Molina Healthcare, Inc. (NYSE: MOH):
- 2016 net income declines due to
continued poor Affordable Care Act (ACA) Marketplace
performance
- Strong enrollment growth generated
approximately $16.3 billion of premium revenue
- General and administrative expenses
ratio decreased to 7.9% in 2016
- 2017 guidance of $1.72 net income per
diluted share and $2.09 adjusted net income per diluted share
Molina Healthcare, Inc. (NYSE: MOH) today reported its financial
results for the fourth quarter of 2016 and announced that it is
providing its outlook and guidance for fiscal year 2017.
“While we experienced strong enrollment growth across our
business and have made progress on our cost cutting efforts,
today’s results highlight the continuing challenges we face in the
ACA Marketplace,” said J. Mario Molina, M.D., chief executive
officer of Molina Healthcare, Inc. “We are clearly disappointed in
these results; however, we have identified and are committed to
taking decisive steps to stabilize Marketplace performance; enhance
our Medicaid profitability across Illinois, Ohio and Washington;
and sustain our progress in Puerto Rico. Further, we continue to
advocate for measures that the federal government can take to level
the Marketplace playing field for insurers, like Molina, that offer
effective, affordable health care to those who need it most.”
Analysis of Our Financial Results for the Year Ended December
31, 2016
Net income per diluted share decreased to $0.14 in 2016 compared
with $2.58 in 2015. Adjusted net income per diluted share decreased
to $0.50 in 2016 compared with $2.78 in 2015. The decrease in net
income was primarily the result of the declining profitability of
our Marketplace program.
Income before income taxes decreased by $185 million to $137
million in 2016 from $322 million in 2015. The significant
disparity in effective tax rates between years makes net income and
diluted earnings per share difficult to compare between 2016 and
2015. Accordingly, we believe that loss or income before income
taxes is a better comparison of our performance between 2016 and
2015.
Financial Impact of Variances between Actual Results and Our
Pricing Model for the Marketplace Exchanges in 2016
We estimate that our loss before income taxes in 2016 from the
Marketplace program amounted to approximately $110 million, or
$1.21 per diluted share. These results are substantially lower than
our expectations based upon our 2016 pricing model. Based upon
actual 2016 enrollment, our 2016 Marketplace program was priced to
produce income before income tax expense of approximately $60
million for all of 2016. The $170 million difference in income
before income tax expense between our reported results and those we
would have expected based upon our pricing model was due to the
following factors:
- Risk transfer payments were
approximately $325 million higher than anticipated in our pricing.
Risk transfer payments amounted to 24% of total premium in 2016,
compared with a pricing expectation of 9%.
- Although medical costs were $120
million lower than anticipated by our pricing model, we
nevertheless incurred $325 million in additional risk transfer
payments noted above.
- Other items increased income before
income taxes by approximately $35 million compared with pricing
expectations.
The difference between our actual results and those anticipated
by our pricing model was exacerbated by the federal government’s
failure to pay amounts owed to our health plans under the
Marketplace risk corridor program. We believe our health plans are
owed approximately $90 million in Marketplace risk corridor
payments for 2016 dates of service, but have not recorded any
amounts associated with this claim.
The following table presents a summary of the variance in
Marketplace performance to pricing expectations for 2016 (in
millions, except per-share amounts):
Year EndedDecember 31, 2016
Amount
Per DilutedShare
(1)
Risk transfer payments $ (325 ) $ (3.65 ) Lower than anticipated
medical costs 120 1.32 Other revenue and operating expenses, net 35
0.44 Variance in Marketplace actual performance
compared with pricing expectations $ (170 ) $ (1.89 )
________________________
(1)
Income tax effect calculated at the statutory tax rate of 37%.
Revenue and Enrollment in 2016
Strong enrollment growth generated approximately $16.3 billion
of premium revenue, or 23% more premium revenue in 2016 compared
with 2015. Enrollment growth was primarily due to increased
Marketplace enrollment and the acquisition of Medicaid managed care
membership. Consolidated premium revenue measured on a per-member
per-month (PMPM) basis decreased approximately 4% in 2016 when
compared with 2015. The decline in PMPM premium revenue was
primarily the result of lower PMPM premiums for Medicaid Expansion
membership and an increase in the percentage of our premium revenue
derived from TANF and Marketplace membership.
Medical Care Costs in 2016
The medical care ratio increased to 90.5% in 2016, from 89.1% in
2015, due to lower Marketplace margins. The medical care ratio of
our Marketplace program increased to 93% in 2016 from 74% in
2015.
