate has been given a reasonable opportunity to cure and shall not effect such a cure within thirty (30) days of receiving writtennotice of the intent to terminate (or commence a cure within such thirty day period and continue diligent efforts to complete the cure ifsuch curing cannot reasonably be completed within such thirty day period). By way of example and not for purposes of limitation, Lifeand Disability Controlled Affiliate's failure to abide by the conditions regarding use of the Licensed Marks set forth in Section 1 of thisAgreement or the quality control provisions of Section 2 (other than with respect to Section 2 D which is subject to immediatetermination as stated in Section 7 C (1) below) shall be considered proper grounds for termination of this Agreement.C.This Agreement and all of Life and Disability Controlled Affiliate's rights hereunder shall immediately terminatewithout any further action by any party or entity in the event that:(1)Life and Disability Controlled Affiliate shall no longer comply with Section 2 D (or Standard No. 1 (Organizationand Governance) of Exhibit A); or(2)Any Sponsoring Plan ceases to be authorized to use the Licensed Marks; or(3)Appropriate fees for Life and Disability Controlled Affiliate pursuant to Section 8 of this Agreement are morethan sixty (60) days in arrears to BCBSA.Upon termination of this Agreement for cause or otherwise, Life and Disability Controlled Affiliate agrees that it shall immediatelydiscontinue all use of the Licensed Marks.In the event of any disagreement between Life and Disability Controlled Affiliate and BCBSA as to whether grounds exist fortermination or as to any other term or condition hereof, the decision of BCBSA shall control, subject to provisions for mediation ormandatory dispute resolution in effect between the parties.-5-Exhibit 10.12Upon termination of this Agreement, Licensed Life and Disability Controlled Affiliate shall immediately notify all of its customers that itis no longer a licensee of BCBSA and provide instruction on how the customer can contact BCBSA or a designated licensee to obtainfurther information on securing coverage. The notification required by this paragraph shall be in writing and in a form approved byBCBSA. BCBSA shall have the right to audit the terminated entity's books and records to verify compliance with this paragraph.8.ROYALTIESLife and Disability Controlled Affiliate will pay to BCBSA a fee for this license in accordance with the following formula:•An annual fee of five thousand dollars ($5,000) per license, plus•.05% of gross revenue per year from group products sold under the Licensed Marks, plus•.5% of gross revenue per year from individual products sold under the Licensed MarksIn the event that any license period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under thisformula will be calculated, billed and paid in arrears.Life and Disability Controlled Affiliate will promptly and timely transmit to BCBSA all fees owed by Life and Disability Controlled Affiliateas determined by the above formula.9.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employmentrelationship between any Sponsoring Plan and Life and Disability Controlled Affiliate or between among them and/or BCBSA.10.VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the BlueCross License Agreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plansshall vote together. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (ifany) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all othervotes of the Plans, the-6-Exhibit 10.12Plan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall bedeemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (rounded to the nearest wholenumber, with 0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of thequestion; or (ii) three (3) of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, ifthere are thirty-nine(1)Plans, the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted voteunless four (4) or more Plans fail to cast weighted votes in favor of the question.11.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall beaddressed in duplicate to the last known address of each other party, marked respectively to the attention of its President and, if any,its General Counsel.12.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. ThisAgreement may only be amended by: (a) a writing signed by all parties; or (b) a writing approved by the affirmative vote of three-fourths of the Blue Plans and three-fourths of the total then current weighted vote of all the Blue Plans as officially recorded by theBCBSA Corporate Secretary. Upon such adoption by the Blue Plans, this Agreement and all other Trademark License Agreements forLife and Disability Insurance Products then in effect shall simultaneously be amended.13.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such finding shall in no wayaffect the remaining obligations of the parties hereunder and the court may substitute a lawful term or condition for any unlawful termor condition so long as the effect of such substitution is to provide the parties with the benefits of this Agreement.14.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of the Life and Disability Controlled Affiliateor any other licensee of any of the terms, covenants or conditions of this Agreement shall constitute a waiver of any subsequentbreach or default in performance of said terms, covenants or conditions.15.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State ofIllinois.-7-Exhibit 10.12IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signaturewritten below.BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: _ Date: _Life and Disability Controlled Affiliate:By: _ Date: _Sponsoring Plan:By: _ Date: _ Name: Sponsoring Plan:By: _ Date: _ Name: [Add other Sponsoring Plans as necessary]-8-Exhibit 10.12EXHIBIT ALICENSE STANDARDS APPLICABLE TO TRADEMARK LICENSE AGREEMENT FOR LIFE AND DISABILITY INSURANCEPRODUCTSPage 1 of 2Standard 1 - Organization and GovernanceAny Life and Disability Controlled Affiliate licensed under the Trademark License Agreement for Life and Disability Insurance Products(“licensee”) shall be organized and operated in such a manner that it is an entity organized and operated in such a manner that it is100% owned and controlled by Sponsoring Plans. Absent written approval by BCBSA of an alternative method of control, control shallmean the legal authority, directly or indirectly through wholly-owned subsidiaries: (a) to select members of the Life and DisabilityControlled Affiliate's governing body having not less than 100% voting control thereof; (b) to exercise operational control with respect tothe governance thereof; and (c) to prevent any change in its articles of incorporation, bylaws or other governing documents deemedinappropriate. In addition, a Sponsoring Plan or Plans shall own at least 100% of any for profit Life and Disability Controlled Affiliate.Standard 2 - State LicensureThe licensee must maintain unimpaired licensure or certificate of authority to operate under applicable state laws as a life company ineach state in which the licensee does business.Standard 3 - Records and ExaminationThe licensee shall maintain and furnish, on a timely and accurate basis, such records and reports regarding the licensee as may berequired in order to establish compliance with the Agreement. The licensee shall permit BCBSA to examine the affairs of the licenseeand shall agree that BCBSA's board may submit a written report to the chief executive officer(s) and the board(s) of directors of theSponsoring Plan(s).Standard 4 - MediationThe licensee, its Sponsoring Plan(s) and all consenting Blue Plans shall agree to use the then-current BCBSA mediation andmandatory dispute resolution processes, in lieu of a legal action between or among another licensed Life and Disability ControlledAffiliate, a Sponsoring Plan and or consenting Blue Plan or BCBSA.-1-Exhibit 10.12EXHIBIT ALICENSE STANDARDS APPLICABLE TO TRADEMARK LICENSE AGREEMENT FOR LIFE AND DISABILITY INSURANCEPRODUCTSPage 2 of 2Standard 5 - Financial ResponsibilityThe licensee shall maintain adequate financial resources to protect its customers and meet its business obligations.Standard 6 - Cooperation with BCBSA GovernanceThe licensee shall cooperate with BCBSA’s Board of Directors and its Brand Enhancement & Protection Committee in theadministration of and in addressing licensee compliance problems that may be identified in connection with the operation oradministration of the Trademark License Agreement for Life and Disability Insurance Products.-2-Exhibit 10.12EXHIBIT BCONSENT AGREEMENTThis Consent Agreement is made and entered into by and among the undersigned Blue Plan, and (“Life and Disability ControlledAffiliate”), and the Blue Cross and Blue Shield Association (“BCBSA”) and shall be deemed effective on (“Effective Date”).Whereas, BCBSA owns the Blue Cross and Blue Shield word and design service marks and any derivative mark thereof (the“Brands”);Whereas, the undersigned Blue Plan is licensed to use one or more of the Brands within a specific geographic area (“Service Area”);Whereas Life and Disability Controlled Affiliate is licensed by BCBSA to use one or more of the Brands to offer life and disabilityinsurance products (“Products”) as defined and authorized in the Trademark License Agreement for Life and Disability InsuranceProducts (“Life and Disability License Agreement”);Whereas neither the Blue Plan nor its affiliates offer the Products under any of the Brands in such Blue Plan’s Service Area or portionthereof where Blue Plan has consented to sale of the Products by Life and Disability Controlled Affiliate; andWhereas BCBSA and the undersigned Blue Plan desire to consent to Life and Disability Controlled Affiliate’s use of the Brands in BluePlan’s Service Area consistent with the terms of the Life and Disability License Agreement and this Consent Agreement.Now, therefore, in consideration of the obligations and conditions stated in this Agreement, Blue Plan, Life and Disability ControlledAffiliate and BCBSA agree as follows:1.Life and Disability Controlled Affiliate may market, sell, administer and underwrite the Products in Blue Plan’s Service Areaunder the Brands licensed to Blue Plan in such Service Area subject to the terms of this Consent Agreement, the Life andDisability License Agreement and Blue Plan’s license agreement(s) with BCBSA. Life and Disability Controlled Affiliate’srights under the Brands to offer the Products under the Brands are limited to offering the Products only under the Brand(s)licensed to the consenting Blue Plan.2.Life and Disability Controlled Affiliate shall work with the undersigned Blue Plan to develop a written sales and marketingagreement that identifies the relationship between it and Blue Plan for the sales, marketing and customer service for theProducts. The term of thesales and marketing agreement shall be the same as the term of this Consent Agreement.1Exhibit 10.123.All sales, marketing and advertising materials developed by and proposed for use by Life and Disability Controlled Affiliatein a consenting Blue Plan’s Service Area must clearly identify the consenting Blue Plan (for example, a statement on suchmaterials that reads “This product is offered with the cooperation of Blue Cross and/or Blue Shield of [Geography]”);4.Life and Disability Controlled Affiliate may use the Brands to sell the Products in the following Service Area or portionthereof as designated by Blue Plan:5.If two or more Blue Plans to use the same Licensed Marks in the same Service Area, Life and Disability Controlled Affiliateshall work with the consenting Blue Plan in the following manner: (a) the sales, marketing and advertising materials mustbe communicated to the consenting Blue Plan’s existing and prospective accounts through or with the approval of suchBlue Plan, and (b) the personnel of such Blue Plan must actively participate in all sales and marketing activities conductedby Life and Disability Controlled Affiliate in the same Service Area, including participating in meetings (whether in-personor via telephone, video or internet conference) with both existing and prospective accounts of the consenting Blue Plan;6.Life and Disability Controlled Affiliate shall be entitled to use in a Service Area only those Licensed Marks that theconsenting Blue Plan has been granted by BCBSA the license to use under its license agreement (for example, if aconsenting Blue Plan is licensed to use only the Blue Cross Marks in its Service Area, the materials used by Life andDisability Controlled Affiliate in that Service Area may only contain or reference the Blue Cross Marks and not the BlueShield Marks).7.If this Consent Agreement is terminated, Life and Disability Controlled Affiliate shall, unless each BCBSA and the BluePlan agree in their sole discretion to a phase out in writing, immediately (i) cease all use of the Licensed Marks, includingin connection with any and all sales and marketing of the Licensed Products in the Service Area where consent has beenterminated, and (ii) notify its customers that it is no longer a licensee of BCBSA and provide instruction on how thecustomer can contact BCBSA or a designated licensee to obtain further information on securing coverage. The notificationrequired by this paragraph shall be in writing and in form approved by BCBSA.2Exhibit 10.128.The term of this Consent Agreement shall be one year from the Effective Date. Unless either Blue Plan or Life andDisability Controlled Affiliate provides the other party with written notice of its desire not to renew this Consent Agreementat least 60 days prior to expiration of the term or any extended term or unless terminated as provided in Paragraph 9below, this Consent Agreement shall automatically renew for subsequent one year periods.9.This Consent Agreement may be terminated as follows:A.Upon mutual written consent of Life and Disability Controlled Affiliate and Blue Plan;B.By Blue Plan or Life and Disability Controlled Affiliate upon 60 days advance written notice to the non-terminating party and BCBSA; orC.By Blue Plan immediately if Life and Disability Controlled Affiliate does not comply with this Consent Agreementor the sales protocol agreement.10.This Consent Agreement shall automatically terminate if Blue Plan’s primary licensee agreement terminates for anyreason or if the Life and Disability License Agreement terminates for any reason.Agreed and Accepted by:[Blue Plan]:By: Title: BLUE CROSS AND BLUE SHIELD ASSOCIATION:By: Title: LIFE AND DISABILITY CONTROLLED AFFILIATE:By: Title: 3Exhibit 10.12Exhibit 1BBLUE SHIELDCONTROLLED AFFILIATE LICENSE AGREEMENT APPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPOPRODUCTS(Adopted by Member Plans at their November 21, 2019)This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and (“Controlled Affiliate"), a ControlledAffiliate of the BlueCross Plan(s), known as Party signatory hereto.("Controlling Plans"), each of which is also aWHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service marks;WHEREAS, under the Medicare Modernization Act, companies may apply to and be awarded a contract by the Centers forMedicare and Medicaid Services (“CMS”) to offer Medicare Advantage PPO products in geographic regions designated by CMS (hereafter“regional MAPPO products”).WHEREAS, some of the CMS-designated regions include the Service Areas, or portions thereof, of more than one Plan.WHEREAS, the Controlling Plans and Controlled Affiliate desire that the latter be entitled to use the BLUE SHIELD and BLUESHIELD Design service marks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE SHIELD in atrade name ("Licensed Name") to offer regional MAPPO products in a region that includes the Service Areas, or portions thereof, of morethan one Controlling Plan;NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the LicensedMarks and Name in connection with, and only in connection with the sale, marketing and administration of regional MAPPO products andrelated services.This grant of rights is non-exclusive and is limited to the following states: (the “Region”). Controlled Affiliate may use the Licensed-1-Exhibit 10.12Marks and Name in its legal name on the following conditions: (i) the legal name must be approved in advance, in writing, by BCBSA; (ii)Controlled Affiliate shall not do business outside the Region under any name or mark except business conducted in the Service Area of aControlling Plan provided that Controlled Affiliate is separately licensed by BCBSA to use the Licensed Marks and Name in connection withhealth care plans and related services in the Service Area of such Controlling Plan; and (iii) Controlled Affiliate shall not use the LicensedMarks and Name, or any derivative thereof, as part of any name or symbol used to identify itself in any securities market. ControlledAffiliate may use the Licensed Marks and Name in its Trade Name only with the prior, written, consent of BCBSA.2.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and furtheragrees to be bound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees to comply with all applicable federal, state and local laws.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by the ControllingPlans or by BCBSA) a report or reports to the Controlling Plans and BCBSA demonstrating Controlled Affiliate's compliance with therequirements of this Agreement including but not limited to the quality control provisions of this paragraph and the attached Exhibit A.D.Controlled Affiliate agrees that the Controlling Plans and/or BCBSA may, from time-to-time, upon reasonable notice,review and inspect the manner and method of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.E.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets thefollowing requirements:(1)Controlled Affiliate is owned or controlled by two or more ControllingPlans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Shield License Agreement to use the Licensed Marksin a geographic area in the Region and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and-2-Exhibit 10.12(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate with which the Controlling Plans do not concur;(c)to exercise control over the policy and operations of the Controlled Affiliate; andNotwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must alsorequire written approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respect tobusiness of the Controlled Affiliate conducted under the Licensed Marks within the Service Area of one of theControlling Plans pursuant to a separate controlled affiliate license agreement with BCBSA sponsored by suchControlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be required withrespect to business of the Controlled Affiliate conducted under the Licensed Marks within the Service Area of oneof the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSA sponsored bysuch Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marksand Name.In addition, the Controlling Plans directly or indirectly through wholly owned subsidiaries shall own 100% of any for-profit ControlledAffiliate.-3-Exhibit 10.123.SERVICE MARK USEA.Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licenseeswhich are committed to strengthening the Licensed Marks and Name. The Controlled Affiliate further recognizes that its actions within theRegion may affect the value of the Licensed Marks and Name nationwide.B.Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but notlimited to use of such symbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules(generally applicable to Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued fromtime-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of the Licensed Marks and Name by Controlled Affiliate shallinure to the benefit of BCBSA.C.Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or isintended to transfer in the Region the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage inactivity that may dilute or tarnish the unique value of the Licensed Marks and Name.D.Controlled Affiliate shall use its best efforts to promote and build the value of the Licensed Marks and Name inconnection with the sale, marketing and administration of regional MAPPO products and related services.4.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation oflaw or otherwise, the rights granted hereunder and any such act shall be voidable at the sole option of any Controlling Plan or BCBSA. ThisAgreement and all rights and duties hereunder are personal to Controlled Affiliate.