MOH Molina Healthcare Inc

Molina Healthcare, Inc. (NYSE: MOH):

• Net income per diluted share for the quarter of $0.58.
• Adjusted net income per diluted share for the quarter of $0.67.
• Net income per diluted share for the quarter up 35% over first quarter 2016.
• Adjusted net income per diluted share for the quarter up 31% over first quarter 2016.
• Total revenue for the quarter of $4.4 billion, up 24% over second quarter 2015.
• Aggregate membership up 26% over second quarter 2015.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2016.

“The results we have reported today reflect meaningful progress from the first quarter of 2016,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “Last quarter, we identified specific improvements that we needed to make to our operations. Today’s announcement demonstrates that we are making good headway with this work. The issues we identified in Ohio and Texas in the first quarter are substantially resolved, and work in Puerto Rico is well under way.”

Update on Financial Performance

Second Quarter 2016 Compared With First Quarter 2016

Second quarter 2016 financial performance improved significantly when compared with the first quarter of 2016. Earnings per diluted share increased to $0.58 in the second quarter of 2016 from $0.43 in the first quarter. Adjusted earnings per diluted share increased to $0.67 in the second quarter of 2016 from $0.51 in the first quarter.

Higher profitability in the second quarter was primarily the result of improvements at the Ohio and Texas health plans. The medical care ratio of the Ohio health plan decreased to 89.7% in the second quarter of 2016 from 92.0% in the first quarter. The medical care ratio of the Texas health plan decreased to 78.5% in the second quarter of 2016 from 92.8% in the first quarter. Even without the benefit of out-of-period quality revenue adjustments discussed below, the medical care ratio of the Texas health plan would have been approximately 85.3% in the second quarter, still well under the 92.8% medical care ratio reported in the first quarter.

In total, out-of-period adjustments related to 2015 dates of service were not significant to second quarter performance. Out-of-period adjustments were significant, however, on a geographic and program basis. Out-of-period adjustments were the result of changes in accounting estimates made as new information became available to the Company. The table below will help the reader to understand the discussion that follows.

 

Summary of Significant Out-of-Period Adjustments Affecting 2016 Financial Results

    Three Months Ended     Six Months Ended June 30, 2016 June 30, 2016 (In millions, except per diluted share amounts) Amount    

Per Diluted

Share

Amount    

Per Diluted

Share

Marketplace adjustments for 2015 dates of service $ (37 ) $ (0.42 ) $ (68 ) $ (0.76 )

Texas quality revenue adjustment for 2014/2015 dates of service

44 0.50 44 0.49 Texas quality revenue adjustment for 1Q 2016 dates of service 7 0.08 N/A N/A Puerto Rico premium revenue adjustment for 2015 dates of service (11 ) (0.12 ) (11 ) (0.12 ) Florida premium revenue adjustment for 2014/2015 dates of service —   —   18   0.20   Total out-of-period adjustments, net $ 3   $ 0.04   $ (17 ) $ (0.19 )  

Out-of-period adjustments increased pretax income by approximately $3 million (or approximately $0.04 per diluted share) in the second quarter of 2016. Specifically:

• Adjustments related to 2015 dates of service reduced Marketplace pretax income by approximately $37 million (or approximately $0.42 per diluted share) in the second quarter. On June 30, 2016, the Centers for Medicare and Medicaid Services released the final update on risk adjustment and reinsurance payments for the 2015 benefit year, and we adjusted our accruals accordingly.
• During the second quarter, we were informed by the Texas Department of Health and Human Services that it will not recoup any quality revenue for calendar years 2014, 2015, and 2016. Therefore, we recognized previously deferred quality revenue amounting to approximately $51 million (or approximately $0.58 per diluted share) in the second quarter of 2016. Of the $51 million adjustment, $44 million related to 2015 and 2014 dates of service, and $7 million related to the first quarter of 2016.
• Reductions to revenue previously recorded for 2015 dates of service in Puerto Rico decreased pretax income by approximately $11 million (or approximately $0.12 per diluted share) in the second quarter.

