MOH Molina Healthcare Inc

Molina Healthcare, Inc. (NYSE: MOH):

• Net income per diluted share, continuing operations, of $0.72 for the quarter, compared with $0.16 in 2014.
• Adjusted net income per diluted share, continuing operations,1 of $0.86 for the quarter, compared with $0.32 for 2014.
• Total revenue of $3.5 billion, up 52% over second quarter 2014 and 11% over first quarter 2015.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2015.

“Our second quarter results mark continued progress and momentum in our business. We were able to improve our profit margins while simultaneously growing our top-line revenue and enrollment,” said J. Mario Molina M.D., chief executive officer of Molina Healthcare, Inc. “We remain confident that we have the right plans in place for the rest of 2015 and look forward to closing our recently announced Medicaid acquisitions in Florida, Illinois, and Michigan later this year.”

Overview of Financial Results, Continuing Operations

Financial results for the second quarter of 2015 improved significantly over the same quarter of 2014 due to higher revenue, greater medical and administrative cost efficiency, and more complete state reimbursement of the Affordable Care Act Health Insurer Fee (HIF).

Income from continuing operations, before tax expense, increased to $101 million in the second quarter of 2015, from $18 million in the second quarter of 2014, and $67 million in the first quarter of this year.

Premium revenue increased approximately 52% in the second quarter of 2015 compared with the second quarter of 2014 due to increased Medicaid expansion and Marketplace enrollment, growth in the Company’s Illinois health plan, and the recent start-up of the Company’s Puerto Rico health plan.

Medical care costs as a percent of premium revenue (the “medical care ratio”) decreased to 88.7% in the second quarter of 2015, from 89.3% in the second quarter of 2014, and were unchanged from the first quarter of this year.

General and administrative expenses as a percentage of total revenue (the “general and administrative expense ratio”) decreased to 8.1% in the second quarter of 2015, from 8.4% in the second quarter of 2014, and were unchanged from the first quarter of this year.

Financing Activities

In June 2015, the Company issued 5.75 million shares of common stock, raising $373 million after offering costs. Additionally in June 2015, the Company entered into a $250 million revolving credit facility. Both of these actions will finance working capital needs, acquisitions, capital expenditures, and other general corporate activities.

Health Insurer Fee Update

The Company continues to make progress in securing full reimbursement for the Medicaid portion of its expense under the Affordable Care Act Health Insurer Fee (HIF).

During the second quarter of 2015, the Company recognized as revenue the entire HIF reimbursement due from California for the period January 1, 2014 through June 30, 2015. The Company recognized approximately $12 million ($0.14 per diluted share) related to 2014; and approximately $17 million ($0.20 per diluted share) related to the first half of 2015. After allowing for HIF revenue not recognized for Michigan and Utah (approximately $8 million, or $0.10 per diluted share, for each of the first and second quarters), the net impact of HIF reimbursement was $12 million ($0.14 per diluted share) favorable for the second quarter and $5 million ($0.06 per diluted share) unfavorable for the six months ended June 30.

The comparable amount of HIF reimbursement not recognized in 2014 was approximately $15 million ($0.20 per diluted share) for the second quarter and approximately $32 million ($0.42 per diluted share) for the six months ended June 30.

Texas Health Plan Quality Revenue Update

As previously disclosed, the Company has deferred recognition of that portion of its quality related revenue in Texas that is based upon measures for which the Company does not have historical information, clear definitions, and clarity around minimum standards. Such revenue is estimated to be approximately $20 million for all of 2014 and $12 million for the first half of 2015. The Company has not recognized any of this revenue through June 30, 2015.

Conference Call

The Company’s management will host a conference call and webcast to discuss its second quarter results at 5:00 p.m. Eastern time on Thursday, July 30, 2015. The number to call for the interactive teleconference is (212) 231-2937. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Thursday, July 30, 2015, through 6:00 p.m. on Friday, July 31, 2015, by dialing (800) 633-8284 and entering confirmation number 21770257. A live audio broadcast of Molina Healthcare’s conference call will be available on the Company’s website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our locally operated health plans in 11 states across the nation and in the Commonwealth of Puerto Rico, Molina currently serves over 3 million members. Dr. C. David Molina founded our company in 1980 as a provider organization serving low-income families in Southern California. Today, we continue his mission of providing high quality and cost-effective health care to those who need it most. For more information about Molina Healthcare, please visit our website at molinahealthcare.com.