-4-Exhibit 10.125.INFRINGEMENTControlled Affiliate shall promptly notify the Controlling Plans and the Controlling Plans shall promptly notify BCBSA of anysuspected acts of infringement, unfair competition or passing off that may occur in relation to the Licensed Marks and Name. ControlledAffiliate shall not be entitled to require the Controlling Plans or BCBSA to take any actions or institute any proceedings to preventinfringement, unfair competition or passing off by third parties. Controlled Affiliate agrees to render to the Controlling Plans and BCBSA,without charge, all reasonable assistance in connection with any matter pertaining to the protection of the Licensed Marks and Name byBCBSA.6.LIABILITY INDEMNIFICATIONControlled Affiliate and the Controlling Plans hereby agree to save, defend, indemnify and hold BCBSA harmless from and againstall claims, damages, liabilities and costs of every kind, nature and description (except those arising solely as a result of BCBSA'snegligence) that may arise as a result of or related to Controlled Affiliate's rendering of services under the Licensed Marks and Name.7.LICENSE TERMA.Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1)year and shall be automatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.B.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that: (i) any one of the Controlling Plans ceases to be authorized to use the Licensed Marks and Name; or(ii) pursuant to Paragraph 15(a)(x) of the Blue Shield License Agreement any one of the Controlling Plans ceases to be authorized to usethe Licensed Names and Marks in the Region.C.Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may beforthwith terminated by the Controlling Plans or the affirmative vote of the majority of the Board of Directors of BCBSA present and votingat a special meeting expressly called by BCBSA for the purpose on ten (10) days written notice to the Controlling Plans advising of thespecific matters at issue and granting the Controlling Plans an opportunity to be heard and to present their response to the Board for: (1)failure to comply with any applicable minimum capital or liquidity requirement under the quality control standards of this-5-Exhibit 10.12Agreement; or (2) failure to comply with the "Organization and Governance" quality control standard of this Agreement; or (3) impendingfinancial insolvency; or (4) failure to comply with any of the applicable requirements of Standards 2, 3, 4, or 5 of attached Exhibit A; or (5)the pendency of any action instituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seekingappointment of a trustee, interim trustee, receiver or other custodian for any of its property or business or seeking the declaration orestablishment of a trust for any of its property or business, unless this Controlled Affiliate License Agreement has been earlier terminatedunder paragraph 7(E); or (6) such other reason as is determined in good faith immediately and irreparably to threaten the integrity andreputation of BCBSA, the Plans (including the Controlling Plans), any other licensee including Controlled Affiliate and/or the LicensedMarks and Name.D.Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled Affiliate fail to comply with theprovisions of this Agreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure withinsuch thirty day period and continue diligent efforts to complete the cure if such curing cannot reasonably be completed within such thirtyday period) BCBSA or the Controlling Plans shall have the right to issue a notice that the Controlled Affiliate is in a state of noncompliance.If a state of noncompliance as aforesaid is undisputed by the Controlled Affiliate or is found to exist by a mandatory dispute resolution paneland is uncured as provided above, BCBSA shall have the right to seek judicial enforcement of the Agreement or to issue a notice oftermination thereof. Notwithstanding any other provisions of this Agreement, any disputes as to the termination of this License pursuant toParagraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to mediation and mandatory dispute resolution. All other disputesbetween or among BCBSA, any of the Controlling Plans and/or Controlled Affiliate shall be submitted promptly to mediation and mandatorydispute resolution. The mandatory dispute resolution panel shall have authority to issue orders for specific performance and assessmonetary penalties. Except, however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marksand Name may not be finally terminated for any reason without the affirmative vote of a majority of the present and voting members of theBoard of Directors of BCBSA.E.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that:(1)Controlled Affiliate shall no longer comply with item 2(E) above;(2)Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to paragraph 9 hereof, which are theroyalties for this License Agreement, are more than sixty (60) days in arrears to BCBSA; or-6-Exhibit 10.12(3)Any of the following events occur: (i) a voluntary petition shall be filed by Controlled Affiliate seeking bankruptcy,reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governinginsolvency or debtor relief, or (ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy,reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governinginsolvency or debtor relief and such petition orproceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed within sixty (60) days of the date upon which thepetition or other document commencing the proceeding is served upon the Controlled Affiliate, or (iii) an order for relief is entered againstControlled Affiliate in any case under the bankruptcy laws of the United States, or Controlled Affiliate is adjudged bankrupt or insolvent asthose terms are defined in the Uniform Commercial Code as enacted in the State of Illinois by any court of competent jurisdiction, or (iv)Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v) any government or any government official,office, agency, branch, or unit assumes control of Controlled Affiliate or delinquency proceedings (voluntary or involuntary) are instituted, or(vi) an action is brought by Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee,interim trustee, receiver or other custodian for any of its property or business, or (vii) an action is instituted by any governmental entity orofficer against Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee,receiver or other custodian for any of its property or business and such action is consented to or acquiesced in by Controlled Affiliate or isnot dismissed within one hundred thirty (130) days of the date upon which the pleading or other document commencing the action is servedupon the Controlled Affiliate, provided that if the action is stayed or its prosecution is enjoined, the one hundred thirty (130) day period istolled for the duration of the stay or injunction, and provided further, that the Association’s Board of Directors may toll or extend the 130 dayperiod at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any of Controlled Affiliate'sproperty or business is appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any other provision of thisAgreement, a declaration or a request for declaration of the existence of a trust over any of the Controlled Affiliate’s property or businessshall not in itself be deemed to constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for purposes ofsubparagraphs 7(E)(3)(vii) and(ii)of this Agreement.F.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediatelydiscontinue all use of the Licensed Marks and Name, including any use in its trade name, except to the extent that it continues to beauthorized to use the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan.-7-Exhibit 10.12G.Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers to whom it providesproducts or services under the Licensed Marks pursuant to this Agreement that it is no longer a licensee of BCBSA and, if directed by theAssociation’s Board of Directors, shall provide instruction on how the customer can contact BCBSA or a designated licensee to obtainfurther information on securing coverage. The notification required by this paragraph shall be in writing and in a form approved by BCBSA.The BCBSA shallhave the right to audit the terminated entity's books and records to verify compliance with this paragraph.H.In the event this Agreement terminates pursuant to 7(B) hereof, upon termination of this Agreement the provisions ofParagraph 7(G) shall not apply and the following provisions shall apply, except that, in the event that Controlled Affiliate is separatelylicensed by BCBSA to use the Licensed Marks in the Service Area of a Controlling Plan and termination of this Agreement is due to apartial termination of such Controlling Plan’s license pursuant to Paragraph 15(a)(x)(ii) of the Blue Shield License Agreement, the notices,national account listing, payment, and audit right listed below shall be applicable solely with respect to the Region and the geographic areafor which the Controlling Plan’s license to use the Licensed Names and Marks is terminated:(1)The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to all individual andgroup customers, providers, brokers and agents of products or services sold, marketed, underwritten or administered by the ControlledAffiliate under the Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall, at a minimum,notify the recipient of the termination of the license, the consequences thereof, and instructions for obtaining alternate products or serviceslicensed by BCBSA. This notice shall be mailed within 15 days after termination.(2)The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a listing of national accounts inwhich the Controlled Affiliate is involved (in a control, participating or servicing capacity), identifying the national account and the ControlledAffiliate’s role therein.(3)Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or (b) of the Plan’s licenseagreement with BCBSA to use the Licensed Marks and Name, the Controlled Affiliate, the Controlling Plans, and any other LicensedControlled Affiliates of the Controlling Plans shall be jointly liable for payment to BCBSA of an amount equal to $25 multiplied by thenumber of Licensed Enrollees of the Controlled Affiliate; provided that if any Plan other than a Controlling Plan is permitted by BCBSA touse marks or names licensed by BCBSA in a geographic area in the Region, the payment for Licensed Enrollees in such geographic areashall be multiplied by a fraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the ControllingPlans, and-8-Exhibit 10.12any other Licensed Controlled Affiliates of the Controlling Plans in such geographic area and the denominator of which is the total numberof Licensed Enrollees in such geographic area. Licensed Enrollee means each and every person and covered dependent who is enrolledas an individual or member of a group receiving products or services sold, marketed or administered under marks or names licensed byBCBSA as determined at the earlier of (i) the end of the last fiscal year of the terminated entity which ended prior to termination or (ii) thefiscal year which ended before any transactions causing the termination began. Notwithstanding theforegoing, the amount payable pursuant to this subparagraph H. (3) shall be due only to the extent that, in BCBSA’s opinion, it does notcause the net worth of the Controlled Affiliate, the Controlling Plans or any other Licensed Controlled Affiliates of the Controlling Plans tofall below 100% of the Health Risk-Based Capital formula, or its equivalent under any successor formula, as set forth in the applicablefinancial responsibility standards established by BCBSA (provided such equivalent is approved for purposes of this subparagraph by theaffirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans); measured as of thedate of termination, and adjusted for the value of any transactions not made in the ordinary course of business. This payment shall not bedue in connection with transactions exclusively by or among Plans (including the Controlling Plans) or their affiliates, includingreorganizations, combinations or mergers, where the BCBSA Board of Directors determines that the license termination does not result in amaterial diminution in the number of Licensed Enrollees or the extent of their coverage. In the event that the Controlled Affiliate’s license isreinstated by BCBSA or is deemed to have remained in effect without interruption by a court of competent jurisdiction, BCBSA shallreimburse the Controlled Affiliate (and/or the Controlling Plans or their other Licensed Controlled Affiliates, as the case may be) forpayments made under this subparagraph 7.H.(3) only to the extent that such payments exceed the amounts due to BCBSA pursuant toparagraph 7.K. and any costs associated with reestablishing the terminated Controlling Plan’s Service Area or the Region, including anypayments made by BCBSA to a Plan or Plans (including the other Controlling Plans), or their Licensed Controlled Affiliates, for purposes ofreplacing the Controlled Affiliate.(4)BCBSA shall have the right to audit the books and records of the Controlled Affiliate, the Controlling Plans, and anyother Licensed Controlled Affiliates of the Controlling Plans to verify compliance with this paragraph 7.H.(5)As to a breach of 7.H.(1), (2), (3) or (4), the parties agree that the obligations are immediately enforceable in a court ofcompetent jurisdiction. As to a breach of 7.H.(1), (2) or (4) by the Controlled Affiliate, the parties agree there is no adequate remedy at lawand BCBSA is entitled to obtain specific performance.-9-Exhibit 10.12I.BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdiction from entryinto any transaction which would result in a termination of this Agreement unless a Controlling Plan’s license from BCBSA to use theLicensed Marks and Names has been terminated pursuant to 10(d) of such Controlling Plan’s license agreement upon the required 6month written notice.J.BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.K.In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed to have remained ineffect without interruption by a court of competent jurisdiction, the Controlled Affiliate, the Controlling Plans, and any otherLicensed Controlled Affiliates of the Controlling Plans shall be jointly liable for reimbursing BCBSA the reasonable costs incurred byBCBSA in connection with the termination and the reinstatement or court action, and any associated legal proceedings, including but notlimited to: outside legal fees, consulting fees, public relations fees, advertising costs, and costs incurred to develop, lease or establish aninterim provider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board ofDirectors in its sole discretion.8.DISPUTE RESOLUTIONThe parties agree that any disputes between or among them or between or among any of them and one or more Plans orControlled Affiliates of Plans that use in any manner the Blue Shield and Blue Shield Marks and Name are subject to theMediation and Mandatory Dispute Resolution process attached to and made a part of each Controlling Plan’s License from BCBSA to usethe Licensed Marks and Name as Exhibit 5 as amended from time-to-time, which documents are incorporated herein by reference asthough fully set forth herein.9.LICENSE FEEControlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit B.10.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employmentrelationship between the Controlling Plans and Controlled Affiliate or between either and BCBSA.11.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressedin duplicate to the last-10-Exhibit 10.12known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.12.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement mayonly be amended by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all thePlans as officially recorded by the BCBSA Corporate Secretary.13.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect theremaining obligations of the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition solong as the effect of such substitution is to provide the parties with the benefits of this Agreement.14.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of theterms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of saidterms, covenants or conditions.14A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue CrossLicense Agreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall votetogether. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holdsas a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all other votes of the Plans, thePlan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall bedeemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (rounded to the nearest whole number,with0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3)of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans,the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or morePlans fail to cast weighted votes in favor of the question.-11-Exhibit 10.1215.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.16.HEADINGSThe headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.-12-Exhibit 10.12IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of last signaturewritten below.Controlled Affiliate:By: Date: Controlling Plan:By: Date: Controlling Plan:By: Date: BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: Date: 13Exhibit 10.12EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS APPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTSNovember 2019 PREAMBLEThe standards for licensing Controlled Affiliates for Medicare Advantage PPO Products are established by BCBSA and are subject tochange from time-to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote.Each Controlling Plan is required to use a standard Controlled Affiliate license form provided by BCBSA and to cooperate fully in assuringthat the licensed Controlled Affiliate maintains compliance with the license standards.Standard 1 - Organization and GovernanceA Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the following requirements:(1)Controlled Affiliate is owned or controlled by two or more ControllingPlans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Shield License Agreement to use the Licensed Marksin a geographic area in the Region and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate with which the Controlling Plans do not concur;(c)exercise control over the policy and operations of the ControlledAffiliate; and-1-Exhibit 10.12EXHIBIT A (continued)Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must alsorequire written approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respectto business of the Controlled Affiliate conducted under the Licensed Marks within the Service Area of oneof the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSAsponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be requiredwith respect to business of the Controlled Affiliate conducted under the Licensed Marks within theService Area of one of the Controlling Plans pursuant to a separate controlled affiliate license agreementwith BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect theLicensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall own 100% of any for-profit ControlledAffiliate.Standard 2 - Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractualobligations to its customers.Standard 3 - State Licensure/CertificationA Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.-2-Exhibit 10.12EXHIBIT A (continued)Standard 4 - Certain DisclosuresA Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of:a.the structure of the Blue Cross and Blue Shield System; andb.the independent nature of every licensee.Standard 5 - Reports and Records for Controlled AffiliatesA Controlled Affiliate and/or its Controlling Plans shall furnish, on a timely and accurate basis, reports and records relating to theseStandards and the License Agreements between BCBSA and Controlled Affiliate.Standard 6 - Best EffortsDuring each year, a Controlled Affiliate shall use its best efforts to promote and build the value of the Blue Shield Marks.Standard 7 - Participation in Certain National ProgramsA Controlled Affiliate shall effectively and efficiently participate in certain national programs from time to time as may be adopted byMember Plans for the purposes of providing ease of claims processing for customers receiving benefits outside of the Controlled Affiliate’sservice area.National program requirements include:a.Inter-Plan Teleprocessing System (ITS); andb.Inter-Plan Medicare Advantage Program.Standard 8 - Participation in Master Business Associate AgreementControlled Affiliates shall comply with the terms of the Business Associate Agreement for Blue Cross and Blue Shield Licensees to theextent they perform the functions of a business associate or subcontractor to a business associate, as defined by the Business AssociateAgreement.Amended as of November 15, 2007-3-Exhibit 10.12EXHIBIT BROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENTSAPPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTSControlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula:An amount equal to its pro rata share of each Controlling Plan dues payable to BCBSA computed with the addition of the ControlledAffiliate's members using the Marks on regional MAPPO products and related services as reported on the Quarterly Enrollment Report withBCBSA. The payment by each Controlling Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy therequirement of this paragraph, and no separate payment will be necessary.Amended as of June 14, 2007-4-Exhibit 10.12Exhibit 1CBLUE SHIELDCONTROLLED AFFILIATE LICENSE AGREEMENTAPPLICABLE TO REGIONAL MEDICARE PART D PRESCRIPTION DRUG PLAN PRODUCTS(Adopted by Member Plans at their November 21, 2019 meeting)This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and (“Controlled Affiliate"), a ControlledAffiliate of the BlueCross Plan(s), known as Party signatory hereto.