Understanding the First Half of 2016

We reported pretax income of $144 million for the first half of 2016. These results were affected by several out-of-period adjustments related to dates of service in 2015 and 2014. In total, these adjustments reduced pretax income in the first half of 2016 by approximately $17 million (or approximately $0.19 per diluted share). Specifically:

• Adjustments related to 2015 dates of service reduced Marketplace pretax income by approximately $68 million (or approximately $0.76 per diluted share) in the first half of 2016. We now estimate that the medical care ratio for our Marketplace program for all of 2015 was approximately 80%. Through June 30, 2016, the medical care ratio of our Marketplace program for months of service in the first half of 2016 alone (exclusive of out-of-period adjustments) was approximately 78%.
• As described above, the recognition of Texas quality revenue associated with calendar years 2014 and 2015 increased pretax income in the first half of 2016 by approximately $44 million (or approximately $0.49 per diluted share).
• Also as noted above, reductions to 2015 premium revenue in Puerto Rico reduced pretax income by approximately $11 million (or approximately $0.12 per diluted share) in the first half of 2016.
• Retroactive adjustments to premium revenue in Florida for dates of service in 2014 and 2015 increased pretax income by approximately $18 million (or approximately $0.20 per diluted share) in the first half of 2016. Prior to reporting first quarter 2016 results, we were informed by the Florida Agency for Health Care Administration that we were due a retroactive increase to Medicaid premium revenue relating to dates of service prior to 2016. We reported this development in our first quarter 2016 results.

Net Income per Share Guidance

Our net income per share guidance for fiscal year 2016 remains unchanged. We expect the following factors, among others, to affect our financial performance in the second half of 2016:

• The ultimate savings to be realized from various cost savings initiatives and the speed at which such savings will be realized.
• Medicaid rate increases (excluding Medicaid Expansion) of approximately 3.0% in California (effective July 1, 2016); approximately 2.5% in Puerto Rico (effective July 1, 2016); and approximately 3.0% in Texas (effective September 1, 2016). All rate changes are consistent with our previous expectations.
• Medicaid Expansion rate decreases of approximately 11.0% in California (effective July 1, 2016) and approximately 2.0% in Ohio (effective July 1, 2016). All rate changes are consistent with our previous expectations.
• The implementation of a medical care ratio floor of 86.0% for the South Carolina Medicaid program effective July 1, 2016.
• Declining margins for our Marketplace business during the second half of 2016 due to normal membership attrition; the addition of higher cost members through the special enrollment process; higher costs as members reach the limits of the cost-sharing provisions of their insurance coverage; and increasing utilization as members become more engaged with our care networks. This is consistent with our previous expectations.

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare's second quarter results at 5:00 p.m. Eastern time on Wednesday, July 27, 2016. The number to call for the interactive teleconference is (212) 271-4651. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Wednesday, July 27, 2016, through 6:00 p.m. Eastern Time on Thursday, July 28, 2016, by dialing (800) 633-8284 and entering confirmation number 21812476. A live audio broadcast of Molina Healthcare’s conference call will be available on our 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 approximately 4.2 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.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding our 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:

• the success of our profit improvement and cost-cutting initiatives;
• uncertainties and evolving market and provider economics associated with the implementation of the Affordable Care Act (the “ACA”), 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 our ability to reduce over time the high medical costs commonly associated with new patient populations;
• our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates in new plans, geographies, and programs where we have less experience with patient and provider populations, and also including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
• our ability to manage growth, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives designed to control costs;
• our receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;
• our ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
• the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions;
• the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;
• the interpretation and implementation of state contract performance requirements regarding the achievement of certain quality measures, and our ability to avoid liquidated damages associated therewith;
• cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
• the success of our health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under our Medicaid contract, the effect of the newly enacted PROMESA law, and our efforts to better manage the health care costs of our Puerto Rico health plan;
• 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 all amounts due to our Illinois health plan;
• the accurate estimation of incurred but not reported or paid medical costs across our health plans;
• subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts due to or receivable from CMS under the ACA's “three R’s” marketplace premium stabilization programs;
• efforts by states to recoup previously paid amounts, including our dispute with the state of New Mexico related to reimbursement for retroactively enrolled members in 2014;
• 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;
• the continuation and renewal of the government contracts of our health plans, Molina Medicaid Solutions, and Pathways, 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 resolution of litigation, arbitration, or administrative proceedings;
• the relatively small number of states in which we operate health plans;
• the effect on our Los Angeles County subcontract of Centene Corporation’s acquisition of Health Net Inc.;
• 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, including but not limited to the deductibility of certain compensation costs;
• newly emergent viruses or widespread epidemics, including the Zika virus, public catastrophes or terrorist attacks, and associated public alarm;
• changes in general economic conditions, including unemployment rates;
• the sufficiency of our funds on hand to pay the amounts due upon conversion of our outstanding notes;
• increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in our periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of our website or on the SEC’s website at sec.gov. Given these risks and uncertainties, we can give no assurances that our forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by our 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 our judgment as of July 27, 2016, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.

       

 

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

  Three Months Ended June 30, Six Months Ended June 30, 2016     2015 2016     2015 (Dollar amounts in millions, except net income per share) Revenue: Premium revenue $ 4,029 $ 3,304 $ 8,024 $ 6,275 Service revenue 135 47 275 99 Premium tax revenue 109 95 218 190 Health insurer fee revenue 76 74 166 122 Investment income 8 4 16 7 Other revenue 2   1   3   3   Total revenue 4,359   3,525   8,702   6,696   Operating expenses: Medical care costs 3,594 2,929 7,182 5,565 Cost of service revenue 116 33 243 69 General and administrative expenses 351 287 691 543 Premium tax expenses 109 95 218 190 Health insurer fee expenses 50 40 108 81 Depreciation and amortization 34   25   66   50   Total operating expenses 4,254   3,409   8,508   6,498   Operating income 105 116 194 198 Interest expense 25   15   50   30   Income before income tax expense 80 101 144 168 Income tax expense 47   62   87   101   Net income $ 33   $ 39   $ 57   $ 67     Diluted net income per share $ 0.58   $ 0.72   $ 1.01   $ 1.29     Diluted weighted average shares outstanding 55.5   53.9   56.3   52.0     Operating Statistics: Medical care ratio (1) 89.2 % 88.7 % 89.5 % 88.7 % General and administrative expense ratio (2) 8.1 % 8.1 % 7.9 % 8.1 % Premium tax ratio (1) 2.6 % 2.8 % 2.6 % 2.9 % Effective tax rate 59.8 % 61.3 % 60.7 % 60.1 % Net profit margin (2) 0.7 % 1.1 % 0.7 % 1.0 %   (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. (2) Computed as a percentage of total revenue.          

 

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

  June 30, December 31, 2016 2015 (Unaudited) (Amounts in millions,except per-share data) ASSETS Current assets: Cash and cash equivalents $ 2,345 $ 2,329 Investments 1,968 1,801 Receivables 1,012 597 Income taxes refundable 23 13 Prepaid expenses and other current assets 197 192 Derivative asset —   374   Total current assets 5,545 5,306 Property, equipment, and capitalized software, net 448 393 Deferred contract costs 80 81 Intangible assets, net 146 122 Goodwill 611 519 Restricted investments 107 109 Deferred income taxes — 18 Derivative asset 226 — Other assets 39   28   $ 7,202   $ 6,576     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Medical claims and benefits payable $ 1,766 $ 1,685 Amounts due government agencies 1,238 729 Accounts payable and accrued liabilities 537 362 Deferred revenue 104 223 Current portion of long-term debt 1 449 Derivative liability —   374   Total current liabilities 3,646 3,822 Senior notes 1,428 962 Lease financing obligations 198 198 Deferred income taxes 25 — Derivative liability 226 — Other long-term liabilities 38   37   Total liabilities 5,561   5,019   Stockholders’ equity: Common stock, $0.001 par value; 150 shares authorized; outstanding: 57 shares at June 30, 2016 and 56 shares at December 31, 2015 — — Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding — — Additional paid-in capital 822 803 Accumulated other comprehensive gain (loss) 4 (4 ) Retained earnings 815   758   Total stockholders’ equity 1,641   1,557   $ 7,202   $ 6,576          