Notes:

1. Adjusted net income per diluted share, continuing operations, is a non-GAAP financial measure used by management as a supplemental metric in evaluating its financial performance, its financing and business decisions, and in forecasting and planning for future periods. This measure is not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measure, which is diluted net income per share, continuing operations. See below for reconciliations of the Company’s non-GAAP measures to the most directly comparable GAAP measures.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding the Company’s plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited to the following:

• uncertainties associated with the implementation of the Affordable Care Act, including the full grossed up reimbursement by states of the non-deductible ACA health insurer fee, the Medicaid expansion, the insurance marketplaces, the effect of various implementing regulations, and uncertainties regarding the Medicare-Medicaid dual eligible demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
• management of our medical costs, including seasonal flu patterns and rates of utilization that are consistent with our expectations, and our ability to reduce over time the high medical costs commonly associated with new patient populations;
• federal or state medical cost expenditure floors, administrative cost and profit ceilings, and profit sharing arrangements;
• the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures, including 2014 and 2015 at-risk premium rules in the state of Texas;
• cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
• the success of our new health plan in Puerto Rico, including the successful resolution of the Puerto Rico debt crisis and the payment of all amounts due under our Medicaid contract;
• newly FDA-approved specialty drugs such as Sovaldi, Olysio, Harvoni, and other specialty drugs or generic drugs that are exorbitantly priced but not factored into the calculation of our capitated rates;
• significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria, including the resolution of the Illinois budget impasse and continued payment of our Illinois health plan;
• the accurate estimation of incurred but not paid medical costs across our health plans;
• retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including Medicaid pharmaceutical rebates or retroactive premium rate increases;
• efforts by states to recoup previously paid amounts;
• the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states, including the pending Medicaid RFP in Michigan;
• the continuation and renewal of the government contracts of both our health plans and Molina Medicaid Solutions and the terms under which such contracts are renewed;
• complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
• government audits and reviews, and any fine, enrollment freeze, or monitoring program that may result therefrom;
• changes with respect to our provider contracts and the loss of providers;
• approval by state regulators of dividends and distributions by our health plan subsidiaries;
• changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
• high dollar claims related to catastrophic illness;
• the favorable or unfavorable resolution of litigation, arbitration, or administrative proceedings, including pending qui tam actions in California and Florida, and the litigation commenced against us by the state of Louisiana alleging that Molina Medicaid Solutions and its predecessors used an incorrect reimbursement formula for the payment of pharmaceutical claims;
• the relatively small number of states in which we operate health plans;
• our management of a portion of College Health Enterprises’ hospital in Long Beach, California;
• the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;
• the failure of a state in which we operate to renew its federal Medicaid waiver;
• changes generally affecting the managed care or Medicaid management information systems industries;
• increases in government surcharges, taxes, and assessments;
• public alarm associated with newly emergent viruses or widespread epidemics;
• changes in general economic conditions, including unemployment rates;
• increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at sec.gov. Given these risks and uncertainties, we can give no assurances that the Company’s forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by the Company’s forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Company’s judgment as of July 30, 2015, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

     