("Controlling Plans"), each of which is also aWHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service marks;WHEREAS, under the Medicare Modernization Act, companies may apply to and be awarded a contract by the Centers forMedicare and Medicaid Services (“CMS”) to offer Medicare Part D Prescription Drug Plan products in geographic regions designated byCMS (hereafter “regional PDP products”).WHEREAS, some of the CMS-designated regions include the Service Areas, or portions thereof, of more than one Plan.WHEREAS, the Controlling Plans and Controlled Affiliate desire that the latter be entitled to use the BLUE SHIELD and BLUESHIELD Design service marks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE SHIELD in atrade name ("Licensed Name") to offer regional PDP products in a region that includes the Service Areas, or portions thereof, of more thanone Controlling Plan;NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:1.GRANT OF LICENSESubject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the LicensedMarks and Name in connection with, and only in connection with the sale, marketing and administration of regional PDP products andrelated services.This grant of rights is non-exclusive and is limited to the following states: (the “Region”). Controlled Affiliate may use the Licensed-1-Exhibit 10.12Marks and Name in its legal name on the following conditions: (i) the legal name must be approved in advance, in writing, by BCBSA; (ii)Controlled Affiliate shall not do business outside the Region under any name or mark except business conducted in the Service Area of aControlling Plan provided that Controlled Affiliate is separately licensed by BCBSA to use the Licensed Marks and Name in connection withhealth care plans and related services in the Service Area of such Controlling Plan; and (iii) Controlled Affiliate shall not use the LicensedMarks and Name, or any derivative thereof, as part of any name or symbol used to identify itself in any securities market. ControlledAffiliate may use the Licensed Marks and Name in its Trade Name only with the prior, written, consent of BCBSA.2.QUALITY CONTROLA.Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and furtheragrees to be bound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time.B.Controlled Affiliate agrees to comply with all applicable federal, state and local laws.C.Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by the ControllingPlans or by BCBSA) a report or reports to the Controlling Plans and BCBSA demonstrating Controlled Affiliate's compliance with therequirements of this Agreement including but not limited to the quality control provisions of this paragraph and the attached Exhibit A.D.Controlled Affiliate agrees that the Controlling Plans and/or BCBSA may, from time-to-time, upon reasonable notice,review and inspect the manner and method of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.E.As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets thefollowing requirements:(1)Controlled Affiliate is owned or controlled by two or more ControllingPlans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Shield License Agreement to use the Licensed Marksin a geographic area in the Region and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and-2-Exhibit 10.12(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents ofthe Controlled Affiliate with which the Controlling Plans do not concur;(c)to exercise control over the policy and operations of the Controlled Affiliate; andNotwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must alsorequire written approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respectto business of the Controlled Affiliate conducted under the Licensed Marks within the Service Area of oneof the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSAsponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be requiredwith respect to business of the Controlled Affiliate conducted under the Licensed Marks within theService Area of one of the Controlling Plans pursuant to a separate controlled affiliate license agreementwith BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect theLicensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly owned subsidiaries shall own 100% of any for-profit ControlledAffiliate.-3-Exhibit 10.123.SERVICE MARK USEA.Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licenseeswhich are committed to strengthening the Licensed Marks and Name. The Controlled Affiliate further recognizes that its actions within theRegion may affect the value of the Licensed Marks and Name nationwide.B.Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but notlimited to use of such symbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules(generally applicable to Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued fromtime-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of the Licensed Marks and Name by Controlled Affiliate shallinure to the benefit of BCBSA.C.Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or isintended to transfer in the Region the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage inactivity that may dilute or tarnish the unique value of the Licensed Marks and Name.D.Controlled Affiliate shall use its best efforts to promote and build the value of the Licensed Marks and Name inconnection with the sale, marketing and administration of regional PDP products and related services.4.SUBLICENSING AND ASSIGNMENTControlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation oflaw or otherwise, the rights granted hereunder and any such act shall be voidable at the sole option of any Controlling Plan or BCBSA. ThisAgreement and all rights and duties hereunder are personal to Controlled Affiliate.5.INFRINGEMENTControlled Affiliate shall promptly notify the Controlling Plans and the Controlling Plans shall promptly notify BCBSA of anysuspected acts of infringement, unfair competition or passing off that may occur in relation to the Licensed Marks and Name. ControlledAffiliate shall not be entitled to require the Controlling Plans or BCBSA to take any actions or institute any proceedings to preventinfringement, unfair competition or passing off by third parties. Controlled Affiliate agrees to render to the Controlling Plans and BCBSA,without charge, all reasonable assistance in connection with any matter pertaining to the protection of the Licensed Marks and Name byBCBSA.-4-Exhibit 10.126.LIABILITY INDEMNIFICATIONControlled Affiliate and the Controlling Plans hereby agree to save, defend, indemnify and hold BCBSA harmless from and againstall claims, damages, liabilities and costs of every kind, nature and description (except those arising solely as a result of BCBSA'snegligence) that may arise as a result of or related to Controlled Affiliate's rendering of services under the Licensed Marks and Name.7.LICENSE TERMA.Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1)year and shall be automatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.B.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that: (i) any one of the Controlling Plans ceases to be authorized to use the Licensed Marks and Name; or(ii) pursuant to Paragraph 15(a)(x) of the Blue Shield License Agreement any one of the Controlling Plans ceases to be authorized to usethe Licensed Names and Marks in the Region.C.Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may beforthwith terminated by the Controlling Plans or the affirmative vote of the majority of the Board of Directors of BCBSA present and voting ata special meeting expressly called by BCBSA for the purpose on ten (10) days written notice to the Controlling Plans advising of thespecific matters at issue and granting the Controlling Plans an opportunity to be heard and to present their response to the Board for: (1)failure to comply with any applicable minimum capital or liquidity requirement under the quality control standards of this Agreement; or (2)failure to comply with the "Organization and Governance" quality control standard of this Agreement; or (3) impending financial insolvency;or (4) failure to comply with any of the applicable requirements of Standards 2, 3, 4, or 5 of attached Exhibit A; or (5) the pendency of anyaction instituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interimtrustee, receiver or other custodian for any of its property or business or seeking the declaration or establishment of a trust for any of itsproperty or business, unless this Controlled Affiliate License Agreement has been earlier terminated under paragraph 7(E); or (6) suchother reason as is determined in good faith immediately and irreparably to threaten the integrity and reputation of BCBSA, the Plans(including the Controlling Plans), any other licensee including Controlled Affiliate and/or the Licensed Marks and Name.D.Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled Affiliate fail to comply with theprovisions of this Agreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure withinsuch thirty day period and continue diligent efforts to-5-Exhibit 10.12complete the cure if such curing cannot reasonably be completed within such thirty day period) BCBSA or the Controlling Plans shall havethe right to issue a notice that the Controlled Affiliate is in a state of noncompliance. If a state of noncompliance as aforesaid is undisputedby the Controlled Affiliate or is found to exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSA shall havethe right to seek judicial enforcement of the Agreement or to issue a notice of termination thereof. Notwithstanding any other provisions ofthis Agreement, any disputes as to the termination of this License pursuant to Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not besubject to mediation and mandatory dispute resolution. All other disputes between or among BCBSA, any of the Controlling Plans and/orControlled Affiliate shall be submitted promptly to mediation and mandatory dispute resolution. The mandatory dispute resolution panelshall have authority to issue orders for specific performance and assess monetary penalties.Except, however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marks and Name may notbe finally terminated for any reason without the affirmative vote of a majority of the present and voting members of the Board of Directors ofBCBSA.E.This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action byany party or entity in the event that:(1)Controlled Affiliate shall no longer comply with item 2(E) above;(2)Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to paragraph 9 hereof, which are theroyalties for this License Agreement, are more than sixty (60) days in arrears to BCBSA; or(3)Any of the following events occur: (i) a voluntary petition shall be filed by Controlled Affiliate seeking bankruptcy,reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governinginsolvency or debtor relief, or (ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy,reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governinginsolvency or debtor relief and such petition or proceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed withinsixty (60) days of the date upon which the petition or other document commencing the proceeding is served upon the Controlled Affiliate,or (iii) an order for relief is entered against Controlled Affiliate in any case under the bankruptcy laws of the United States, or ControlledAffiliate is adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted in the State of Illinois byany court of competent jurisdiction, or (iv) Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v)any government or any government official, office, agency, branch, or unit assumes control of Controlled Affiliate or delinquencyproceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by Controlled Affiliate seeking its dissolution or liquidationof its assets or seeking the appointment of a trustee, interim-6-Exhibit 10.12trustee, receiver or other custodian for any of its property or business, or (vii) an action is instituted by any governmental entity or officeragainst Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee,receiver or other custodian for any of its property or business and such action is consented to or acquiesced in by Controlled Affiliate or isnot dismissed within one hundred thirty (130) days of the date upon which the pleading or other document commencing the action is servedupon the Controlled Affiliate, provided that if the action is stayed or its prosecution is enjoined, the one hundred thirty (130) day period istolled for the duration of the stay or injunction, and provided further, that the Association’s Board of Directors may toll or extend the 130 dayperiod at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any of Controlled Affiliate'sproperty or business is appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any other provision of thisAgreement, a declaration or a request for declaration of the existence of a trust over any of the Controlled Affiliate’s property or businessshall not in itself be deemed to constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for purposes ofsubparagraphs 7(E)(3)(vii) and(viii) of this Agreement.F.Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediatelydiscontinue all use of the Licensed Marks and Name, including any use in its trade name, except to the extent that it continues to beauthorized to use the Licensed Marks within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliatelicense agreement with BCBSA sponsored by such Controlling Plan.G.Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers to whom it providesproducts or services under the Licensed Marks pursuant to this Agreement that it is no longer a licensee of BCBSA and, if directed by theAssociation’s Board of Directors, shall provide instruction on how the customer can contact BCBSA or a designated licensee to obtainfurther information on securing coverage. The notification required by this paragraph shall be in writing and in a form approved by BCBSA.The BCBSA shall have the right to audit the terminated entity's books and records to verify compliance with this paragraph.H.In the event this Agreement terminates pursuant to 7(B) hereof, upon termination of this Agreement the provisions ofParagraph 7(G) shall not apply and the following provisions shall apply, except that, in the event that Controlled Affiliate is separatelylicensed by BCBSA to use the Licensed Marks in the Service Area of a Controlling Plan and termination of this Agreement is due to apartial termination of such Controlling Plan’s license pursuant to Paragraph 15(a)(x)(ii) of the Blue Shield License Agreement, the notices,national account listing, payment, and audit right listed below shall be applicable solely with respect to the Region and the geographic areafor which the Controlling Plan’s license to use the Licensed Names and Marks is terminated:-7-Exhibit 10.12(1)The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to all individual andgroup customers, providers, brokers and agents of products or services sold, marketed, underwritten or administered by the ControlledAffiliate under the Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall, at a minimum,notify the recipient of the termination of the license, the consequences thereof, and instructions for obtaining alternate products or serviceslicensed by BCBSA. This notice shall be mailed within 15 days after termination.(2)The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a listing of national accounts inwhich the Controlled Affiliate is involved (in a control, participating or servicing capacity), identifying the national account and the ControlledAffiliate’s role therein.(3)Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or (b) of the Plan’s licenseagreement with BCBSA to use the Licensed Marks and Name, the Controlled Affiliate, the Controlling Plans, and any other LicensedControlled Affiliates of the Controlling Plans shall be jointly liable for payment to BCBSA of an amount equal to $25 multiplied by thenumber of Licensed Enrollees of the Controlled Affiliate; provided that if any Plan other than a Controlling Plan is permitted by BCBSA touse marks or names licensed by BCBSA in a geographic area in the Region, the payment for Licensed Enrollees in such geographic areashall be multiplied by a fraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the ControllingPlans, and any other Licensed Controlled Affiliates of the Controlling Plans in such geographic area and the denominator of which is thetotal number of Licensed Enrollees in such geographic area. Licensed Enrollee means each and every person and covered dependent whois enrolled as an individual or member of a group receiving products or services sold, marketed or administered under marks or nameslicensed by BCBSA as determined at the earlier of (i) the end of the last fiscal year of the terminated entity which ended prior to terminationor (ii) the fiscal year which ended before any transactions causing the termination began. Notwithstanding the foregoing, the amountpayable pursuant to this subparagraph H. (3) shall be due only to the extent that, in BCBSA’s opinion, it does not cause the net worth of theControlled Affiliate, the Controlling Plans or any other Licensed Controlled Affiliates of the Controlling Plans to fall below 100% of theHealth Risk-Based Capital formula, or its equivalent under any successor formula, as set forth in the applicable financial responsibilitystandards established by BCBSA (provided such equivalent is approved for purposes of this subparagraph by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans); measured as of the date of termination, andadjusted for the value of any transactions not made in the ordinary course of business. This payment shall not be due in connection withtransactions exclusively by or among Plans (including the Controlling Plans) or their affiliates, including reorganizations, combinations ormergers, where the BCBSA Board of Directors determines that the license-8-Exhibit 10.12termination does not result in a material diminution in the number of Licensed Enrollees or the extent of their coverage. In the event thatthe Controlled Affiliate’s license is reinstated by BCBSA or is deemed to have remained in effect without interruption by a court ofcompetent jurisdiction, BCBSA shall reimburse the Controlled Affiliate (and/or the Controlling Plans or their other Licensed ControlledAffiliates, as the case may be) for payments made under this subparagraph 7.H.(3) only to the extent that such payments exceed theamounts due to BCBSA pursuant to paragraph 7.K. and any costs associated with reestablishing the terminated Controlling Plan’s ServiceArea or the Region, including any payments made by BCBSA to a Plan or Plans (including the other Controlling Plans), or their LicensedControlled Affiliates, for purposes of replacing the Controlled Affiliate.(4)BCBSA shall have the right to audit the books and records of the Controlled Affiliate, the Controlling Plans, and anyother Licensed Controlled Affiliates of the Controlling Plans to verify compliance with this paragraph 7.H.(5)As to a breach of 7.H.(1), (2), (3) or (4), the parties agree that the obligations are immediately enforceable in a court ofcompetent jurisdiction. As to a breach of 7.H.(1), (2) or (4) by the Controlled Affiliate, the parties agree there is no adequate remedy at lawand BCBSA is entitled to obtain specific performance.I.BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdiction from entryinto any transaction which would result in a termination of this Agreement unless a Controlling Plan’s license from BCBSA to use theLicensed Marks and Names has been terminated pursuant to 10(d) of such Controlling Plan’s license agreement upon the required 6month written notice.J.BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.K.In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed to have remained ineffect without interruption by a court of competent jurisdiction, the Controlled Affiliate, the Controlling Plans, and any other LicensedControlled Affiliates of the Controlling Plans shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by BCBSA inconnection with the termination and the reinstatement or court action, and any associated legal proceedings, including but not limited to:outside legal fees, consulting fees, public relations fees, advertising costs, and costs incurred to develop, lease or establish an interimprovider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board of Directorsin its sole discretion.