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

  Three Months Ended June 30, Six Months Ended June 30, 2016     2015 2016     2015 (Amounts in millions) Operating activities: Net income $ 33 $ 39 $ 57 $ 67 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 45 29 89 62 Deferred income taxes 9 6 39 7 Share-based compensation 9 3 16 9 Amortization of convertible senior notes and lease financing obligations 7 8 15 15 Other, net 5 6 11 9 Changes in operating assets and liabilities: Receivables (149 ) (140 ) (415 ) (35 ) Prepaid expenses and other assets 59 40 (143 ) (97 ) Medical claims and benefits payable (173 ) 44 82 292 Amounts due government agencies 328 203 509 298 Accounts payable and accrued liabilities (58 ) (31 ) 147 158 Deferred revenue 10 (112 ) (119 ) (138 ) Income taxes 14   (1 ) (10 ) 1   Net cash provided by operating activities 139   94   278   648     Investing activities: Purchases of investments (363 ) (555 ) (974 ) (993 ) Proceeds from sales and maturities of investments 464 286 812 541 Purchases of property, equipment, and capitalized software (56 ) (41 ) (102 ) (66 )

Change in restricted investments

9 (9 ) 5 (14 ) Net cash paid in business combinations (6 ) — (8 ) (8 ) Other, net (7 ) (10 ) (6 ) (17 ) Net cash provided by (used in) investing activities 41   (329 ) (273 ) (557 )   Financing activities: Proceeds from common stock offering, net of issuance costs — 373 — 373 Proceeds from employee stock plans 10 7 10 8 Other, net (1 ) (1 ) 1   3   Net cash provided by financing activities 9   379   11   384   Net increase in cash and cash equivalents 189 144 16 475 Cash and cash equivalents at beginning of period 2,156   1,870   2,329   1,539   Cash and cash equivalents at end of period $ 2,345   $ 2,014   $ 2,345   $ 2,014    

MOLINA HEALTHCARE, INC.UNAUDITED NON-GAAP FINANCIAL MEASURES

We use two non-GAAP financial measures as supplemental metrics in evaluating our 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 our 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). We believe that EBITDA is particularly helpful in assessing our ability to meet the cash demands of our operating units. The following table reconciles net income, which we believe to be the most comparable GAAP measure, to EBITDA.

        Three Months Ended June 30, Six Months Ended June 30, 2016     2015 2016     2015 (Amounts in millions) Net income $ 33 $ 39 $ 57 $ 67 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 39 29 76 58 Interest expense 25 15 50 30 Income tax expense 47   62   87   101 EBITDA $ 144   $ 145   $ 270   $ 256  

The second of these non-GAAP measures is adjusted net income (including adjusted net income per diluted share). We believe that adjusted net income per diluted share is very helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles. The following table reconciles net income, which we believe to be the most comparable GAAP measure, to adjusted net income.

        Three Months Ended June 30, Six Months Ended June 30, 2016     2015 2016     2015 (In millions, except per diluted share amounts) Amount     Per share Amount     Per share Amount     Per share Amount     Per share Net income $ 33 $ 0.58 $ 39 $ 0.72 $ 57 $ 1.01 $ 67 $ 1.29 Adjustment, net of tax: Amortization of intangible assets 5   0.09   3   0.05   10   0.17   6   0.10 Adjusted net income $ 38   $ 0.67   $ 42   $ 0.77   $ 67   $ 1.18   $ 73   $ 1.39                  

 

MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

  June 30, March 31, December 31, June 30, 2016 2016 2015 2015 Ending Membership by Health Plan: California 680,000 676,000 620,000 593,000 Florida 565,000 576,000 440,000 348,000 Illinois 201,000 206,000 98,000 101,000 Michigan 393,000 399,000 328,000 260,000 New Mexico 251,000 246,000 231,000 225,000 Ohio 341,000 336,000 327,000 332,000

Puerto Rico

336,000 339,000 348,000 361,000 South Carolina 105,000 102,000 99,000 114,000 Texas 367,000 380,000 260,000 266,000 Utah 151,000 151,000 102,000 92,000 Washington 709,000 672,000 582,000 553,000 Wisconsin 134,000   137,000   98,000   107,000 4,233,000   4,220,000   3,533,000   3,352,000 Ending Membership by Program:

Temporary Assistance for Needy Families (TANF), CHIP(1)

2,500,000 2,485,000 2,312,000 2,180,000 Medicaid Expansion 654,000 632,000 557,000 475,000 Marketplace 597,000 630,000 205,000 261,000 Aged, Blind or Disabled (ABD) 387,000 380,000 366,000 353,000 Medicare-Medicaid Plan (MMP) - Integrated 51,000 50,000 51,000 39,000 Medicare Special Needs Plans 44,000   43,000   42,000   44,000 4,233,000   4,220,000   3,533,000   3,352,000  

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

   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

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

  Three Months Ended June 30, 2016

Member

Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)     Medical Margin Total     PMPM Total     PMPM California 2.0 $ 554 $ 268.95 $ 493 $ 239.63 89.1 % $ 61 Florida 1.8 464 273.90 426 251.69 91.9 38 Illinois 0.6 154 256.17 137 227.71 88.9 17 Michigan 1.2 369 312.18 334 282.86 90.6 35 New Mexico 0.8 342 451.72 305 403.52 89.3 37 Ohio 1.0 483 473.91 433 424.87 89.7 50 Puerto Rico 1.0 170 169.04 175 173.49 102.6 (5 ) South Carolina 0.3 87 277.22 71 226.27 81.6 16 Texas 1.1 635 571.14 499 448.23 78.5 136 Utah 0.5 110 240.26 106 233.12 97.0 4 Washington 2.1 559 264.40 500 236.32 89.4 59 Wisconsin 0.4 99 244.88 96 235.88 96.3 3 Other(3) —   3   — 19   — — (16 ) 12.8   $ 4,029   $ 316.72 $ 3,594   $ 282.54 89.2 % $ 435     Three Months Ended June 30, 2015 Member

Months(1)

Premium Revenue Medical Care Costs MCR(2) Medical Margin Total PMPM Total PMPM California 1.7 $ 503 $ 285.14 $ 459 $ 259.85 91.1 % $ 44 Florida 1.1 257 244.35 217 205.97 84.3 40 Illinois 0.3 102 337.55 98 325.91 96.6 4 Michigan 0.8 237 307.27 200 258.67 84.2 37 New Mexico 0.7 322 466.46 276 400.27 85.8 46 Ohio 1.1 509 510.30 432 433.75 85.0 77 Puerto Rico 1.1 194 179.33 184 170.32 95.0 10 South Carolina 0.4 93 276.36 67 196.92 71.3 26 Texas 0.8 512 635.74 468 581.42 91.5 44 Utah 0.2 80 288.60 72 258.88 89.7 8 Washington 1.6 410 249.39 371 225.46 90.4 39 Wisconsin 0.3 75 233.15 56 175.62 75.3 19 Other(3) —   10   — 29   — — (19 ) 10.1   $ 3,304   $ 328.96 $ 2,929   $ 291.65 88.7 % $ 375       (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