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

  Three Months Ended

June 30,

Six Months Ended

June 30,

2015   2014 2015   2014 (Amounts in thousands, except net income per share) Revenue: Premium revenue $ 3,304,372 $ 2,167,142 $ 6,275,024 $ 4,107,479 Service revenue 47,243 50,232 99,101 103,862 Premium tax revenue 94,609 70,120 189,956 121,813 Health insurer fee revenue 73,890 19,662 121,838 38,358 Investment income 3,828 1,945 6,843 3,574 Other revenue 948   2,938   3,251   6,196   Total revenue 3,524,890   2,312,039   6,696,013   4,381,282   Operating expenses: Medical care costs 2,929,534 1,934,299 5,565,318 3,655,957 Cost of service revenue 32,819 37,107 68,721 77,764 General and administrative expenses 286,496 193,239 542,586 381,326 Premium tax expenses 94,609 70,120 189,956 121,813 Health insurer fee expenses 40,652 21,945 81,430 44,135 Depreciation and amortization 25,152   22,902   50,144   43,593   Total operating expenses 3,409,262   2,279,612   6,498,155   4,324,588   Operating income 115,628   32,427   197,858   56,694   Other expenses, net: Interest expense 14,946 13,993 29,822 27,815 Other income, net (32 ) (9 ) (42 ) (53 ) Total other expenses, net 14,914   13,984   29,780   27,762  

Income from continuing operations before income tax expense

100,714 18,443 168,078 28,932 Income tax expense 61,783   10,702   101,006   16,357   Income from continuing operations 38,931 7,741 67,072 12,575

Income (loss) from discontinued operations, net of tax

12   70   24   (266 ) Net income $ 38,943   $ 7,811   $ 67,096   $ 12,309     Diluted net income per share: Income from continuing operations $ 0.72   $ 0.16   $ 1.29   $ 0.26   Diluted net income per share $ 0.72   $ 0.16   $ 1.29   $ 0.26     Diluted weighted average shares outstanding 53,871   48,003   52,008   47,824     Operating Statistics, Continuing Operations: Medical care ratio (1) 88.7 % 89.3 % 88.7

%

89.0 % Service revenue ratio (2) 69.5 % 73.9 % 69.3 % 74.9 % General and administrative expense ratio (3) 8.1 % 8.4 % 8.1 % 8.7 % Premium tax ratio (1) 2.8 % 3.1 % 2.9 % 2.9 % Effective tax rate 61.3 % 58.0 % 60.1 % 56.5 % Net profit margin, continuing operations (3) 1.1 % 0.3 % 1.0 % 0.3 %              

(1) Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue. Medical care costs include costs incurred for providing long term services and supports (LTSS).

(2) Service revenue ratio represents cost of service revenue as a percentage of service revenue.

(3) Computed as a percentage of total revenue.

       

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

  June 30, 2015

December 31,

2014

(Unaudited) (Amounts in thousands,except per-share data) ASSETS Current assets: Cash and cash equivalents $ 2,013,882 $ 1,539,063 Investments 1,466,622 1,019,462 Receivables 631,124 596,456 Deferred income taxes 37,480 39,532 Prepaid expenses and other current assets 148,615 50,884 Derivative asset 508,504   —   Total current assets 4,806,227 3,245,397 Property, equipment, and capitalized software, net 363,244 340,778 Deferred contract costs 65,410 53,675 Intangible assets, net 80,462 89,273 Goodwill 272,046 271,964 Restricted investments 110,956 102,479 Derivative asset — 329,323 Other assets 37,814   44,326   $ 5,736,159   $ 4,477,215     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Medical claims and benefits payable $ 1,492,252 $ 1,200,522 Amounts due government agencies 824,934 527,193 Accounts payable and accrued liabilities 399,186 241,654 Deferred revenue 57,723 196,076 Income taxes payable 10,396 8,987 Current portion of long-term debt 445,668 341 Derivative liability 508,355   —   Total current liabilities 3,738,514 2,174,773 Convertible senior notes 272,930 704,097 Lease financing obligations 161,323 160,710 Lease financing obligations - related party 40,016 40,241 Deferred income taxes 29,174 24,271 Derivative liability — 329,194 Other long-term liabilities 31,095   33,487   Total liabilities 4,273,052   3,466,773   Stockholders’ equity: Common stock, $0.001 par value; 150,000 shares authorized; outstanding: 56,050 shares at June 30, 2015 and 49,727 shares at December 31, 2014 56 50 Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding — — Additional paid-in capital 782,433 396,059 Accumulated other comprehensive loss (1,830 ) (1,019 ) Retained earnings 682,448   615,352   Total stockholders’ equity 1,463,107   1,010,442   $ 5,736,159   $ 4,477,215          