-9-Exhibit 10.128.DISPUTE RESOLUTIONThe parties agree that any disputes between or among them or between or among any of them and one or more Plans orControlled Affiliates of Plans that use in any manner the Blue Shield and Blue Shield Marks and Name are subject to the Mediation andMandatory Dispute Resolution process attached to and made a part of each Controlling Plan’s License from BCBSA to use the LicensedMarks and Name as Exhibit 5 as amended from time-to-time, which documents are incorporated herein by reference as though fully setforth herein.9.LICENSE FEEControlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit B.10.JOINT VENTURENothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employment relationshipbetween the Controlling Plans and Controlled Affiliate or between either and BCBSA.11.NOTICES AND CORRESPONDENCENotices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressedin duplicate to the last known address of each other party, marked respectively to the attention of its President and, if any, its GeneralCounsel.12.COMPLETE AGREEMENTThis Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement mayonly be amended by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all thePlans as officially recorded by the BCBSA Corporate Secretary.-10-Exhibit 10.1213.SEVERABILITYIf any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect theremaining obligations of the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition solong as the effect of such substitution is to provide the parties with the benefits of this Agreement.14.NONWAIVERNo waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of theterms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of saidterms, covenants or conditions.14A. VOTINGFor all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities licensed under the Blue CrossLicense Agreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall votetogether. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (if any) that itholds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all other votes of the Plans,the Plan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall bedeemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the Plans (rounded to the nearest whole number,with0.5 or multiples thereof being rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3)of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine (39) Plans,the requirement of an affirmative three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or morePlans fail to cast weighted votes in favor of the question.15.GOVERNING LAWThis Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.16.HEADINGSThe headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.-11-Exhibit 10.12IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of last signaturewritten below.Controlled Affiliate:By: Date: Controlling Plan:By: Date: Controlling Plan:By: Date:BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy: Date: -12-Exhibit 10.12EXHIBIT ACONTROLLED AFFILIATE LICENSE STANDARDS APPLICABLE TO REGIONAL MEDICAREPART D PRESCRIPTION DRUG PLAN PRODUCTSNovember 2019 PREAMBLEThe standards for licensing Controlled Affiliates for Medicare Part D Prescription Drug Plan Products are established by BCBSA and aresubject to change from time- to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the totalweighted vote. Each Controlling Plan is required to use a standard Controlled Affiliate license form provided by BCBSA and to cooperatefully in assuring that the licensed Controlled Affiliate maintains compliance with the license standards.Standard 1 - Organization and GovernanceA Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the following requirements:(1)Controlled Affiliate is owned or controlled by two or more ControllingPlans;(2)Each Controlling Plan is authorized pursuant to a separate Blue Shield License Agreement to use the Licensed Marksin a geographic area in the Region and every geographic area in the Region is so licensed to at least one of the Controlling Plans; and(3)The Controlling Plans must have the legal authority directly or indirectly through wholly-owned subsidiaries:(a)to select members of the Controlled Affiliate’s governing body having not less than 100% voting control thereof;(b)prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of theControlled Affiliate with which the Controlling Plans do not concur;(c)exercise control over the policy and operations of the ControlledAffiliate; and-13-Exhibit 10.12EXHIBIT A (continued)Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s establishing or governing documents must alsorequire written approval by each of the Controlling Plans before the Controlled Affiliate can:(i)change its legal and/or trade names;(ii)change the geographic area in which it operates (except such approval shall not be required with respectto business of the Controlled Affiliate conducted under the Licensed Marks within the Service Area of oneof the Controlling Plans pursuant to a separate controlled affiliate license agreement with BCBSAsponsored by such Controlling Plan);(iii)change any of the type(s) of businesses in which it engages (except such approval shall not be requiredwith respect to business of the Controlled Affiliate conducted under the Licensed Marks within theService Area of one of the Controlling Plans pursuant to a separate controlled affiliate license agreementwith BCBSA sponsored by such Controlling Plan);(iv)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect theLicensed Marks and Name.In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall own 100% of any for-profit ControlledAffiliate.Standard 2 - Financial ResponsibilityA Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractualobligations to its customers.Standard 3 - State Licensure/CertificationA Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.-14-Exhibit 10.12EXHIBIT A (continued)Standard 4 - Certain DisclosuresA Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of:a.the structure of the Blue Cross and Blue Shield System; andb.the independent nature of every licensee.Standard 5 - Reports and Records for Controlled AffiliatesA Controlled Affiliate and/or its Controlling Plans shall furnish, on a timely and accurate basis, reports and records relating to theseStandards and the License Agreements between BCBSA and Controlled Affiliate.Standard 6 - Best EffortsDuring each year, a Controlled Affiliate shall use its best efforts to promote and build the value of the Blue Shield Marks.Standard 7 - Participation in Master Business Associate AgreementControlled Affiliates shall comply with the terms of the Business Associate Agreement for Blue Cross and Blue Shield Licensees to theextent they perform the functions of a business associate or subcontractor to a business associate, as defined by the Business AssociateAgreement.-15-Exhibit 10.12EXHIBIT BROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENTSAPPLICABLE TO REGIONAL MEDICARE PART D PRESCRIPTION DRUG PLAN PRODUCTSControlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula:An amount equal to its pro rata share of each Controlling Plan dues payable to BCBSA computed with the addition of the ControlledAffiliate's members using the Marks on regional PDP products and related services as reported on the Quarterly Enrollment Report withBCBSA. The payment by each Controlling Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy therequirement of this paragraph, and no separate payment will be necessary.Amended as of June 14, 2007-16-Exhibit 10.12EXHIBIT 2Membership StandardsPage 1 of 5PreambleThe Membership Standards apply to all organizations seeking to become or to continue as Regular Members of the Blue Cross and BlueShield Association. Any organization seeking to become a Regular Member must be found to be in substantial compliance with allMembership Standards at the time membership is granted and the organization must be found to be in substantial compliance with allMembership Standards for a period of two (2) years preceding the date of its application. If Membership is sought by an entity whichcontrols or is controlled by one or more Plans, such compliance shall be determined on the basis of compliance by such Plan or Plans.The Regular Member Plans shall have authority to interpret these Standards.A Regular Member Plan that operates as a “Shell Holding Company” is defined as an entity that assumes no underwriting risk and has lessthan 1% of the consolidated enterprise assets (excludes investments in subsidiaries) and less than 5% of the consolidated enterprise netgeneral and administrative expenses.A Regular Member Plan that operates as a “Hybrid Holding Company” is defined as an entity that assumes no underwriting risk and haseither more than 1% of the consolidated enterprise assets (excludes investments in subsidiaries) or more than 5% of the consolidatedenterprise net general and administrative expenses.Standard 1:A Plan shall maintain a governing Board, which shall control the Plan and ensure that the Plan follows appropriatepractices of corporate governance. A Plan's Board shall not be controlled by any special interest group, shall makean annual determination that a majority of its directors are independent, and shall act in the best interest of itsCorporation and its customers. The Board shall be composed of a majority of persons other than providers of healthcare services, who shall be known as public members. A public member shall not be an employee of or have afinancial interest in a health care provider, nor be a member of a profession which provides health care services.Amended as of March 15, 2007Exhibit 10.12EXHIBIT 2Membership StandardsPage 2 of 5Standard 2:A Plan shall furnish to the Association on a timely and accurate basis reports and records relating to compliancewith these Standards and the License Agreements between the Association and the Plans. Such reports andrecords are the following:A.BCBSA Membership Information Request;B.Triennial trade name and service mark usage material, including disclosure material under Standard 7;C.Changes in the governance of the Plan, including changes in a Plan's Charter, Articles of Incorporation, orBylaws, changes in a Plan's Board composition, or changes in the identity of the Plan's Principal Officers;D.Quarterly Financial Report, Semi-annual “Health Risk- Based Capital (HRBC) Report” as defined by the NAIC,Annual Budget, Annual Certified Audit Report, Insurance Department Examination Report, Annual Statementfiled with State Insurance Department (with all attachments), Plan, Subsidiary and Affiliate Report; and•Plans that are a Shell Holding Company as defined in the Preamble hereto are required to furnish only acalendar year-end “Health Risk-Based Capital (HRBC) Report” as defined by the NAIC.Amended as of November 17, 2011Exhibit 10.12EXHIBIT 2Membership StandardsPage 3 of 5E.Quarterly Enrollment Report, Quarterly Member Touchpoint Measures Index (MTM) through 12/31/2011, andSemi- annual MTM Index starting 1/1/2012 and thereafter.•For purposes of MTM reporting only, a Plan shall file a separate MTM report for each Geographic Market.Standard 3:A Plan shall be operated in a manner that provides reasonable financial assurance that it can fulfill itscontractual obligations to its customers.Standard 4:A Plan shall be operated in a manner responsive to customer needs and requirements.Standard 5:A Plan shall effectively and efficiently participate in each national program as from time to time may be adoptedby the Member Plans for the purposes of providing portability of membership between the Plans and ease ofclaims processing for customers receiving benefits outside of the Plan's Service Area.Such programs are applicable to Blue Cross and Blue Shield Plans, and include:A.Inter-Plan Teleprocessing System (ITS);B.BlueCard Program;C.National Account Programs;D.Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April 14, 2003; andE.Inter-Plan Medicare Advantage Program.Amended as of November 21, 2014Exhibit 10.12EXHIBIT 2Membership StandardsPage 4 of 5Standard 6:In addition to requirements under the national programs listed in Standard 5: Participation in National Programs,a Plan shall take such action as required to ensure its financial performance in programs and contracts of aninter-Plan nature or where the Association is a party.Standard 7:A Plan shall make adequate disclosure in contracting with third parties and in disseminating public statements of(i) the structure of the Blue Cross and Blue Shield System, (ii) the independent nature of every Plan, and (iii) thePlan's financial condition.Standard 8:A Plan shall cooperate with the Association's Board of Directors and its Brand Enhancement & ProtectionCommittee in the administration of the Plan Performance Response Process and in addressing Planperformance problems identified thereunder.Standard 9:A Plan shall obtain a rating of its financial strength from an independent rating agency approved by theAssociation's Board of Directors for such purpose.Standard 10:Notwithstanding any other provision in this License Agreement, during each year, a Plan and its ControlledAffiliate(s) engaged in providing licensable services (excluding Life Insurance and Charitable FoundationServices) shall use their best efforts to promote and build the value of the Blue Shield Marks.Standard 11:Neither a Plan nor any Larger Controlled Affiliate shall cause or permit an entity other than a Plan or a LicensedControlled Affiliate thereof to obtain control of the Plan or Larger Controlled Affiliate or to acquire a substantialportion of its assets related to licensable services.Amended as of June 16, 2005Exhibit 10.12EXHIBIT 2Membership StandardsPage 5 of 5Standard 12:No provider network, or portion thereof, shall be rented or otherwise made available to a National Competitor ifthe Licensed Marks or Names are used in any way with such network.A provider network may be rented or otherwise made available, provided there is no use of the Licensed Marksor Names with respect to the network being rented.Standard 13:Each Plan shall operate in a manner to reasonably: 1) protect the security and confidentiality of PersonallyIdentifiable Information (PII) and Protected Health Information (PHI); 2) protect the Brands from reputationaldamage; and 3) cooperate with BCBSA and other Plans if a data security incident or data breach occurs.Amended as of June 18, 2015Exhibit 10.12EXHIBIT 3GUIDELINES WITH RESPECT TO USE OFLICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL ACCOUNTSPage 1 of 31.The strength of the Blue Cross/Blue Shield National Accounts mechanism, and the continued provision of cost effective, qualityhealth care benefits to National Accounts, are predicated on locally managed provider networks coordinated on a national scale in amanner consistent with effective service to National Account customers and consistent with the preservation of the integrity of the BlueCross/Blue Shield system and the Licensed Marks. These guidelines shall be interpreted in keeping with such ends.2.A National Account is an entity with employee and/or retiree locations in more than one Plan's Service Area. Unless otherwiseagreed, a National Account is deemed located in the Service Area in which the corporate headquarters of the National Account is located.A local plant, office or division headquarters of an entity may be deemed a separate National Account when that local plant, office ordivision headquarters 1) has employee locations in more than one Service Area, and 2) has independent health benefit decision-makingauthority for the employees working at such local plant, office or division headquarters and for employees working at other locations outsidethe Service Area. In such a case, the local plant, office or division headquarters is a National Account that is deemed located in the ServiceArea in which such local plant, office or division headquarters is located. The Control Plan of a National Account is the Plan in whoseService Area the National Account is located. A participating ("Par") Plan is a Plan in whose Service Area the National Account hasemployee and/or retiree locations, but in which the National Account is not located. In the event that a National Account parent companyconsolidates health benefit-decision making for itself and its wholly-owned subsidiary companies, the parent company and the subsidiarycompanies shall be considered one National Account. The Control Plan for such a National Account shall be the Plan in whose ServiceArea the parent company headquarters is located.3.The National Account Guidelines enunciated herein below shall be applicable only with respect to the business of new NationalAccounts acquired after January 1, 1991.4.Control Plans shall utilize National Account identification cards complying with then currently effective BCBSA graphic standardsin connection with all National Accounts business to facilitate administration thereof, to minimize subscriber and provider confusion, and toreflect a commitment to cooperation among Plans.Amended as of June 12, 2003Exhibit 10.12Exhibit 3Page 2 of 35.Disputes among Plans and/or BCBSA as to the interpretation or implementation of these Guidelines or as to other NationalAccounts issues shall be submitted to mediation and mandatory dispute resolution as provided in the License Agreement. For two yearsfrom the effective date of the License Agreement, however, such disputes shall be subject to mediation only, with the results of suchmediation to be collected and reported in order to establish more definitive operating parameters for National Accounts business and toserve as ground rules for future binding dispute resolution.6.The Control Plan may use the BlueCard Program (as defined by IPPC) to deliver benefits to employees and non-Medicare eligibleretirees in a Participating Plan’s service area if an alternative arrangement with the Participating Plan cannot be negotiated. TheParticipating Plan’s minimum servicing requirement for those employees and non-Medicare retirees in its service area is to deliver benefitsusing the BlueCard Program. Account delivery is subject to the policies, provisions and procedures of the BlueCard Program.7.For provider payments in a Participating Plan’s area (on non-BlueCard claims), payment to the provider may be made by theParticipating Plan or the Control Plan at the Participating Plan's option. If the Participating Plan elects to pay the provider, it may notwithhold payment of a claim verified by the Control Plan or its designated processor, and payment must be in conformity with servicecriteria established by the Board of Directors of BCBSA (or an authorized committee thereof) to assure prompt payment, good service andminimum confusion with providers and subscribers. The Control Plan, at the Participating Plan's request, will also assure that measures aretaken to protect the confidentiality of the data pertaining to provider reimbursement levels and profiles.Amended as of June 14, 1996Exhibit 10.12Exhibit 3Page 3 of 38.The Control Plan, in its financial agreements with a National Account, is expected to reasonably reflect the aggregate amount ofdifferentials passed along to the Control Plan by all Participating Plans in a National Account.9.Other than in contracting with health care providers or soliciting such contracts in areas contiguous to a Plan's Service Area inorder to serve its subscribers or those of its licensed Controlled Affiliate residing or working in its Service Area, a Control Plan may not usethe Licensed Marks and/or Name, as a tag line or otherwise, to negotiate directly with providers outside its Service Area.Amended as of March 13, 2003Exhibit 10.12EXHIBIT 4GOVERNMENT PROGRAMS AND CERTAIN OTHER USESPage 1 of 141.A Plan and its licensed Controlled Affiliate may use the Licensed Marks and Name in bidding on and executing a contract toserve a Government Program, and in thereafter communicating with the Government concerning the Program. With respect, however, tosuch contracts entered into after the 1st day of January, 1991, the Licensed Marks and Name will not be used in communications ortransactions with beneficiaries or providers in the Government Program located outside a Plan's Service Area, unless the Plan candemonstrate to the satisfaction of BCBSA's governing body that such a restriction on use of the Licensed Marks and Name will jeopardizeits ability to procure the contract for the Government Program. As to both existing and future contracts for Government Programs, Planswill discontinue use of the Licensed Marks and Name as to beneficiaries and Providers outside their Service Area as expeditiously ascircumstances reasonably permit. Effective January 1, 1995, except as provided in the first sentence above, all use by a Plan of theLicensed Marks and Name in Government Programs outside of the Plan's Service Area shall be discontinued. Incidental communicationsoutside a Plan's Service Area with resident or former