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

  Six Months Ended June 30, 2016 Member

Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)     Medical Margin Total     PMPM Total     PMPM California 4.0 $ 1,095 $ 271.14 $ 962 $ 238.30 87.9 % $ 133 Florida 3.4 953 284.53 839 250.58 88.1 114 Illinois 1.2 303 261.43 269 232.06 88.8 34 Michigan 2.4 756 316.18 681 285.13 90.2 75 New Mexico 1.5 678 450.62 601 399.17 88.6 77 Ohio 2.0 971 481.44 882 437.35 90.8 89 Puerto Rico 2.0 351 172.98 349 171.95 99.4 2 South Carolina 0.6 171 276.61 138 223.58 80.8 33 Texas 2.2 1,255 575.87 1,074 492.65 85.5 181 Utah 0.9 224 252.08 208 234.46 93.0 16 Washington 4.1 1,065 260.05 958 233.84 89.9 107 Wisconsin 0.8 196 247.57 188 236.92 95.7 8 Other(3) —   6   — 33   — — (27 ) 25.1   $ 8,024   $ 320.17 $ 7,182   $ 286.57 89.5 % $ 842     Six Months Ended June 30, 2015 Member

Months(1)

Premium Revenue Medical Care Costs MCR(2) Medical Margin Total PMPM Total PMPM California 3.4 $ 1,014 $ 294.85 $ 911 $ 264.97 89.9 % $ 103 Florida 2.0 568 291.33 498 255.45 87.7 70 Illinois 0.6 206 339.72 188 309.66 91.2 18 Michigan 1.5 457 298.87 385 251.57 84.2 72 New Mexico 1.4 636 462.62 568 413.48 89.4 68 Ohio 2.1 1,024 498.96 845 412.05 82.6 179 Puerto Rico 1.1 194 179.33 184 170.32 95.0 10 South Carolina 0.7 184 271.35 141 206.88 76.2 43 Texas 1.6 894 565.45 820 518.60 91.7 74 Utah 0.5 157 289.42 146 268.72 92.8 11 Washington 3.2 786 245.22 723 225.47 91.9 63 Wisconsin 0.6 135 216.85 105 168.58 77.7 30 Other(3) —   20   — 51   — — (31 ) 18.7   $ 6,275   $ 336.21 $ 5,565   $ 298.18 88.7 % $ 710       (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

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

  Three Months Ended June 30, 2016 Member

Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)    

Medical

Margin

Total     PMPM Total     PMPM TANF and CHIP 7.5 $ 1,302 $ 173.57 $ 1,202 $ 160.26 92.3 % $ 100 Medicaid Expansion 1.9 742 378.19 634 323.56 85.6 108 Marketplace 1.8 373 206.88 323 178.79 86.4 50 ABD 1.2 1,168 991.38 1,038 881.80 88.9 130 MMP 0.2 315 2,093.29 270 1,792.78 85.6 45 Medicare 0.2   129   997.44 127   974.30 97.7 2   12.8   $ 4,029   $ 316.72 $ 3,594   $ 282.54 89.2 % $ 435     Three Months Ended June 30, 2015 Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical

Margin

Total PMPM Total PMPM TANF and CHIP 6.5 $ 1,169 $ 178.38 $ 1,063 $ 162.24 91.0 % $ 106 Medicaid Expansion 1.4 582 419.67 474 341.67 81.4 108 Marketplace 0.8 161 204.22 90 113.21 55.4 71 ABD 1.1 1,053 984.99 947 885.84 89.9 106 MMP 0.1 198 1,784.30 214 1,934.40 108.4 (16 ) Medicare 0.2   141   1,059.90 141   1,062.71 100.3 —     10.1   $ 3,304   $ 328.96 $ 2,929   $ 291.65 88.7 % $ 375     Six Months Ended June 30, 2016 Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical

Margin

Total PMPM Total PMPM TANF and CHIP 14.9 $ 2,626 $ 176.00 $ 2,400 $ 160.85 91.4 % $ 226 Medicaid Expansion 3.8 1,421 371.82 1,208 316.13 85.0 213 Marketplace 3.4 782 228.19 657 191.62 84.0 125 ABD 2.4 2,280 976.58 2,079 890.71 91.2 201 MMP 0.3 655 2,157.55 587 1,932.73 89.6 68 Medicare 0.3   260   1,013.04 251   977.35 96.5 9   25.1   $ 8,024   $ 320.17 $ 7,182   $ 286.57 89.5 % $ 842     Six Months Ended June 30, 2015 Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical

Margin

Total PMPM Total PMPM TANF and CHIP 12.0 $ 2,141 $ 177.93 $ 1,960 $ 162.89 91.6 % $ 181 Medicaid Expansion 2.7 1,089 409.29 867 325.84 79.6 222 Marketplace 1.4 355 258.66 246 179.15 69.3 109 ABD 2.1 1,993 940.23 1,810 853.56 90.8 183 MMP 0.2 423 1,986.04 413 1,942.20 97.8 10 Medicare 0.3   274   1,036.95 269   1,020.01 98.4 5   18.7   $ 6,275   $ 336.21 $ 5,565   $ 298.18 88.7 % $ 710       (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.       MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA (In millions, except percentages and per-member per-month amounts)    

The following tables provide the details of our medical care costs for the periods indicated:

  Three Months Ended June 30, 2016     2015 Amount     PMPM     % of

Total

Amount     PMPM     % of

Total

Fee for service $ 2,620 $ 206.01 72.9 % $ 2,103 $ 209.34 71.8 % Pharmacy 529 41.59 14.7 392 39.01 13.3 Capitation 304 23.87 8.5 248 24.72 8.5 Direct delivery 18 1.39 0.5 27 2.78 1.0 Other 123   9.68   3.4   159   15.80   5.4   $ 3,594   $ 282.54   100.0 % $ 2,929   $ 291.65   100.0 %   Six Months Ended June 30, 2016 2015 Amount PMPM % of

Total

Amount PMPM % of

Total

Fee for service $ 5,357 $ 213.77 74.6 % $ 4,051 $ 217.05 72.8 % Pharmacy 1,054 42.05 14.7 743 39.81 13.4 Capitation 599 23.87 8.3 465 24.90 8.3 Direct delivery 34 1.36 0.5 54 2.93 1.0 Other 138   5.52   1.9   252   13.49   4.5   $ 7,182   $ 286.57   100.0 % $ 5,565   $ 298.18   100.0 %  

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

        June 30, December 31, 2016 2015 Fee-for-service claims incurred but not paid (IBNP) $ 1,292 $ 1,191 Pharmacy payable 103 88 Capitation payable 37 140 Other (1) 334   266 $ 1,766   $ 1,685  

 

(1)  “Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. As of June 30, 2016 and December 31, 2015, we had recorded non-risk provider payables of approximately $191 million and $167 million, respectively.

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

Our claims liability includes a provision 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. Our 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 our 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 for the periods indicated:

        Year Ended Six Months Ended June 30, December 31, 2016     2015 2015   Medical claims and benefits payable, beginning balance $ 1,685 $ 1,201 $ 1,201 Components of medical care costs related to: Current period 7,371 5,703 11,935 Prior period (189 ) (138 ) (141 ) Total medical care costs 7,182   5,565   11,794     Change in non-risk provider payables 24   14   48   Payments for medical care costs related to: Current period 5,885 4,449 10,448 Prior period 1,240   839   910   Total paid 7,125   5,288   11,358   Medical claims and benefits payable, ending balance $ 1,766   $ 1,492   $ 1,685     Benefit from prior period as a percentage of: Balance at beginning of period 11.3 % 11.5 % 11.8 % Premium revenue, trailing twelve months 1.3 % 1.2 % 1.1 % Medical care costs, trailing twelve months 1.4 % 1.4 % 1.2 %   Fee-For-Service Claims Data: Days in claims payable, fee for service 48 49 48 Number of members at end of period 4,233,000 3,352,000 3,533,000 Number of claims in inventory at end of period 530,900 463,200 380,800 Billed charges of claims in inventory at end of period $ 1,279 $ 905 $ 816 Claims in inventory per member at end of period 0.13 0.14 0.11 Billed charges of claims in inventory per member at end of period $ 302.06 $ 269.93 $ 230.91 Number of claims received during the period 26,279,000 18,679,000 40,173,300 Billed charges of claims received during the period $ 31,649 $ 21,505 $ 46,211

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