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS,

CONTINUING AND DISCONTINUED OPERATIONS

  Three Months Ended June 30, Six Months Ended June 30, 2015   2014 2015   2014 (Amounts in thousands) Operating activities: Net income $ 38,943 $ 7,811 $ 67,096 $ 12,309

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 29,502 32,660 62,076 65,654 Deferred income taxes 6,308 2,362 7,405 1,692 Share-based compensation 3,566 4,860 9,241 10,456 Amortization of convertible senior notes and lease financing obligations 7,395 6,781 14,685 13,455 Other, net 5,077 3,271 8,641 1,723 Changes in operating assets and liabilities: Receivables (139,694 ) (135,282 ) (34,668 ) (174,579 ) Prepaid expenses and other current assets 40,251 11,136 (97,027 ) (66,887 ) Medical claims and benefits payable 44,120 104,641 291,730 254,395 Amounts due government agencies 202,776 76,607 297,741 119,872 Accounts payable and accrued liabilities (31,639 ) (1,327 ) 157,734 57,625 Deferred revenue (112,088 ) (100,331 ) (138,353 ) (76,271 ) Income taxes (440 ) 11,374   1,409   16,016   Net cash provided by operating activities 94,077   24,563   647,710   235,460     Investing activities: Purchases of investments (554,387 ) (226,159 ) (992,978 ) (368,304 ) Proceeds from sales and maturities of investments 285,441 179,278 541,050 326,648

Purchases of property, equipment, and capitalized software

(40,886 ) (19,882 ) (65,860 ) (37,670 ) Increase in restricted investments (9,590 ) (1,241 ) (14,202 ) (15,622 ) Net cash paid in business combinations — — (8,006 ) — Other, net (9,637 ) (6,841 ) (16,853 ) (7,388 ) Net cash used in investing activities (329,059 ) (74,845 ) (556,849 ) (102,336 )   Financing activities: Proceeds from common stock offering, net of issuance costs 373,151 — 373,151 — Contingent consideration liabilities settled — (12,230 ) — (50,349 ) Proceeds from employee stock plans 7,298 6,287 8,387 7,617 Other, net (1,609 ) 207   2,420   1,064   Net cash provided by (used in) financing activities 378,840   (5,736 ) 383,958   (41,668 ) Net increase (decrease) in cash and cash equivalents 143,858 (56,018 ) 474,819 91,456 Cash and cash equivalents at beginning of period 1,870,024   1,083,369   1,539,063   935,895   Cash and cash equivalents at end of period $ 2,013,882   $ 1,027,351   $ 2,013,882   $ 1,027,351  

MOLINA HEALTHCARE, INC.UNAUDITED NON-GAAP FINANCIAL MEASURES

The Company uses two non-GAAP financial measures as supplemental metrics in evaluating its financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing the Company’s performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures.

The first of these non-GAAP measures is earnings before interest, taxes, depreciation and amortization (EBITDA). The following table reconciles net income, which the Company believes to be the most comparable GAAP measure, to EBITDA.

        Three Months Ended Six Months Ended June 30, June 30, 2015   2014 2015   2014 (Amounts in thousands) Net income $ 38,943 $ 7,811 $ 67,096 $ 12,309 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 28,688 28,292 57,798 54,206 Interest expense 14,946 13,993 29,822 27,815 Income tax expense 61,799   10,760   101,039   15,997 EBITDA $ 144,376   $ 60,856   $ 255,755   $ 110,327  

The second of these non-GAAP measures is adjusted net income, continuing operations (including adjusted net income per diluted share). The following table reconciles net income from continuing operations, which the Company believes to be the most comparable GAAP measure, to adjusted net income, continuing operations.