resident beneficiaries of the Plan, and other categories of necessary incidentalcommunications approved by BCBSA, are not prohibited. For purposes of this Paragraph 1, the term “Government Programs” shall meanMedicare Part A, Medicare Part B and other non-risk government programs.2.In connection with activity otherwise in furtherance of the License Agreement, a Plan and its Controlled Affiliates that are licensedto use the Licensed Marks and Name in its Service Area pursuant to the Controlled Affiliate License Agreements authorized inclauses a) through c) of Paragraph 2 of the Plan’s License Agreement with BCBSA may use the Licensed Marks and Nameoutside the Plan’s Service Area in the following circumstances which are deemed legitimate and necessary and not likely to causeconsumer confusion:2.1.Common Business Communicationsa.sending letterhead, envelopes, and similar items solely for administrative purposes (e.g., not for purposes of marketing,advertising, promoting, selling or soliciting the sale of health care plans and related services);b.distributing business cards other than in marketing and selling;c.advertising in publications or electronic media solely to persons for employment;Amended as of June 19, 2014Exhibit 10.12EXHIBIT 4Page 2 of 142.2.Marketing Spillovera.advertising in print, electronic or other media which serve, as a substantial market, the Service Area of the Plan orlicensed Controlled Affiliate, provided that no Plan or Controlled Affiliate may advertise outside its Service Area on thenational broadcast and cable networks and that advertisements in national print media are limited to the smallest regionaledition encompassing the Service Area;b.advertising by direct mail where the addressee's zip code plus 4 includes, at least in part, the Plan's Service Area or thatof a licensed Controlled Affiliate;2.3.Provider Contractinga.contracting with health care providers or soliciting such contracts in areas contiguous to the Plan's Service Area in order toserve its subscribers or those of such licensed Controlled Affiliates residing or working in its service area;b.issuing a small sign containing the legal name or trade name of the Plan or such licensed Controlled Affiliates for displayby a provider to identify the latter as a participating provider of the Plan or Controlled Affiliate;c.negotiating case-specific reimbursement rates with a provider that does not have a contract applicable to a specificmember’s services rendered or to be rendered with the Licensee (or any of the Licensees in the case of overlappingService Areas) in whose Service Area the health care provider is located, so long as(1)the Licensee engaging in the negotiations complies with all applicable Inter-Plan Programs Policies and Provisions andBrand Regulations related to case-specific rate negotiations, and(2)the Licensee (or all Licensees in the case of overlapping Service Areas) in whose Service Area the health care provider islocated provides consent before negotiations commence.Amended as of January 22, 2019Exhibit 10.12EXHIBIT 4Page 3 of 14d.contracting with a pharmacy management organization (“Pharmacy Intermediary”) to gain access to a national or regionalpharmacy network to provide self-administered prescription drugs to deliver a pharmacy benefit for all of the Plan’s orlicensed Controlled Affiliate’s members nationwide, provided, however, that the Pharmacy Intermediary may not use theLicensed Marks or Name in contracting with the pharmacy providers in such network;Amended as of January 22, 2019Exhibit 10.12EXHIBIT 4Page 4 of 14e.contracting with the corporate owner of a national or regional retail pharmacy chain to gain access to the pharmacies inthe chain to provide self-administered prescription drugs to deliver a pharmacy benefit for all of the Plan’s or licensedControlled Affiliate’s members nationwide, provided that (1) the Plan and the Controlled Affiliate may not contract directlywith pharmacists or pharmacy stores outside the Plan’s Service Area, and (2) neither the Plan’s or the ControlledAffiliate’s name nor the Licensed Marks or Name may be posted or otherwise displayed at or by any pharmacy storeoutside the Plan’s Service Area;f.contracting with a dental management organization (“Dental Intermediary”) to gain access to a national or regional dentalnetwork to deliver a routine dental benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide,provided, however, that the Dental Intermediary may not use the Licensed Marks or Name in contracting with the dentalproviders in such network;g.contracting with a vision management organization (“Vision Intermediary”) to gain access to a national or regional visionnetwork to deliver a routine vision benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide,provided, however, that the Vision Intermediary may not use the Licensed Marks or Name in contracting with the visionproviders in such network;h.contracting with an independent clinical laboratory for analysis and clinical assessment of specimens that are collectedwithin the Plan’s Service Area;i.contracting with a durable medical equipment or home medical equipment company for durable medical equipment andsupplies and home medical equipment and supplies that are shipped to a location within the Plan’s Service Area;j.contracting with a specialty pharmaceutical company for non-routine biological therapeutics that are ordered by a healthcare professional located within the Plan’s Service Area;Exhibit 10.12EXHIBIT 4Page 5 of 14k.contracting with a company that operates provider sites in the Plan’s Service Area, provided that the contract is solely forservices rendered at a site (e.g., hospital, mobile van) that is within the Plan’s Service Area;l.contracting with a company that makes health care professionals available in the Plan’s Service Area (e.g., travelinghome health nurse), provided that the contract is solely for services rendered by health care professionals who are locatedwithin the Plan’s Service Area.2.4.Services to National Accountsa.in conjunction with contracting with a National Account as Control Licensee or Alternate Control Licensee (as those termsare defined in the Inter-Plan Programs Policies and Provisions (“IP Policies”)) to offer Blue-branded Health Coverage tothe National Account, offering Blue- branded Health and Wellness Programs to all members of the National Account,including members who have not enrolled in the Blue- branded Health Coverage (“non-Blue Health Coverage members”),provided that:(i)the Plan and/or Licensed Controlled Affiliate has no contact or interaction with providers outside of the Plan’sService Area, except as specifically provided in the IP Policies and in 2.4(b); and(ii)if in accordance with IP Policies another Licensee is soliciting or servicing under the Brands a local plant, office ordivision of the account that is outside of the Plan’s Service Area, the Plan and/or licensed Controlled Affiliate maynot offer Blue-branded Health and Wellness Programs to any employees working at such local plant, office ordivision without the consent of such other Licensee; and(iii)if the Plan and/or licensed Controlled Affiliate provides an information card to the non-Blue Health Coveragemembers, the card may not display the Symbols in the masthead, must contain a prominent disclosure conveyingthat it is not a health insurance card, and otherwise must be designed so that it is dissimilar to a Blue memberidentification card.Amended as of March 26, 2015Exhibit 10.12EXHIBIT 4Page 6 of 142.4.Services to National Accounts (continued)For purposes of this subparagraph a, the following definitions apply:“Health and Wellness Program” shall mean a program that includes at least one of the following elements or a relatedelement:•Health Risk Assessment and/or Preventive Screenings•Exercise and Fitness Programs•Health and Wellness Events (e.g., attendance at a health fair, a 5K walk)•Nutrition and Weight Management•Health Education (e.g., smoking cessation classes)•Prenatal and Parenting Education•Disease or Chronic Condition ManagementThe above listing is intended to represent examples of the types of programs that may be offered, and other programs,including those offered through different media such as the internet or telephonically, may also be deemed Health andWellness programs.“Health Coverage” shall mean providing or administering medical, surgical, hospital, major medical, or catastrophiccoverage, or any HMO, PPO, POS or other managed care plan for the foregoing services.b.as part of a Health and Wellness Program that is otherwise compliant with Brand Regulation 4.11.4(a), contracting with ahealth and wellness organization to gain access to providers to deliver a discrete health and wellness event (“Event”) heldat a National Account’s worksite outside of the Licensee’s Service Area, provided that:(i)the services delivered at the Event are limited to fingerstick screenings for cholesterol and glucose, seasonal fluimmunizations, blood pressure measurements, body mass index measurements, and other routine screenings,immunizations and measurements; and(ii)neither such services nor their costs are applied as claims against any benefit plan; and(iii)the Event is presented during one or more limited periods during a benefit year and is available to allemployees at the worksite.Amended as of March 26, 2015Exhibit 10.12EXHIBIT 4Page 7 of 14c.in conjunction with contracting with a National Account as Control Licensee or Alternate Control Licensee to offer Blue-branded Health Coverage to the National Account, performing the Eligibility and Enrollment functions of HR administrationfor all benefit plans offered by the National Account to its members, including benefit plans that are not underwritten oradministered by the Plan, provided that:(i)in performing such functions, the Plan and/or licensed Controlled Affiliate does not use the Brands in anycommunications with health care providers outside of the Plan’s Service Area, and otherwise limits its use of theBrands outside of the Service Area to communications with the account’s members, the other benefit planproviders with which the account has contracted and other reasonably necessary communications to performsuch functions; and(ii)if in accordance with IP Policies another Licensee is soliciting or servicing under the Brands a local plant, office ordivision of the account that is outside of the Plan’s Service Area, the Plan and/or licensed Controlled Affiliate maynot perform Eligibility and Enrollment functions for employees working at such local plant, office or division withoutthe consent of such other Licensee;d.in conjunction with contracting with a National Account as Control Licensee or Alternate Control Licensee to perform orinvestigate fraud, waste and abuse investigation activities for a non-participating provider in a Par/Host Plan’s servicearea, as long as the Control/Home Plan is given permission to do so by the Par/Host Plan and specific conditions are metin accordance with Inter-Plan Programs and Inter-Plan Medicare Advantage Program policies.For purposes of this subparagraph b, the following definitions apply: “Health Coverage” has the meaning set forth in subparagraph 2.4.a.Amended as of September 27, 2018Exhibit 10.12EXHIBIT 4Page 8 of 14“Eligibility” means services that manage the account’s eligibility data and determine or process determinations relating toeligibility for benefit plans offered by the account to its employees, including such services as:•monitoring and auditing data to ensure that only entitled individuals are enrolled in each such benefit plan;•review of eligibility documentation (e.g. marriage licenses, birth certificates, student status verificationletters, employment records);•identification of key member segments such as over-age dependents, part-time employees, employeesreaching certain milestones (e.g. Medicare-eligible, retirees);•termination of coverage for those individuals found to be ineligible for coverage under a benefit plan, and,if applicable, generation of a COBRA event; and•management of “hour-banking” for union environments in which union members can bank hours to remaineligible for benefits.“Enrollment” means services that enroll eligible individuals and their spouses/dependents or terminate or change theirenrollment in the account’s benefit plans on an ongoing basis and during open enrollment periods, including such servicesas:•the coordination of each step in open enrollment process from project planning and system set-up to thegeneration of confirmation statements;•ongoing enrollment support for new hires and changes due to life events and work status adjustments;•evidence of insurability (EOI) administration for life and disability coverage;•transmission of eligibility/enrollment information to the account’s benefit plan providers;•review and reconciliation of error reports received from the account’s benefit plan providers; and•transmission of information to the account’s payroll system (e.g., benefit deductions, employeedemographic data).Amended as of March 26, 2015Exhibit 10.12EXHIBIT 4Page 9 of 142.5.Knowledge Sharinga.submitting scholarly articles authored or co-authored by the Plan or Controlled Affiliate or its respective employees forpublication in peer- reviewed journals;b.permitting an internal representative of the Licensee (e.g., officer, employee) to speak or present at a conference orsymposium outside of the Licensee’s Service Area regarding either (i) healthcare financing, administration, delivery orpolicy, or (ii) topics within the representative’s functional discipline or expertise at the Licensee, for which the eventsponsor will issue communications to promote, administer, and/or recap the event that will identify the Licensee’srepresentative as a participant. The communications outside of the Licensee’s Service Area that mention the Licensee’srepresentative shall be limited to materials and digital media provided to attendees, on-site signage, advertising in relevanttrade publications, direct mail and email to attendees and prospective attendees, and the sponsor’s website, Participationin any conference or symposium outside of the Licensee’s Service Area may not be for the purpose of marketing or sellingproducts or services.If the Licensee’s representative wishes to use the Brands in any manner, including use in his/her title, when participatingas a speaker or presenter outside of the Licensee’s Service Area about a topic that is not related to healthcare financing,administration, delivery, or policy, or to topics within the representative’s functional discipline or expertise at the Licensee,the Licensee must notify BCBSA and receive prior approval from BCBSA before participating.Amended as of March 26, 2015Exhibit 10.12EXHIBIT 4Page 10 of 142.6.Other Usesa.entering into a license agreement between and among BCBSA, the Plan and a debit card issuer located outside thePlan’s Service Area, and entering into a corresponding operating agreement or agreements, in order to offer a debit cardbearing the Licensed Marks and Name to eligible persons as defined by the aforementioned license agreement;b.appearing in communications issued by an independent third party to recognize outstanding performance of the Plan orControlled Affiliate or a member of the Plan’s or Controlled Affiliate’s senior management as part of an establishedprogram of the third party for which the Plan has provided information to be considered for the recognition, provided thatsuch use complies with regulations of general application specifically prescribed by BCBSA from time to time;c.to identify itself as being a joint sponsor of an event, program or activity along with other Plans or such Plans’ licensedControlled Affiliates, provided that such use complies with regulations of general application specifically prescribed byBCBSA from time to time;d.hosting meetings or events (collectively, “events”) in Washington, D.C. or a Plan’s State Capitol related to policy andbusiness issues in the Licensee’s Service Area, or hosting events in conjunction with the assemblies or conventions ofnational political parties. Such events may not involve marketing or selling products or services. Use of the Brands outsidethe Licensee’s Service Area in connection with such events shall be limited to materials and digital media provided toattendees and prospective attendees and onsite signage. For any such events in Washington, D.C. that are open toattendees other than government officials or their staffs, or are briefings open to all Congressional staff, or are otherwiselikely to receive media coverage, the Licensee is required to provide advance notice to BCBSA. For events hosted outsideof Washington, D.C. in conjunction with the assemblies or conventions of national political parties, the Licensee isrequired to provide advance notice to BCGSA and to the local Plan(s);Amended as of March 26, 2015Exhibit 10.12EXHIBIT 4Page 11 of 14e.permitting an affiliate that is not licensed to use the Licensed Marks to identify its corporate relationship with the Plan,provided that such use complies with regulations of general application specifically prescribed by BCBSA from time totime.3.In connection with activity otherwise in furtherance of the License Agreement, a Controlled Affiliate that is licensed to use theLicensed Marks and Name pursuant to a Controlled Affiliate License Agreement authorized in clauses d) or e) of Paragraph 2 of the Plan’sLicense Agreement with BCBSA may use the Licensed Marks and Name outside the Region (as that term is defined in such respectiveControlled Affiliate License Agreements) in the following circumstances which are deemed legitimate and necessary and not likely to causeconsumer confusion:a.sending letterhead, envelopes, and similar items solely for administrative purposes (e.g., not for purposes of marketing,advertising, promoting, selling or soliciting the sale of health care plans and related services);b.distributing business cards other than in marketing and selling;c.contracting with health care providers or soliciting such contracts in areas contiguous to the Region in order to serve itssubscribers residing in the Region, provided that the Controlled Affiliate may not use the names of any of its ControllingPlans in connection with such contracting unless the provider is located in a geographic area that is also contiguous tosuch Controlling Plan’s Service Area;d.issuing a small sign containing the legal name or trade name of the Controlled Affiliate for display by a provider to identifythe latter as a participating provider of the Controlled Affiliate, provided that the Controlled Affiliate may not use the namesof any of its Controlling Plans on such signs unless the provider is located in a geographic area that is also contiguous tosuch Controlling Plan’s Service Area;e.advertising in publications or electronic media solely to persons for employment;Amended as of March 26, 2015Exhibit 10.12EXHIBIT 4Page 12 of 14f.advertising in print, electronic or other media which serve, as a substantial market, the Region, provided that theControlled Affiliate may not advertise outside its Region on the national broadcast and cable networks and thatadvertisements in national print media are limited to the smallest regional edition encompassing the Region, and providedfurther that any such advertising by the Controlled Affiliate may not reference the name of any of its Controlling Plansunless the respective Controlling Plan is authorized under paragraph 2 of this Exhibit 4 to advertise in such media;g.advertising by direct mail where the addressee's zip code plus 4 includes, at least in part, the Region, provided that suchadvertising by the Controlled Affiliate may not reference the name of any of its Controlling Plans unless the respectiveControlling Plan is authorized under paragraph 2 of this Exhibit 4 to send direct mail to such zip code plus 4.h.