        Three Months Ended June 30, Six Months Ended June 30, 2015   2014 2015   2014 (In thousands, except per diluted share amounts) Net income, continuing operations $ 38,931     $ 0.72 $ 7,741     $ 0.16 $ 67,072     $ 1.29 $ 12,575     $ 0.26 Adjustments, net of tax: Amortization of convertible senior notes and lease financing obligations 4,659 0.09 4,272 0.09 9,252 0.18 8,477 0.18 Amortization of intangible assets 2,671   0.05   3,209   0.07   5,548   0.10   6,538   0.14 Adjusted net income, continuing operations (1) $ 46,261   $ 0.86   $ 15,222   $ 0.32   $ 81,872   $ 1.57   $ 27,590   $ 0.58                                  

(1) Beginning in the first quarter of 2015, the Company revised its calculation of adjusted net income, continuing operations. The Company no longer subtracts “depreciation, and amortization of capitalized software” and “share-based compensation” from net income, continuing operations to arrive at adjusted net income, continuing operations. The Company has made this change to better reflect the way in which it evaluates its financial performance, makes financing and business decisions, and forecasts and plans for future periods. All periods presented conform to this presentation.

         

MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP, CONTINUING OPERATIONS

 

June 30,

2015

March 31,

2015

December 31,

2014

June 30,

2014

Ending Membership by Health Plan: California 593,000 574,000 531,000 455,000 Florida 348,000 352,000 164,000 58,000 Illinois 101,000 102,000 100,000 6,000 Michigan 260,000 256,000 242,000 244,000 New Mexico 225,000 222,000 212,000 195,000 Ohio 332,000 350,000 347,000 302,000

Puerto Rico (1)

361,000 — — — South Carolina 114,000 111,000 118,000 119,000 Texas 266,000 268,000 245,000 247,000 Utah 92,000 90,000 83,000 83,000 Washington 553,000 533,000 497,000 461,000 Wisconsin 107,000   107,000   84,000   85,000 3,352,000   2,965,000   2,623,000   2,255,000 Ending Membership by Program: Temporary Assistance for Needy Families (TANF), CHIP (2) 2,180,000 1,825,000 1,809,000 1,642,000 Medicaid Expansion (3) 475,000 437,000 385,000 232,000 Aged, Blind or Disabled (ABD) 353,000 358,000 347,000 314,000 Marketplace (3) 261,000 266,000 15,000 18,000 Medicare Special Needs Plans 44,000 45,000 49,000 44,000 Medicare-Medicaid Plan (MMP) – Integrated (4) 39,000   34,000   18,000   5,000 3,352,000   2,965,000   2,623,000   2,255,000        

(1) The Puerto Rico health plan began serving members effective April 1, 2015.

(2) CHIP stands for Children’s Health Insurance Program.

(3) Medicaid Expansion membership phased in, and Marketplace became available for consumers

to access coverage, beginning January 1, 2014.

(4) MMP members who receive both Medicaid and Medicare coverage from the Company. The Company began serving members under this program in the second quarter of 2014.

 

   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In thousands, except percentages and per-member per-month amounts)

  Three Months Ended June 30, 2015 Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM California 1,767 $ 503,739 $ 285.14 $ 459,045 $ 259.85 91.1 % $ 44,694 Florida 1,053 257,317 244.35 216,906 205.97 84.3 40,411 Illinois 301 101,769 337.55 98,260 325.91 96.6 3,509 Michigan 773 237,506 307.27 199,940 258.67 84.2 37,566 New Mexico 690 321,808 466.46 276,144 400.27 85.8 45,664 Ohio 996 508,468 510.30 432,186 433.75 85.0 76,282 Puerto Rico 1,082 193,984 179.33 184,240 170.32 95.0 9,744 South Carolina 337 93,089 276.36 66,332 196.92 71.3 26,757 Texas 806 512,408 635.74 468,629 581.42 91.5 43,779 Utah 277 79,964 288.60 71,727 258.88 89.7 8,237 Washington 1,643 409,758 249.39 370,437 225.46 90.4 39,321 Wisconsin 320 74,532 233.15 56,140 175.62 75.3 18,392 Other (3) —   10,030   — 29,548   — — (19,518 ) 10,045   $ 3,304,372   $ 328.96 $ 2,929,534   $ 291.65 88.7 % $ 374,838     Three Months Ended June 30, 2014 Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical

Margin

Total PMPM Total PMPM California 1,335 $ 398,071 $ 298.11 $ 324,923 $ 243.33 81.6 % $ 73,148 Florida 229 101,423 443.05 92,865 405.67 91.6 8,558 Illinois 17 19,263 1,136.20 20,472 1,207.48 106.3 (1,209 ) Michigan 702 185,337 264.18 163,392 232.89 88.2 21,945 New Mexico 617 267,994 434.57 240,151 389.42 89.6 27,843 Ohio 849 328,630 386.79 276,716 325.69 84.2 51,914 Puerto Rico — — — — — — — South Carolina 360 96,453 268.38 84,686 235.64 87.8 11,767 Texas 742 320,966 432.46 297,899 401.38 92.8 23,067 Utah 249 76,574 307.47 73,094 293.49 95.5 3,480 Washington 1,364 336,959 247.03 305,098 223.67 90.5 31,861 Wisconsin 256 36,925 144.42 33,143 129.63 89.8 3,782 Other (3) —   (1,453 ) — 21,860   — — (23,313 ) 6,720   $ 2,167,142   $ 322.52 $ 1,934,299   $ 287.87 89.3 % $ 232,843                                

(1) A member month is defined as the aggregate of each month’s ending membership for the period presented.

(2) The MCR represents medical costs as a percentage of premium revenue.

(3) “Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

     

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In thousands, except percentages and per-member per-month amounts)

  Six Months Ended June 30, 2015 Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM California 3,440 $ 1,014,283 $ 294.85 $ 911,480 $ 264.97 89.9 % $ 102,803 Florida 1,950 568,288 291.33 498,295 255.45 87.7 69,993 Illinois 606 205,914 339.72 187,697 309.66 91.2 18,217 Michigan 1,529 457,031 298.87 384,703 251.57 84.2 72,328 New Mexico 1,374 635,464 462.62 567,970 413.48 89.4 67,494 Ohio 2,051 1,023,555 498.96 845,260 412.05 82.6 178,295 Puerto Rico 1,082 193,984 179.33 184,240 170.32 95.0 9,744 South Carolina 680 184,415 271.35 140,601 206.88 76.2 43,814 Texas 1,581 894,193 565.45 820,107 518.60 91.7 74,086 Utah 543 157,106 289.42 145,871 268.72 92.8 11,235 Washington 3,206 786,108 245.22 722,811 225.47 91.9 63,297 Wisconsin 622 134,874 216.85 104,849 168.58 77.7 30,025 Other (3) —   19,809   — 51,434   — — (31,625 ) 18,664   $ 6,275,024   $ 336.21 $ 5,565,318   $ 298.18 88.7 % $ 709,706     Six Months Ended June 30, 2014 Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical

Margin

Total PMPM Total PMPM California 2,589 $ 675,713 $ 260.97 $ 562,267 $ 217.16 83.2 % $ 113,446 Florida 499 206,589 414.17 186,326 373.55 90.2 20,263 Illinois 31 34,434 1,109.99 34,966 1,127.12 101.5 (532 ) Michigan 1,350 358,833 265.81 298,712 221.27 83.2 60,121 New Mexico 1,166 493,062 423.00 436,560 374.53 88.5 56,502 Ohio 1,621 606,925 374.33 514,044 317.04 84.7 92,881 Puerto Rico — — — — — — — South Carolina 754 192,473 255.31 174,948 232.07 90.9 17,525 Texas 1,491 641,062 429.85 590,857 396.19 92.2 50,205 Utah 495 155,228 313.67 140,294 283.49 90.4 14,934 Washington 2,640 660,420 250.15 603,205 228.48 91.3 57,215 Wisconsin 530 75,453 142.48 61,952 116.99 82.1 13,501 Other (3) —   7,287   — 51,826   — — (44,539 ) 13,166   $ 4,107,479   $ 311.98 $ 3,655,957   $ 277.69 89.0 % $ 451,522                                

(1) A member month is defined as the aggregate of each month’s ending membership for the period presented.

(2) The MCR represents medical costs as a percentage of premium revenue.

(3) “Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

     

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In thousands, except percentages and per-member per-month amounts)

  Three Months Ended June 30, 2015 (1) Member

Months (2)

  Premium Revenue   Medical Care Costs   MCR (3)  

Medical

Margin

Total   PMPM Total   PMPM TANF and CHIP 6,556 $ 1,169,277 $ 178.38 $ 1,063,489 $ 162.24 91.0 % $ 105,788 Medicaid Expansion 1,387 582,443 419.67 474,198 341.67 81.4 108,245 ABD 1,069 1,053,098 984.99 947,093 885.84 89.9 106,005 Marketplace 789 161,214 204.22 89,368 113.21 55.4 71,846 Medicare 133 140,137 1,059.90 140,508 1,062.71 100.3 (371 ) MMP 111   198,203   1,784.30 214,878   1,934.40 108.4 (16,675 ) 10,045   $ 3,304,372   $ 328.96 $ 2,929,534   $ 291.65 88.7 % $ 374,838     Six Months Ended June 30, 2015 (1) Member

Months (2)

Premium Revenue Medical Care Costs MCR (3)

Medical

Margin

Total PMPM Total PMPM TANF and CHIP 12,035 $ 2,141,316 $ 177.93 $ 1,960,315 $ 162.89 91.5 % $ 181,001 Medicaid Expansion 2,661 1,089,339 409.29 867,229 325.84 79.6 222,110 ABD 2,120 1,993,366 940.23 1,809,613 853.56 90.8 183,753 Marketplace 1,371 354,725 258.66 245,682 179.15 69.3 109,043 Medicare 264 273,472 1,036.95 269,005 1,020.01 98.4 4,467 MMP 213   422,806   1,986.04 413,474   1,942.20 97.8 9,332   18,664   $ 6,275,024   $ 336.21 $ 5,565,318   $ 298.18 88.7 % $ 709,706                                

(1) Three and six months ended June 30, 2014 data not presented due to lack of comparability.

(2) A member month is defined as the aggregate of each month’s ending membership for the period presented.

(3) The MCR represents medical costs as a percentage of premium revenue.

    MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA, CONTINUING OPERATIONS (In thousands, except percentages and per-member per-month amounts)  

The following tables provide the details of the Company’s medical care costs from continuing operations for the periods indicated:

  Three Months Ended June 30, 2015   2014 Amount   PMPM   % of

Total

Amount   PMPM % of

Total

Fee for service $ 2,102,776 $ 209.34 71.8 % $ 1,378,037 $ 205.08 71.2 % Pharmacy 391,899 39.01 13.3 295,596 43.99 15.3 Capitation 248,357 24.72 8.5 176,817 26.31 9.1 Direct delivery 27,885 2.78 1.0 23,063 3.43 1.2 Other 158,617   15.80   5.4   60,786   9.06   3.2   $ 2,929,534   $ 291.65   100.0 % $ 1,934,299   $ 287.87   100.0 %   Six Months Ended June 30, 2015 2014 Amount PMPM % of

Total

Amount PMPM % of

Total

Fee for service $ 4,051,081 $ 217.05 72.8 % $ 2,559,098 $ 194.38 70.0 % Pharmacy 743,097 39.81 13.4 582,224 44.22 15.9 Capitation 464,682 24.90 8.3 346,256 26.30 9.5 Direct delivery 54,656 2.93 1.0 45,084 3.42 1.2 Other 251,802   13.49   4.5   123,295   9.37   3.4   $ 5,565,318   $ 298.18   100.0 % $ 3,655,957   $ 277.69   100.0 %    

 

The following table provides the details of the Company’s medical claims and benefits payable as of the dates indicated:

 

June 30,

2015

December 31,

2014

Fee-for-service claims incurred but not paid (IBNP) $ 1,138,794 $ 870,429 Pharmacy payable 80,902 71,412 Capitation payable 30,673 28,150 Other (1) 241,883   230,531 $ 1,492,252   $ 1,200,522  

(1)  “Other” medical claims and benefits payable include amounts payable to certain providers for which the Company acts as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact the Company’s unaudited consolidated statements of income. As of June 30, 2015 and December 31, 2014, the Company had recorded non-risk provider payables of approximately $134.2 million and $119.3 million, respectively.