[Intentionally left blank, pending review by the Inter-Plan Programs Committee of the applicability of the case managementrule to such Controlled Affiliates.]i.contracting with a pharmacy management organization (“Pharmacy Intermediary”) to gain access to a national or regionalpharmacy network to provide self-administered prescription drugs to deliver a pharmacy benefit for the ControlledAffiliate’s regional Medicare Advantage PPO or regional Medicare Part D Prescription Drug members enrolled under theLicensed Marks pursuant to such respective Controlled Affiliate License Agreements, provided, however, that thePharmacy Intermediary may not use the Licensed Marks or Name in contracting with the pharmacy providers in suchnetwork;j.contracting with the corporate owner of a national or regional retail pharmacy chain to gain access to the pharmacies inthe chain to provide self-administered prescription drugs to deliver a pharmacy benefit to the Controlled Affiliate’s regionalMedicare Advantage PPO or regional Medicare Part D Prescription Drug members enrolled under the Licensed Markspursuant to such respectiveExhibit 10.12EXHIBIT 4Page 13 of 14Controlled Affiliate License Agreements, provided that (1) the Controlled Affiliate may not contract directly withpharmacists or pharmacy stores outside the Region, and (2) neither the Controlled Affiliate’s name nor the LicensedMarks or Name may be posted or otherwise displayed at or by any pharmacy store outside the Region;k.contracting with a dental management organization (“Dental Intermediary”) to gain access to a national or regional dentalnetwork to deliver a routine dental benefit for the Controlled Affiliate’s regional Medicare Advantage PPO membersenrolled under the Licensed Marks pursuant to such Controlled Affiliate License Agreement, provided, however, that theDental Intermediary may not use the Licensed Marks or Name in contracting with the dental providers in such network;l.contracting with a vision management organization (“Vision Intermediary”) to gain access to a national or regional visionnetwork to deliver a routine vision benefit for the Controlled Affiliate’s regional Medicare Advantage members enrolledunder the Licensed Marks pursuant to such Controlled Affiliate License Agreement, provided, however, that the VisionIntermediary may not use the Licensed Marks or Name in contracting with the vision providers in such network;m.contracting with an independent clinical laboratory for analysis and clinical assessment of specimens that are collectedwithin the Controlled Affiliate’s Region;n.contracting with a durable medical equipment or home medical equipment company for durable medical equipment andsupplies and home medical equipment and supplies that are shipped to a location within the Controlled Affiliate’s Region;o.contracting with a specialty pharmaceutical company for non-routine biological therapeutics that are ordered by a healthcare professional located within the Region;p.contracting with a company that operates provider sites in the Region, provided that the contract is solely for servicesrendered at a site (e.g., hospital, mobile van) that is within the Region;Exhibit 10.12EXHIBIT 4Page 14 of 14q.contracting with a company that makes health care professionals available in the Region (e.g., traveling home healthnurse), provided that the contract is solely for services rendered by health care professionals who are located within theRegion.4.BCBSA shall retain the right to use the Licensed Marks in conjunction with the Federal Employee Program and with any othernational offering made to federal employees pursuant to the Federal Employees Health Benefits Program (FEHBP), including theright to license such use to its vendors, but only in the following manner.a.the Licensed Marks may only be used by BCBSA with the term “Federal Employee Program”, “Federal”, “FEP”, or similarlanguage identifying the program as a benefit program for federal employees;b.the Licensed Marks may not be used by BCBSA with the name(s) of a specific Plan or Plans and;c.any use by BCBSA in conjunction with a new national FEHBP program proposed after the enactment of this amendmentwill require the approval of the BCBSA Board of Directors.5.Where required by applicable state or local law or regulation, a Plan or its licensed Controlled Affiliate may submitdocuments that contain the Brands to, and file forms that contain the Brands with, state or local regulators in a state not included in itsService Area, provided that it gives reasonable advance notice to the local Plan of its intent to submit such documents or file such forms.Notwithstanding, in no event may a Plan or its licensed Controlled Affiliate use the Brands to register, or to obtain or maintain a license, acertificate of authority, or an equivalent document authorizing it to act as a risk-bearing entity or third party administrator in a state notincluded in its Service Area. If the local Plan advises BCBSA that it believes its License Agreement has been or would be violated by anysubmission or filing, BCBSA shall determine whether such submission or filing is required by state or local law or regulation and violates theLicense Agreement, subject to the Plan’s or licensed Controlled Affiliate’s rights to obtain an independent review of such determinationunder Paragraph 9(a) and Exhibit 5 of its License Agreement or Paragraph 8 of the Controlled Affiliate License. For purposes of thisparagraph, “local Plan” is defined as each Plan whose Service Area includes all or part of the state in which the foregoing applicable stateor local law or regulation has been enacted.Amended as of March 26, 2015Exhibit 10.12EXHIBIT 5Page 1 of 23MEDIATION AND MANDATORY DISPUTE RESOLUTION (MMDR) RULESThe Blue Cross and Blue Shield Plans ("Plans") and the Blue Cross Blue Shield Association ("BCBSA") recognize andacknowledge that the Blue Cross and Blue Shield system is a unique nonprofit and for-profit system offering cost effective health carefinancing and services. The Plans and BCBSA desire to utilize Mediation and Mandatory Dispute Resolution (“MMDR”) to avoid expensiveand time-consuming litigation that may otherwise occur in the federal and state judicial systems. Even MMDR should be viewed, however,as methods of last resort, all other procedures for dispute resolution having failed. Except as otherwise provided in the LicenseAgreements, the Plans, their Controlled Affiliates and BCBSA agree to submit all disputes to MMDR pursuant to these Rules and in lieu oflitigation.1.Initiation of ProceedingsA.Pre-MMDR EffortsBefore filing a Complaint to invoke the MMDR process, the CEO of a complaining party, or his/her designated representative, shallundertake good faith efforts with the other side(s) to try to resolve any dispute.B.ComplaintTo commence a proceeding, the complaining party (or parties) shall provide by certified mail, return receipt requested, a writtenComplaint to the BCBSA Corporate Secretary (which shall also constitute service on BCBSA if it is a respondent) and to any Plan(s) and/orControlled Affiliate(s) named therein. The Complaint shall contain:i.identification of the complaining party (or parties) requesting the proceeding;ii.identification of the respondent(s);iii.identification of any other persons or entities who are interested in a resolution of the dispute;iv.a full statement describing the nature of the dispute;v.identification of all of the issues that are being submitted for resolution;Amended as of November 21, 1996Exhibit 10.12EXHIBIT 5Page 2 of 23vi.the remedy sought;vii.a statement as to whether the complaining party (or parties) elect(s) first to pursue Mediation;viii.any request, if applicable, that the matter be handled on an expedited basis and the reasons therefor; andix.a statement signed by the CEO of the complaining party affirming that the CEO has undertaken efforts, or hasdirected efforts to be undertaken, to resolve the dispute before resorting to the MMDR process.The complaining party (or parties) shall file and serve with the Complaint copies of all documents which the party (or parties) intend(s) tooffer at the Arbitration Hearing and a statement identifying the witnesses the party (or parties) intend(s) to present at the Hearing, alongwith a summary of each witness' expected testimony.C.AnswerWithin twenty (20) days after receipt of the Complaint, each respondent shall serve on BCBSA and on the complaining party (orparties):i.a full Answer to the aforesaid Complaint;ii.a statement of any Counterclaims against the complaining party (or parties), providing with respect thereto theinformation specified in Paragraph 1.B., above;iii.a statement as to whether the respondent elects to first pursue Mediation; andiv.any request, if applicable, that the matter be handled on an expedited basis and the reasons therefor.The respondent(s) shall file and serve with the Answer or by the date of the Initial Conference set forth in Paragraph 3.C., below, copies ofall documents which the respondent(s) intend(s) to offer at the Arbitration Hearing and a statement identifying the witnesses the party (orparties) intend(s) to present at the Hearing, along with a summary of each witness' expected testimony.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 3 of 23D.Reply To CounterclaimWithin ten (10) days after receipt of any Counterclaim, the complaining party (or parties) shall serve on BCBSA and on theresponding party (or parties) a Reply to the Counterclaim. Such Reply must provide the same information required by Paragraph 1.C.,above.2.MediationTo facilitate the mediation of disputes between or among BCBSA, the Plans and/or their Controlled Affiliates, the BCBSA Boardhas provided for Mediation under these Rules. Mediation may be pursued in lieu of or in an effort to obviate the Mandatory DisputeResolution process, and all parties are strongly urged, but not required, to exhaust the mediation procedure provided for herein. In theevent any party refuses to proceed with Mediation, the parties shall proceed immediately to Mandatory Dispute Resolution, as provided inSection 3.A.Selection of MediatorsIf all parties agree to pursue Mediation, they shall promptly attempt to agree upon: (i) the number of mediators desired, not toexceed three mediators; and (ii) the selection of experienced mediator(s) from an independent entity to mediate all disputes set forth in theComplaint and Answer (and Counterclaim and Reply, if any). In the event the parties are unable to agree upon the selection or number ofmediators, both within five (5) days of the service of the Answer or Reply to Counterclaim, whichever is later, the BCBSA CorporateSecretary shall immediately refer the matter to a nationally recognized professional ADR organization (such as CPR or JAMS) formediation by a single mediator to be selected by the ADR organization.B.Binding DecisionBefore the Mediation Hearing described below, the BCBSA Corporate Secretary shall contact the parties to determine whetherthey wish to be bound by any recommendation of the selected mediator(s) for resolution of the disputes. If all wish to be bound, theCorporate Secretary will send appropriate documentation to them for their signatures before the Mediation Hearing begins.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 4 of 23C.Mediation ProcedureThe Mediator(s) shall apply the mediation procedures and processes provided for herein (not the rules of the ADR organizationwith which they are affiliated) and shall promptly advise the parties of a scheduled Mediation Hearing date. Unless a party requests anexpedited procedure, or unless all parties to the proceeding agree to one or more extensions of time, the Mediation Hearing set forth belowshall be completed within forty (40) days of BCBSA's receipt of the Complaint. The selected mediator(s), unless the parties otherwiseagree, shall adhere to the following procedure:i.Each party must be represented by its CEO or other representative who has been delegated full authority to resolvethe dispute. However, parties may send additional representatives as they see fit.ii.Each party will be given one-half hour to present its case, beginning with the complaining party (or parties), followedby the other party or parties. The parties are free to structure their presentations as they see fit, using oral statementsor direct examination of witnesses. However, neither cross-examination nor questioning of opposing representativeswill be permitted. At the close of each presentation, the selected mediator(s) will be given an opportunity to askquestions of the presenters and witnesses. All parties must be present throughout the Mediation Hearing. Theselected mediator(s) may extend the time allowed for each party's presentation at the Mediation Hearing. The selectedmediator(s) may meet in executive session, outside the presence of the parties, or may meet with the partiesseparately, to discuss the controversy.iii.After the close of the presentations, the parties will attempt to negotiate a settlement of the dispute. If the partiesdesire, the selected mediators, or any one or more of the selected mediator(s), will sit in on the negotiations.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 5 of 23iv.After the close of the presentations, the selected mediator(s) may meet privately to agree upon a recommendation forresolution of the dispute which would be submitted to the parties for their consideration and approval. If the partieshave previously agreed to be bound by the results of this procedure, this recommendation shall be binding upon theparties.v.The purpose of the Mediation Hearing is to assist the parties to settle their grievances short of mandatory disputeresolution. As a result, the Mediation Hearing has been designed to be as informal as possible. Rules of evidenceshall not apply. There will be no transcript of the proceedings, and no party may make a tape recording of theMediation Hearing.vi.In order to facilitate a free and open discussion, the Mediation proceeding shall remain confidential. A "Stipulation toConfidentiality" which prohibits future use of settlement offers, all position papers or other statements furnished to theselected mediator(s), and decisions or recommendations in any Mediation proceeding shall be executed by eachparty.vii.Upon request of the selected mediator(s), or one of the parties, BCBSA staff may also submit documentation at anytime during the proceedings.D.Notice of Termination of MediationIf the Mediation cannot be completed within the prescribed or agreed time period due to the lack of cooperation of any party, asdetermined by the selected mediator(s), or if the Mediation does not result in a final resolution of all disputes at the Mediation Hearing orwithin ten (10) days after the Mediation Hearing, any party or any one of the selected mediator(s) shall so notify the BCBSA CorporateSecretary, who shall promptly issue a Notice of Termination of Mediation to all parties, to the selected mediator(s), and to the MDRAdministrator. Such notice shall serve to bring the Mediation to an end and to initiate Mandatory Dispute Resolution. Upon agreement of allparties and the mediator(s), the Mediation process may continue at the same time the MDR process is invoked. In such case, the Notice ofTermination of Mediation described above serves to initiate the MDR proceeding, but does not terminate mediation proceedings, whichmay proceed simultaneous with the MDR proceeding.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 6 of 233.Mandatory Dispute Resolution (MDR)If any party elects not to first pursue Mediation, or if a Notice of Termination of Mediation is issued as set forth in Paragraph 2.D.,above, then the unresolved disputes set forth in any Complaint and Answer (and Counterclaim and Reply, if any) shall be subject tomandatory binding arbitration (herein referred to as “MDR”).A.MDR AdministratorThe Administrator for purposes of Mandatory Arbitration shall be an independent nationally recognized entity such as CPR orJAMS, specializing in alternative dispute resolution. In the event the parties pursued Mediation with CPR, JAMS or a similar organization,that organization also shall serve as the MDR Administrator, unless all parties notify the BCBSA Corporate Secretary in writing within two(2) days of receiving the Notice of Termination of Mediation that they wish to pursue MDR with another nationally recognized organizationserving as MDR Administrator.In the event the parties (i) did not pursue Mediation, (ii) pursued mediation with a Mediator not affiliated with an ADR organizationthat offers a panel of arbitrators, or (iii) all parties that pursued Mediation notified the BCBSA Corporate Secretary that they wish to have anMDR Administrator that is different from the organization with which their mediator was affiliated, they shall promptly attempt to agree on anationally recognized ADR entity that supplies a panel of arbitrators. If they reach such agreement within five (5) days of the Notice ofTermination of Mediation or receipt of the Answer or Reply to Counterclaim (whichever is later), the parties shall promptly inform theBCBSA Corporate Secretary of their agreed upon ADR organization. In the event the parties are unable to reach agreement on an MDRAdministrator within that timeframe, the BCBSA Corporate Secretary shall immediately refer the matter to CPR, JAMS or a similarorganization for MDR.Any person who served as a Mediator shall not serve as an arbitrator for the same or similar dispute for purposes of MDR.B.Rules for MDRThe rules controlling all aspects of MDR shall be exclusively those provided for herein. The rules promulgated or otherwise used bythe MDR Administrator organization shall not apply.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 7 of 23C.Initial ConferenceWithin seven (7) days after a Notice of Termination has issued, or the matter has otherwise been referred to an MDRAdministrator, or within five (5) days after the time for filing and serving the Answer or Reply to any Counterclaim (whichever is later) if theparties elect first not to mediate, the parties shall confer with the Administrator to discuss selecting a dispute resolution panel ("the Panel").This conference (the “Initial Conference”) may be by telephone. The parties are encouraged to agree to the composition of the Panel and topresent that agreement to the Administrator at the Initial Conference. If the parties do not agree on the composition of the Panel by thetime of the Initial Conference, or by any extension thereof agreed to by all parties and the Administrator, then the Panel Selection Processset forth in subparagraph D, below, shall be followed.D.Panel Selection ProcessThe Administrator shall designate, prior to the Initial Conference, at least seven potential arbitrators. Each party shall be permittedto strike any designee for cause and the Administrator shall determine the sufficiency thereof in its sole discretion. The Administrator willdesignate a replacement for any designee so stricken. Each party shall then be permitted one peremptory strike from the list of designees.The Administrator shall set the dates for exercising all strikes, which shall be set to encourage the prompt selection of arbitrators.After the parties exercise any designee strikes for cause and their peremptory strike against any designee of their choice, theparties shall each rank the remaining panel members in order of preference and provide the Administrator, without serving on any otherparty, their ranked list. The Administrator shall not disclose any party’s ranked list to members of the panel or to other parties.From the remaining designees, and after considering opportunities to maximize, so far as possible, the collectively stated arbitratorpreferences provided by the parties on their ranked lists, the Administrator shall select a three member Panel. The Panel SelectionProcess shall be completed no later than ten (10) days after the Initial Conference.Each Arbitrator shall be compensated at his or her normal hourly rate or, in the absence of an established rate, at a reasonablehourly rate to be promptly fixed by the Administrator for all time spent in connection with the proceedings and shall be reimbursed for anytravel and other reasonable expenses.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 8 of 23E.Duties Of The ArbitratorsThe Panel shall promptly designate a Presiding Arbitrator for the purposes reflected below, but shall retain the power to review andmodify any ruling or other action of said Presiding Arbitrator. Each Arbitrator shall be an independent Arbitrator, shall be governed by theCode of Ethics for Arbitrators in Commercial Disputes, and shall at or prior to the commencement of any Arbitration Hearing take an oath tothat effect. Each Arbitrator shall promptly disclose in writing to the Panel and to the parties any circumstances, whenever arising, that mightcause doubt as to such Arbitrator's compliance, or ability to comply, with said Code of Ethics, and, absent resignation by such Arbitrator,the remaining Arbitrators shall determine in their sole discretion whether the circumstances so disclosed constitute grounds fordisqualification and for replacement. With respect to such circumstances arising or coming to the attention of a party after an Arbitrator'sselection, a party may likewise request the Arbitrator's resignation or a determination as to disqualification by the remaining Arbitrators.With respect to a sole Arbitrator, the determination as to disqualification shall be made by the Administrator.There shall be no ex parte communication between the parties or their counsel and any member of the Panel.F.Panel's Jurisdiction And AuthorityThe Panel's jurisdiction and authority shall extend to all disputes between or among the Plans, their Controlled Affiliates, and/orBCBSA, except for those disputes excepted from these MMDR procedures as set forth in the License Agreements.With the exception of punitive or treble damages, the Panel shall have full authority to award the relief it deems appropriate toresolve the parties' disputes, including monetary awards and injunctions, mandatory or prohibitory. The Panel has no authority to awardpunitive or treble damages except that the Panel may allocate or assess responsibility for punitive or treble damages assessed by anothertribunal. Subject to the above limitations, the Panel may, by way of example, but not of limitation:Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 9 of 23i.interpret or construe the meaning of any terms, phrase or provision in any license between BCBSA and a Plan or aControlled Affiliate relating to the use of the BLUE CROSS® or BLUE SHIELD® service marks.ii.determine whether BCBSA, a Plan or a Controlled Affiliate has violated the terms or conditions of any licensebetween the BCBSA and a Plan or a Controlled Affiliate relating to the use of the BLUE CROSS® or BLUE SHIELD®service marks.iii.decide challenges as to its own jurisdiction.iv.issue such orders for interim relief as it deems appropriate pending Hearing and Award in any Arbitration.It is understood that the Panel is expected to resolve issues based on governing principles of law, preserving to the maximumextent legally possible the continued integrity of the Licensed Marks and the BLUE CROSS/BLUE SHIELD system. The Panel shall applyfederal law to all issues which, if asserted in the United States District Court, would give rise to federal question jurisdiction, 28U.S.C. § 1331. The Panel shall apply Illinois law to all issues involving interpretation, performance or construction of any LicenseAgreement or Controlled Affiliate License Agreement unless the agreement otherwise provides. As to other issues, the Panel shall choosethe applicable law based on conflicts of law principles of the State of Illinois.G.Administrative ConferenceWithin five (5) days of the Panel being selected, the Presiding Arbitrator shall confer with the parties and the other members of thePanel and shall schedule, in writing, a conference in which the parties and the Panel shall participate (the “Administrative Conference”).The Administrative Conference shall take place no later than fifteen (15) days after the Panel is selected. At the Administrative Conferencethe parties and the Panel shall discuss the scheduling of the Arbitration Hearing and any other matter appropriate to be considered,including but not limited to: any written discovery in the form of requests for production of documents or requests to admit facts; the identityof any witness whose deposition a party may desire and a showing of exceptional good cause for the takingAmended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 10 of 23of any such deposition; the desirability of bifurcation or other separation of the issues; the need for and the type of record of conferencesand hearings, including the need for transcripts; the need for expert witnesses and how expert testimony should be presented; theappropriateness of motions to dismiss and/or for full or partial summary judgment; consideration of stipulations; the desirability ofpresenting any direct testimony in writing; and the necessity for any on-site inspection by the Panel. If the parties agree, the AdministrativeConference may be by telephone.H.Discoveryi.Requests for Production of Documents: All requests for the production of documents must be served no later thanfive (5) days after the date of the Initial Conference. Within twenty (20) days after receipt of a request for production ofdocuments, a party shall(a)serve responses and objections to the request, (b) produce all responsive, non-privileged documents to therequesting party, and(c) to the extent any responsive documents are withheld on the grounds of attorney-client privilege or work product,produce a log identifying such documents in the manner specified in Fed. R. Civ.P. 26(b)(5). If, after reviewing a privilege log, the requesting party believes attorney-client privilege or work productprotection was improperly claimed by the producing party with respect to any document, the requesting party may askthe Presiding Arbitrator to conduct an in-camera inspection of the same. With respect to documentary and otherdiscovery produced in any MDR proceeding by BCBSA, the fact that a party’s CEO or other senior officers may serveon the BCBSA Board of Directors, BCBSA Board Committees or other BCBSA work groups, task forces and the like,shall not be a basis for defeating an otherwise valid claim of attorney-client privilege or work product protection oversuch documentary or other discovery materials by BCBSA.ii.Requests for Admissions: Requests for Admissions may be served up to twenty-one (21) days prior to the discoverycut-off set by the Presiding Arbitrator. A party served with Requests For Admissions must respond within twenty (20)days of receipt of said request. The good faith use of and response to Requests for Admissions is encouraged, andthe Panel shall have full discretion, with reference to the Federal Rules of Civil Procedure, in awarding appropriatesanctions with respect to abuse of the procedure.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 11 of 23iii.Depositions: As a general rule, the parties will not be permitted to take party or non-party deposition testimony fordiscovery purposes. The Presiding Arbitrator, in his or her sole discretion, shall have the authority to permit a party totake such deposition testimony upon a showing of exceptional good cause. The parties will be permitted to take debene esse deposition1 testimony to the fullest extent permitted by law of any witness who cannot be compelled totestify at the Arbitration Hearing. No deposition, for discovery purposes or otherwise, shall exceed three (3) hours,excluding objections and colloquy of counsel. Depositions may be recorded in any manner recognized by the FederalRules of Civil Procedure and the parties shall specify in each notice of deposition or request for permission to takedeposition testimony the manner in which such deposition shall be recorded.iv.Expert witness(es): If a party intends to present the testimony of an expert witness during the oral hearing, it shallprovide all other parties with a written statement setting forth the information required to be provided by Fed. R. Civ.P. 26(a)(2)(B) ten (10) days prior to the discovery cut-off set by the Presiding Arbitrator. If a party intends to presentthe testimony of a rebuttal expert witness during the Arbitration Hearing, it shall provide all other parties with a writtenstatement setting forth the information required to be provided by Fed. R. Civ. P. 26(a)(2)(B) within twenty (20) daysafter the date on which the written statement of the expert witness whose testimony is to be rebutted was produced.v.Discovery cut-off: The Presiding Arbitrator shall determine the date on which the discovery period will end, but thediscovery period shall not exceed thirty (30) days from the date of the Administrative Conference without theagreement of all parties.Amended as of September 20, 20071 As used in these Rules, "de bene esse deposition" means a deposition that is not taken for discovery purposes, but is taken for thepurpose of reading part or all of the deposition transcript into the record at the Arbitration Hearing, to the extent permitted by the Panel,because the witness cannot be compelled to testify at the Arbitration Hearing or has exercised a right provided under these Rules toprovide deposition testimony in lieu of testimony at the Arbitration Hearing.Exhibit 10.12EXHIBIT 5Page 12 of 23vi.Additional discovery: Any additional discovery will be at the discretion of the Presiding Arbitrator.vii.Discovery Disputes: Any discovery disputes shall be raised by motion to the Presiding Arbitrator, who is authorizedto resolve all such disputes, and whose resolution will be binding on the parties unless modified by the ArbitrationPanel. Prior to raising any discovery dispute with the Presiding Arbitrator, the parties shall meet and confer,telephonically or in person, in an attempt to resolve or narrow the dispute. If a party refuses to comply with a decisionresolving a discovery dispute, the Panel, in keeping with Fed. R. Civ. P. 37, may refuse to allow that party to supportor oppose designated claims or defenses, prohibit that party from introducing designated matters into evidence or, inextreme cases, decide an issue submitted for resolution adversely to that party.viii.Extensions: The time for responding to discovery requests may be extended by the Presiding Arbitrator for good andsufficient cause shown. Any request for such an extension shall be made in writing.I.Panel Suggested Settlement/MediationAt any point during the proceedings, the Panel at the request of any party or on its own initiative, may suggest that the partiesexplore settlement and that they do so at or before the conclusion of the Arbitration Hearing, and the Panel shall give such assistance insettlement negotiations as the parties may request and the Panel may deem appropriate. Alternatively, the Panel may direct the parties toendeavor to mediate their disputes as provided above, or to explore a mini-trial proceeding, or to have an independent party render aneutral evaluation of the parties’ respective positions. The Panel shall enter such sanctions as it deems appropriate with respect to anyparty failing to pursue in good faith such Mediation or other alternate dispute resolution methods.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 13 of 23J.Subpoenas on Third PartiesPursuant to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., and subject to Paragraph 3.G(iii) above, a partymay request the issuance of a subpoena on any third party, including but not limited to any third party Blue Plan or any officer, employeeor director of a third party Blue Plan, to compel deposition testimony or the production of documents, and, if good and sufficient cause isshown, the Panel shall issue such a subpoena.K.Arbitration HearingAn Arbitration Hearing will be held within thirty (30) days after the Administrative Conference if no discovery is taken, or withinthirty (30) days after the close of discovery, unless all parties and the Panel agree to extend the Arbitration Hearing date, or unless theparties agree in writing to waive the Arbitration Hearing. The parties may mutually agree on the location of the Arbitration Hearing. If theparties fail to agree, the Arbitration Hearing shall be held in Chicago, Illinois, or at such other location determined by the Presiding Arbitratorto be most convenient to the participants. The Panel will determine the date(s) and time(s) of the Arbitration Hearing(s) after consultationwith all parties and shall provide reasonable notice thereof to all parties or their representatives.L.Arbitration Hearing MemorandaTwenty (20) days prior to the Arbitration Hearing, each party shall submit to the other party (or parties) and to the Panel anArbitration Hearing Memorandum which sets forth the applicable law and any argument as to any relevant issue. The Arbitration HearingMemorandum will supplement, and not repeat, the allegations, information and documents contained in or with the Complaint, Answer,Counterclaim and Reply, if any. Ten (10) days prior to the Arbitration Hearing, each party shall submit to each other party a list of all expertand fact witnesses (but not including rebuttal fact witness) that such party intends to have testify at the Arbitration Hearing and a briefsummary of the testimony each such witness is expected to give. In addition, no later than five (5) days prior to the Arbitration, each partymay submit to each other party and to the Panel a Response Arbitration Hearing Memorandum which sets forth any response to anotherparty's Arbitration Hearing Memorandum.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 14 of 23M.Notice For TestimonyTen (10) days prior to the Arbitration Hearing, any party may serve a Notice on any other party (or parties) requesting theattendance at the Arbitration Hearing of any officer, employee or director of the other party (or parties) for the purpose of providingnoncumulative testimony. If a party fails to produce one of its officers, employees or directors whose noncumulative testimony during theArbitration Hearing is reasonably requested by an adverse party, the Panel may refuse to allow that party to support or oppose designatedclaims or defenses, prohibit that party from introducing designated matters into evidence or, in extreme cases, decide an issue submittedfor mandatory dispute resolution adversely to that party; provided, however, that a party may refuse to produce a director to testify if, withintwo (2) days of receiving a notice requesting the attendance of such director at the Arbitration Hearing, the party agrees to make thedirector available for a de bene esse deposition at a mutually convenient time at any location within fifty (50) miles of the director’s primaryresidence chosen by the party requesting the director’s testimony. This Rule may not be used for the purpose of burdening or harassingany party, and the Presiding Arbitrator may impose such orders as are appropriate so as to prevent or remedy any such burden orharassment.Pursuant to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., twenty (20) days or more prior to the ArbitrationHearing, a party may request the issuance of a subpoena on any third party, including but not limited to any third party Blue Plan, BCBSAor any officer, employee or director of a third party Blue Plan or BCBSA for the purpose of providing noncumulative testimony at theArbitration Hearing, and, if good and sufficient cause is shown, the Panel shall issue such a subpoena; provided however, that a director ofa third party Blue Plan or BCBSA may refuse to testify if, within two (2) days of receiving a subpoena requesting the attendance of suchdirector at the Arbitration Hearing, the director agrees to make him/herself available for a de bene esse deposition at a mutually convenienttime at any location within fifty (50) miles of the director’s primary residence chosen by the party requesting the director’s testimony. EachBlue Plan agrees to waive, on its own behalf and on behalf of its directors and officers, any objection it otherwise might have to any suchsubpoena based on service, venue or extraterritoriality.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 15 of 23N.Arbitration Hearing Proceduresi.Attendance at Arbitration Hearing: Any person having a direct interest in the proceeding is entitled to attend theArbitration Hearing. The Presiding Arbitrator shall otherwise have the power to require the exclusion of any witness,other than a party or other essential person, during the testimony of any other witness. It shall be discretionary withthe Presiding Arbitrator to determine the propriety of the attendance of any other person.ii.Confidentiality: The Panel and all parties shall maintain the privacy of the Arbitration Proceeding. The parties andthe Panel shall treat the Arbitration Hearing and any discovery or other proceedings or events related thereto,including any award resulting therefrom, as confidential except as otherwise necessary in connection with a judicialchallenge to or enforcement of an award or unless otherwise required by law.iii.Stenographic Record: Any party, or if the parties do not object, the Panel, may request that a stenographic or otherrecord be made of any Arbitration Hearing or portion thereof. The costs of the recording and/or of preparing thetranscript shall be borne by the requesting party and by any party who receives a copy thereof. If the Panel requests arecording and/or a transcript, the costs thereof shall be borne equally by the parties.iv.Oaths: The Panel may require witnesses to testify under oath or affirmation administered by any duly qualified personand, if requested by any party, shall do so.v.Order of Arbitration Hearing: An Arbitration Hearing shall be opened by the recording of the date, time, and place ofthe Arbitration Hearing, and the presence of the Panel, the parties, and their representatives, if any. The Panel may, atthe beginning of the Arbitration Hearing, ask for statements clarifying the issues involved.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 16 of 23Unless otherwise agreed, the complaining party (or parties) shall then present evidence to support their claim(s). Therespondent(s) shall then present evidence supporting their defenses and Counterclaims, if any. The complaining party(or parties) shall then present evidence supporting defenses to the Counterclaims, if any, and rebuttal.Witnesses for each party shall submit to questions by adverse parties and/or the Panel.The Panel has the discretion to vary these procedures, but shall afford a full and equal opportunity to all parties for thepresentation of any material and relevant evidence.vi.Evidence: The parties may offer such evidence as is relevant and material to the dispute and shall produce suchevidence as the Panel may deem necessary to an understanding and resolution of the dispute. Unless good cause isshown, as determined by the Panel or agreed to by all other parties, no party shall be permitted to offer evidence atthe Arbitration Hearing which was not disclosed prior to the Arbitration Hearing by that party. The Panel may receiveand consider the evidence of witnesses by affidavit upon such terms as the Panel deems appropriate.The Panel shall be the judge of the relevance and materiality of the evidence offered, and conformity to legal rules ofevidence, other than enforcement of the attorney-client privilege and the work product protection, shall not benecessary. The Federal Rules of Evidence shall be considered by the Panel in conducting the Arbitration Hearing butthose rules shall not be controlling. All evidence shall be taken in the presence of the Panel and all of the parties,except where any party is in default or has waived the right to be present.Settlement offers by any party in connection with Mediation or MDR proceedings, decisions or recommendations ofthe selected mediators, and a party's position papers or statements furnished to the selected mediators shall not beadmissible evidence or considered by the Panel without the consent of all parties.Exhibit 10.12EXHIBIT 5Page 17 of 23vii.Closing of Arbitration Hearing: The Presiding Arbitrator shall specifically inquire of all parties whether they haveany further proofs to offer or witnesses to be heard. Upon receiving negative replies or if he or she is satisfied that therecord is complete, the Presiding Arbitrator shall declare the Arbitration Hearing closed with an appropriate notationmade on the record. Subject to being reopened as provided below, the time within which the Panel is required to makethe award shall commence to run, in the absence of contrary agreement by the parties, upon the closing of theArbitration Hearing.With respect to complex disputes, the Panel may, in its sole discretion, defer the closing of the Arbitration Hearing fora period of up to thirty (30) days after the presentation of proofs in order to permit the parties to submit post-hearingbriefs and argument, as the Panel deems appropriate, prior to making an award.For good cause, the Arbitration Hearing may be reopened for up to thirty (30) days on the Panel's initiative, or uponapplication of a party, at any time before the award is madeO.AwardsAn Award must be in writing and shall be made promptly by the Panel and, unless otherwise agreed by the parties or specified bylaw, no later than thirty (30) days from the date of closing the Arbitration Hearing. If all parties so request, the Award shall contain findingsof fact and conclusions of law. The Award, and all other rulings and determinations by the Panel, may be by a majority vote.Parties shall accept as legal delivery of the Award the placing of the Award or a true copy thereof in the mail addressed to a partyor its representative at its last known address or personal service of the Award on a party or its representative.Awards are binding only on the parties to the Arbitration and are not binding on any non-parties to the Arbitration and may not beused or cited as precedent in any other proceeding.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 18 of 23After the expiration of twenty (20) days from initial delivery, the Award (with corrections, if any) shall be final and binding on theparties, and the parties shall undertake to carry out the Award without delay.Proceedings to confirm, modify or vacate an Award shall be conducted in conformity with and controlled by the Federal ArbitrationAct. 