MOLINA HEALTHCARE, INC.UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE(Dollars in thousands, except per-member amounts)

The Company’s claims liability includes an allowance for adverse claims deviation based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. The Company’s reserving methodology is consistently applied across all periods presented. The amounts displayed for “Components of medical care costs related to: Prior period” represent the amount by which the Company’s original estimate of claims and benefits payable at the beginning of the period were more than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable from continuing and discontinued operations combined for the periods indicated:

      Six Months Ended

Year Ended

December 31,

2014

June 30, 2015   2014   Medical claims and benefits payable, beginning balance $ 1,200,522 $ 669,787 $ 669,787 Components of medical care costs related to: Current period 5,703,391 3,693,730 8,122,885 Prior period (1) (138,131 ) (37,131 ) (45,979 ) Total medical care costs 5,565,260   3,656,599   8,076,906     Change in non-risk provider payables 14,826   (83,044 ) (31,973 ) Payments for medical care costs related to: Current period 4,448,820 2,891,174 7,064,427 Prior period 839,536   427,986   449,771   Total paid 5,288,356   3,319,160   7,514,198   Medical claims and benefits payable, ending balance $ 1,492,252   $ 924,182   $ 1,200,522     Benefit from prior period as a percentage of: Balance at beginning of period 11.5 % 5.5 % 6.9 % Premium revenue, trailing twelve months 1.2 % 0.5 % 0.5 % Medical care costs, trailing twelve months 1.4 % 0.6 % 0.6 %   Fee-For-Service Claims Data: Days in claims payable, fee for service 49 46 49 Number of members at end of year 3,352,000 2,255,000 2,623,000 Number of claims in inventory at end of year 463,200 180,600 307,700 Billed charges of claims in inventory at end of year $ 904,800 $ 400,000 $ 718,500 Claims in inventory per member at end of year 0.14 0.08 0.12 Billed charges of claims in inventory per member at end of year $ 269.93 $ 177.38 $ 273.92 Number of claims received during the year 18,679,000 12,641,300 27,597,000 Billed charges of claims received during the year $ 21,505,000 $ 13,609,000 $ 30,315,600          

(1)  The benefit from prior period development of medical claims and benefits payable for the six months ended June 30, 2015, included approximately $22 million relating to programs that contain medical cost floor or corridor provisions. Accordingly, premium revenue for the six months ended June 30, 2015, was reduced by the same amount.

     

 

MOLINA HEALTHCARE, INC.

HEALTH INSURER FEE DETAILS BY HEALTH PLAN

(In thousands)

  HIF Reimbursement Revenue, Gross (1) Six Months Ended June 30, 2015  

Year Ending

Dec. 31, 2015

Recognized  

Necessary

for

Full Reimbursement

Necessary

for

Full Reimbursement

Q1 2015   Q2 2015   Total 2015 HIF: California $ — $ 17,258 $ 17,258 $ 17,258 $ 34,517 Florida 2,027 2,042 4,069 4,069 8,139 Illinois 965 973 1,938 1,938 3,875 Michigan — — — 13,776 27,551 New Mexico 7,539 7,597 15,136 15,136 30,273 Ohio 11,936 12,027 23,963 23,963 47,925 South Carolina 3,053 3,077 6,130 6,130 12,261 Texas 5,839 5,884 11,723 11,723 23,446 Utah — — — 2,968 5,936 Washington 10,951 10,963 21,914 21,914 43,828 Wisconsin 1,126   1,135   2,261   2,261     4,522 Subtotal, Medicaid 43,436 60,956 104,392 121,136 242,273 Marketplace 398 400 798 798 1,595 Medicare 5,702   3,652   9,354   9,354   18,702 49,536 65,008 114,544 $ 131,288   $ 262,570 2014 HIF: California —   11,616   11,616   $ 49,536   $ 76,624   $ 126,160     Recognized in: Health insurer fee revenue $ 47,948 $ 73,890 $ 121,838 Premium tax revenue 1,588   2,734   4,322   $ 49,536   $ 76,624   $ 126,160                            

(1)  Amounts in the table include the Company’s estimate of the full economic impact of the excise tax including premium tax and the income tax effect.

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Molina Healthcare, Inc.Investor Relations:Juan José Orellana, 562-435-3666, ext. 111143