9 U.S.C. § 1, et seq.P.Return of DocumentsWithin sixty (60) days after the Award and the conclusion of any judicial proceedings with respect thereto, each party and thePanel shall return any documents produced by any other party, including all copies thereof. If a party receives a discovery request in anyother proceeding which would require it to produce any documents produced to it by any other party in a proceeding hereunder, it shall notproduce such documents without first notifying the producing party and giving said party reasonable time to respond, if appropriate, to thediscovery request.4.MiscellaneousA.Expedited ProceduresAny party to a Mediation may direct a request for an expedited Mediation Hearing to the Chairman of the Mediation Committee, tothe selected Mediators, and to all other parties at any time. The Chairman of the Mediation Committee, or at his or her direction, the thenselected Mediators, shall grant any request which is supported by good and sufficient reasons. If such a request is granted, the Mediationshall be completed within as short a period as practicable, as determined by the Chairman of the Mediation Committee or, at his or herdirection, the then selected Mediators.Any party to an Arbitration may direct a request for expedited proceedings to the Administrator, to the Panel, and to all otherparties at any time. The Administrator, or the Presiding Arbitrator if the Panel has been selected, shall grant any such request which issupported by good and sufficient reasons. If such a request is granted, the Arbitration shall be completed within as short a time aspracticable, as determined by the Administrator and/or the Presiding Arbitrator.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 19 of 23B.Temporary or Preliminary Injunctive ReliefAny party may seek temporary or preliminary injunctive relief with the filing of a Complaint or at any time thereafter. If such relief issought prior to the time that an Arbitration Panel has been selected, then the Administrator shall select a single Arbitrator who is a lawyerwho has no interest in the subject matter of the dispute, and no connection to any of the parties, to hear and determine the request fortemporary or preliminary injunction. If such relief is sought after the time that an Arbitration Panel has been selected, then the ArbitrationPanel will hear and determine the request. The request for temporary or preliminary injunctive relief will be determined with reference tothe temporary or preliminary injunction standards set forth in Fed. R. Civ. P. 65.C.Defaults and Proceedings in the Absence of a PartyWhenever a party fails to comply with the MDR Rules in a manner deemed material by the Panel, the Panel shall fix a reasonabletime for compliance and, if the party does not comply within said period, the Panel may enter an Order of default or afford such other reliefas it deems appropriate. Arbitration may proceed in the event of a default or in the absence of any party who, after due notice, fails to bepresent or fails to obtain an extension. An Award shall not be made solely on the default or absence of a party, but the Panel shall requirethe party who is present to submit such evidence as the Panel may require for the making of findings, determinations, conclusions, andAwards.D.NoticeEach party shall be deemed to have consented that any papers, notices, or process necessary or proper for the initiation orcontinuation of a proceeding under these rules or for any court action in connection therewith may be served on a party by mail addressedto the party or its representative at its last known address or by personal service, in or outside the state where the MDR proceeding is to beheld.The Corporate Secretary and the parties may also use facsimile transmission, telex, telegram, or other written forms of electroniccommunication to give the notices required by these rules.Exhibit 10.12EXHIBIT 5Page 20 of 23E.ExpensesThe expenses of witnesses shall be paid by the party causing or requesting the appearance of such witnesses. All expenses of theMDR proceeding, including compensation, required travel and other reasonable expenses of the Panel, and the cost of any proof producedat the direct request of the Panel, shall be borne equally by the parties and shall be paid periodically on a timely basis, unless they agreeotherwise or unless the Panel in the Award assesses such expenses, or any part thereof against any party (or parties). In exceptionalcases, the Panel may award reasonable attorneys' fees as an item of expense, and the Panel shall promptly determine the amount of suchfees based on affidavits or such other proofs as the Panel deems sufficient.F.Disqualification or Disability of A Panel MemberIn the event that any Arbitrator of a Panel with more than one Arbitrator should become disqualified, resign, die, or refuse or beunable to perform or discharge his or her duties after the commencement of MDR but prior to the rendition of an Award, and the parties areunable to agree upon a replacement, the remaining Panel member(s):i.shall designate a replacement, subject to the right of any party to challenge such replacement for cause.ii.shall decide the extent to which previously held hearings shall be repeated.If the remaining Panel members consider the proceedings to have progressed to a stage as to make replacement impracticable,the parties may agree, as an alternative to the recommencement of the Mandatory Dispute Resolution process, to resolution of the disputeby the remaining Panel members.In the event that a single Arbitrator should become disqualified, resign, die, or refuse or be unable to perform or discharge his orher duties after the commencement of MDR but prior to the rendition of an Award, and the parties are unable to agree upon a replacement,the Administrator shall appoint a successor, subject to the right of any party to challenge such successor for cause, and the successor shalldecide the extent to which previously held proceedings shall be repeated.Exhibit 10.12EXHIBIT 5Page 21 of 23G.Extensions of TimeSubject to the provisions of Paragraph 3.H.(viii), any time limit set forth in these Rules may be extended upon agreement of theparties and approval of: (1) the Mediator if the proceeding is then in Mediation; (2) the Administrator if the proceeding is in Arbitration, butno Arbitration Panel has been selected; or (3) the Arbitration Panel, if the proceeding is in Arbitration and the Arbitration Panel has beenselected.H.InterventionThe Plans, their Controlled Affiliates, and BCBSA, to the extent subject to MMDR pursuant to their License Agreements, shall havethe right to move to intervene in any pending Arbitration. A written motion for intervention shall be made to: (1) the Administrator, if theproceeding is in Arbitration, but no Arbitration Panel has been selected; or (2) the Arbitration Panel, if the proceeding is in Arbitration andthe Arbitration Panel has been selected. The written motion for intervention shall be delivered to the BCBSA Corporate Secretary (whichshall also constitute service on the BCBSA if it is a respondent) and to any Plan(s) and/or Controlled Affiliate(s) which are parties to theproceeding. Any party to the proceeding can submit written objections to the motion to intervene. The motion for intervention shall begranted upon good cause shown. Intervention also may be allowed by stipulation of the parties to the Arbitration proceeding. Interventionshall be allowed upon such terms as the Arbitration Panel decides.I.BCBSA Assistance In Resolution of DisputesThe resources and personnel of the BCBSA may be requested by any member Plan at any time to try to resolve disputes withanother Plan.J.Neutral EvaluationThe parties can voluntarily agree at any time to have an independent party render a neutral evaluation of the parties’ respectivepositions.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 22 of 23K.Recovery of Attorney Fees and Expensesi.Motions to CompelNothwithstanding any other provisions of these Rules, any Party subject to the License Agreements (for purposes of this Section Kand all of its sub- sections only hereinafter referred to collectively and individually as a “Party”) that initiates a court action oradministrative proceeding solely to compel adherence to these Rules shall not be determined to have violated these Rules byinitiating such action or proceeding.iRecovery of Fees, Expenses and CostsThe Arbitration Panel may, in its sole discretion, award a Party its reasonable attorneys’ fees, expenses and costs associated witha filing to compel adherence to these Rules and/or reasonable attorneys’ fees, expenses and costs incurred in responding to anaction filed in violation of these Rules; provided, however, that neither fees, expenses, nor costs shall be awarded by theArbitration Panel if the Party from which the award is sought can demonstrate to the Arbitration panel, in its sole discretion, that itdid not violate these Rules or that it had reasonable grounds for believing that its action did not violate these Rules.iiRequests for ReimbursementFor purposes of this Section K, any Party may request reimbursement of fees, expenses and/or costs by submitting said request inwriting to the Arbitration Panel at any time before an award is delivered pursuant to Paragraph 3.O above, with a copy to the Partyfrom which reimbursement is sought, explaining why it is entitled to such reimbursement. The Party from which reimbursement issought shall have twenty (20) days to submit a response to such request to the Arbitration Panel with a copy to the Party seekingreimbursement.Amended as of September 20, 2007Exhibit 10.12EXHIBIT 5Page 23 of 23L.Calculation of Time and DeadlinesIn computing any period of time prescribed or allowed under these rules, the day of the act or event from which the designatedperiod of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, aSunday, or a legal holiday, in which event the period runs until the end of the next day which is not one of the aforementioned days. Whenthe period of time prescribed is less than six (6) days, intermediate Saturdays, Sundays and legal holidays shall be excluded in thecomputation. As used in this rule, “legal holiday” includes New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday, MemorialDay, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day and any other day appointed as aholiday by the President or the Congress of the United States.Amended as of September 20, 2007Exhibit 21SUBSIDIARIES OF THE COMPANYLegal Name Domestic Jurisdiction Doing Business AsAmerican Imaging Management, Inc. Illinois AIM Specialty HealthAmerica's 1st Choice of South Carolina, Inc. South Carolina America's Health Management Services, Inc. South Carolina AMERIGROUP Community Care of New Mexico, Inc. New Mexico AMERIGROUP Corporation Delaware AMERIGROUP CORPORATION; AGP Corporation;AMGP; AMGP Corporation; AMGP Missouri;AmerigroupAmerigroup Delaware, Inc. Delaware Amerigroup District of Columbia, Inc. District of Columbia Amerigroup Health Plan of Louisiana, Inc. Louisiana Amerigroup Insurance Company Texas Amerigroup Iowa, Inc. Iowa Amerigroup IPA of New York, LLC New York Amerigroup Kansas, Inc. Kansas AMERIGROUP Maryland, Inc. Maryland AMERIGROUP Community CareAmerigroup Mississippi, Inc. Mississippi AMERIGROUP New Jersey, Inc. New Jersey AMERIGROUP Community CareAMERIGROUP Ohio, Inc. Ohio AMERIGROUP Community CareAmerigroup Oklahoma Inc. Oklahoma Amerigroup Partnership Plan, LLC Illinois Amerigroup Pennsylvania, Inc. Pennsylvania AMERIGROUP Tennessee, Inc. Tennessee AMERIGROUP Community CareAMERIGROUP Texas, Inc. Texas AMERIGROUP Community CareAMERIGROUP Washington, Inc. Washington AMGP Georgia Managed Care Company, Inc. Georgia AMERIGROUP; AMERIGROUP Community Care;AMERIGROUP Georgia; AMGP GeorgiaAnthem Blue Cross Life and Health Insurance Company California Anthem Financial, Inc. Delaware Anthem Health Plans of Kentucky, Inc. Kentucky Anthem Blue Cross and Blue ShieldAnthem Health Plans of Maine, Inc. Maine Anthem Blue Cross and Blue Shield; AssociatedHospital ServiceAnthem Health Plans of New Hampshire, Inc. New Hampshire Anthem Blue Cross and Blue ShieldAnthem Health Plans of Virginia, Inc. Virginia Anthem Blue Cross and Blue ShieldAnthem Health Plans, Inc. Connecticut Anthem Blue Cross and Blue ShieldAnthem Holding Corp. Indiana Anthem Properties, Inc.Anthem Innovation Israel, Ltd. Israel Anthem Insurance Companies, Inc. Indiana Anthem Blue Cross and Blue Shield; Blue Cross andBlue Shield of Indiana; Empire Blue Cross-RetireeSolutions; Empire Blue Cross Blue Shield-RetireeSolutions; Anthem BC Health Insurance CompanyAnthem Kentucky Managed Care Plan, Inc. Kentucky Anthem Blue Cross and Blue Shield MedicaidAnthem Life & Disability Insurance Company New York Exhibit 21Anthem Life Insurance Company Indiana Anthem Partnership Holding Company, LLC Indiana Anthem Services Company, LLC Indiana Anthem Southeast, Inc. Indiana Anthem UM Services, Inc. Indiana Anthem Workers' Compensation, LLC Indiana Applied Pathways LLC Illinois Arcus Enterprises, Inc. Delaware Aspire Health, Inc. Delaware Associated Group, Inc. Indiana ATH Holding Company, LLC Indiana Blue Cross Blue Shield Healthcare Plan of Georgia, Inc. Georgia Anthem Blue Cross and Blue ShieldBlue Cross Blue Shield of Wisconsin Wisconsin Anthem Blue Cross and Blue ShieldBlue Cross of California California Anthem Blue CrossBlue Cross of California Partnership Plan, Inc. California Anthem Blue Cross Partnership PlanCareMarket, Inc. Indiana Sydney CareCareMore Health Plan California CareMore Health Plan of Arizona, Inc. Arizona CareMore Health Plan of Nevada Nevada CareMore Health Plan of Texas, Inc. Texas CareMore Health System California CareMore, LLC Indiana Cerulean Companies, Inc. Georgia Claim Management Services, Inc. Wisconsin Anthem Blue Cross and Blue ShieldCommunity Care Health Plan of Louisiana, Inc. Louisiana Healthy BlueCommunity Care Health Plan of Nevada, Inc. Nevada Anthem Blue Cross and Blue Shield HealthcareSolutions; AMERIGROUP Community CareCommunity Insurance Company Ohio Anthem Blue Cross and Blue ShieldCompcare Health Services Insurance Corporation Wisconsin Anthem Blue Cross and Blue ShieldCrossroads Acquisition Corp. Delaware DBG Holdings, Inc. Indiana DeCare Analytics, LLC Minnesota DeCare Dental Health International, LLC Minnesota DeCare Dental Insurance Ireland, Ltd. Ireland DeCare Dental Networks, LLC Minnesota DeCare Dental, LLC Minnesota DeCare Operations Ireland, Limited Ireland Delivery Network, LLC Florida Designated Agent Company, Inc. Kentucky EasyScripts Cutler Bay, LLC Florida EasyScripts Hialeah, LLC Florida EasyScripts Westchester, LLC Florida EasyScripts, LLC Florida Exhibit 21EHC Benefits Agency, Inc. New York Empire HealthChoice Assurance, Inc. New York Empire Blue Cross; Empire Blue Cross Blue ShieldEmpire HealthChoice HMO, Inc. New York Empire Blue Cross HMO; Empire Blue Cross BlueShield HMOFederal Government Solutions, LLC Wisconsin Freedom Health, Inc. Florida Global TPA, LLC Florida Golden West Health Plan, Inc. California Greater Georgia Life Insurance Company Georgia Anthem LifeHealth Core, Inc. Delaware Health Management Corporation Virginia LiveHealth Online; HMC of Virginia; HealthManagement of VirginiaHealth Ventures Partner, L.L.C. Illinois HealthKeepers, Inc. Virginia HealthLink HMO, Inc. Missouri HealthLink HMOHealthLink Insurance Company Illinois HealthLink, Inc. Illinois HealthPlus HP, LLC New York Empire BlueCross BlueShield HealthPlus; EmpireBlueCross HealthPlusHealthSun Health Plans, Inc. Florida HealthSun Holdings, LLC Florida HealthSun Management, LLC Florida HealthSun Physicians Network I, LLC Florida HealthSun Physicians Network, LLC Florida Healthy Alliance Life Insurance Company Missouri Anthem Blue Cross and Blue ShieldHEP AP Holdings, Inc. Delaware Highland Acquisition Holdings, LLC Delaware Highland Holdco, Inc. Delaware Highland Intermediate Holdings, LLC Delaware Highland Investor Holdings, LLC Delaware HMO Colorado, Inc. Colorado HMO Colorado; HMO NevadaHMO Missouri, Inc. Missouri Amerigroup Missouri; Anthem Blue Cross and BlueShieldImaging Management Holdings, LLC Delaware IngenioRx, Inc. Indiana Ingenio, Inc.; IngenioRx AdministratorsLegato Health Technologies, LLP India Legato Health Technologies Philippines, Inc. Philippines Legato Holdings I, Inc. Indiana Legato Holdings II, LLC Indiana Living Complete Technologies, Inc. Maryland TAI Software, Inc.Matthew Thornton Health Plan, Inc. New Hampshire Memphis Supportive Care Partnership, LLC Tennessee Meridian Resource Company, LLC Wisconsin Missouri Care, Incorporated Missouri Nash Holding Company, LLC Delaware Exhibit 21National Government Services, Inc. Indiana NGS of IndianaNew England Research Institutes, Inc. Massachusetts Summit Community CareNGS Federal, LLC Indiana Optimum Healthcare, Inc. Florida Park Square Holdings, Inc. California Park Square I, Inc. California Park Square II, Inc. California Pasteur Medical Bird Road, LLC Florida Pasteur Medical Center, LLC Delaware Pasteur Medical Cutler Bay, LLC Florida Pasteur Medical Group, LLC Florida Pasteur Medical Hialeah Gardens, LLC Florida Pasteur Medical Holdings, LLC Florida Pasteur Medical Kendall, LLC Florida Pasteur Medical Management, LLC Florida Pasteur Medical Miami Gardens, LLC Florida Pasteur Medical North Miami Beach, LLC Florida Pasteur Medical Partners, LLC Florida Resolution Health, Inc. Delaware Delaware Resolution Health, Inc.RightCHOICE Managed Care, Inc. Delaware RightCHOICE Benefit Administrators; Anthem BlueCross and Blue ShieldRocky Mountain Hospital and Medical Service, Inc. Colorado Anthem Blue Cross and Blue ShieldSellCore, Inc. Delaware SellCore Insurance Services, Inc.Simply Healthcare Plans, Inc. Florida Clear Health Alliance; Better Health; AmerigroupFloridaSoutheast Services, Inc. Virginia State Sponsored DM Services, Inc. Indiana Amerigroup GBD Disease Management Program;Anthem GBD Disease Management ProgramAmerigroup GBD Behavioral Health; Anthem GBDBehavioral HealthThe Anthem Companies of California, Inc. California The Anthem Companies, Inc. Indiana TrustSolutions, LLC Wisconsin UNICARE Health Plan of West Virginia, Inc. West Virginia UNICARE Illinois Services, Inc. Illinois UniCare Life & Health Insurance Company Indiana UNICARE AdjusterUNICARE National Services, Inc. Delaware UniCare Specialty Services, Inc. Delaware Valus, Inc. Indiana WellCare of Nebraska, Inc. Nebraska Wellmax Health Medical Centers, LLC Florida Wellmax Health Physicians Network, LLC Florida WellPoint Acquisition, LLC Indiana WellPoint California Services, Inc. Delaware WellPoint Dental Services, Inc. Delaware Exhibit 21WellPoint Health Solutions, Inc. Indiana WellPoint Holding Corp. Delaware WellPoint Information Technology Services, Inc. California WellPoint Insurance Services, Inc. Hawaii WellPoint Military Care Corporation Indiana Wisconsin Collaborative Insurance Company Wisconsin WPMI, LLC Delaware Exhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements:•Form S-8 No. 333-84906 and Form S-8 No. 333-129334 pertaining to the Anthem 401(k) Plan;•Form S-8 No. 333-156099 pertaining to the Anthem, Inc. Employee Stock Purchase Plan;•Form S-8 No. 333-159830 pertaining to the Anthem Incentive CompensationPlan;•Form S-8 No. 333-218190 pertaining to the 2017 Anthem Incentive Compensation Plan;and•Form S-3 No. 333-221824 pertaining to the Anthem, Inc. registration of senior debt securities, subordinated debt securities, preferred stock, commonstock, depositary shares, warrants, rights, stock purchase contracts and stock purchase unitsof our reports dated February 19, 2020, with respect to the consolidated financial statements and financial statement schedule listed in the Index at Item 15(c) ofAnthem, Inc., and the effectiveness of internal control over financial reporting of Anthem, Inc., included in its Annual Report (Form 10-K) for the year endedDecember 31, 2019./S/ ERNST & YOUNG LLPIndianapolis, IndianaFebruary 19, 20201Exhibit 31.1CERTIFICATION PURSUANT TORULE 13a-14(a) AND RULE 15d-14(a) OF THE EXCHANGE ACT RULES,AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Gail K. Boudreaux, certify that:1.I have reviewed this report on Form 10-K of Anthem,Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 19, 2020 /s/ GAIL K. BOUDREAUX President and Chief Executive OfficerExhibit 31.2CERTIFICATION PURSUANT TORULE 13a-14(a) AND RULE 15d-14(a) OF THE EXCHANGE ACT RULES,AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, John E. Gallina, certify that:1.I have reviewed this report on Form 10-K of Anthem,Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 19, 2020 /s/ JOHN E. GALLINA Executive Vice President and Chief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Anthem, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed with the Securities andExchange Commission on the date hereof (the “Report”), I, Gail K. Boudreaux, President and Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany./s/ GAIL K. BOUDREAUX Gail K. Boudreaux President and Chief Executive Officer February 19, 2020 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Anthem, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed with the Securities andExchange Commission on the date hereof (the “Report”), I, John E. Gallina, Executive Vice President and Chief Financial Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to§ 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany./s/ JOHN E. GALLINA John E. Gallina Executive Vice President and Chief Financial Officer February 19, 2020 

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