The medical care ratio of all of our programs excluding
Marketplace increased by only 40 basis points between 2015 and
2016, as decreasing margins in Medicaid Expansion (where we saw a
500 basis point increase in our medical care ratio) were offset by
improved margins in other programs. Consolidated medical care costs
measured on a PMPM basis decreased approximately 3% in 2016 when
compared with 2015.
General and Administrative Expense in 2016
General and administrative expenses as a percentage of total
revenue (the “general and administrative expense ratio”) decreased
to 7.9% in 2016, from 8.1% in 2015.
Analysis of our Financial Results for the Quarter Ended
December 31, 2016
Profitability declined in the fourth quarter of 2016. Net loss
per diluted share was $1.64, compared with net income per diluted
share of $0.52 in the fourth quarter of 2015. Adjusted net loss per
diluted share was $1.54, compared with adjusted net income per
diluted share of $0.58 in the fourth quarter of 2015.
The following discrete items had an adverse impact on our
financial performance in the fourth quarter of 2016:
- Difficulties experienced by our
Marketplace program, including a $30 million premium deficiency
reserve recorded in the fourth quarter of 2016 for anticipated
losses in 2017. Including this reserve, our Marketplace program
lost $130 million on a pre-tax basis in the fourth quarter of
2016.
- Adjustments to premium revenue and
medical costs of approximately $25 million at our health plans that
related to dates of service in 2015 or 2014.
- Adjustments to premium revenue and
medical costs of approximately $37 million at our health plans that
related to dates of service in the first three quarters of
2016.
- Continued rate pressure in Illinois,
Ohio and Washington. As discussed below, rate increases effective
January 1, 2017, in all three of these states will provide margin
relief in 2017.
Financial Impact of the Marketplace and Out-of-Period Items
at Our Health Plans on our Fourth Quarter 2016 Results
The poor performance of our Marketplace program was very
detrimental to our financial performance for both the quarter and
the year ended December 31, 2016. The following table presents the
fourth quarter impact of the Marketplace and certain out-of-period
items at our Health Plans segment to our fourth quarter
consolidated results (in millions, except per-share amounts):
Quarter EndedDecember 31, 2016
Amount
Per Diluted Share
(1)
Marketplace losses before income tax expense $ (130 ) $ (1.47 )
Premium and provider adjustments recorded in the Health Plans
segment related to dates of service in 2015 or 2014 (25 ) (0.29 )
Premium and provider adjustments recorded in the Health Plans
segment related to dates of service in the first three quarters of
2016 (37 ) (0.41 ) $ (192 ) $ (2.17 ) ________________________
(1)
Income tax effect calculated at the statutory tax rate of 37%.
Income Taxes in 2016
The health insurer fee that we pay to the federal government is
not deductible for purposes of determining our income tax expense.
The decrease in income before taxes in 2016 compared with 2015,
combined with the relatively large amount of reported expenses that
are not deductible for tax purposes, has resulted in an effective
tax rate in excess of 90% for the full year 2016, compared with
55.5% for 2015. Because non-deductible expenses for the year are
fixed and do not decline relative to income or loss before income
tax expense, the substantial change in income before income taxes
in the fourth quarter is not matched by a proportional adjustment
to income tax expense. Rather, the effective tax rate we reported
in the fourth quarter of 2016 represents the cumulative adjustment
to our year-to-date effective tax rate.
Molina’s 2017 Plan for Action
We have identified the following areas of focus and related
actions to execute in 2017:
1. Stabilize Marketplace
Performance:
We will continue to advocate for the
immediate remediation of risk transfer methodologies that penalize
comparatively efficient and affordable health plans like ours and,
by extension, those individual consumers in need of affordable
health insurance. In particular, we are recommending that the
planned change to the Marketplace risk transfer methodology, which
is currently scheduled to take effect on January 1, 2018, be
brought forward in time and implemented immediately in 2017. Had
that same planned methodology change been in effect in 2016, we
estimate that our pre-tax income in 2016 would have been
approximately $70 million higher.
In January 2017, we filed suit on behalf of
our health plans seeking recovery from the federal government of
approximately $52 million in Marketplace risk corridor payments for
calendar year 2015. Based upon current estimates, we believe our
health plans are also owed approximately $90 million in Marketplace
risk corridor payments from the federal government for calendar
year 2016, and a further nominal amount for calendar year 2014. Our
lawsuit seeks recovery of all of these unpaid amounts. We have not
recognized revenue, nor have we recorded a receivable, for any
amount due from the federal government for unpaid Marketplace risk
corridor payments as of December 31, 2016. We have fully recognized
all liabilities due to the federal government that we have incurred
under the Marketplace risk corridor program, and have paid all
amounts due to the federal government as required.
2. Improve Medicaid performance
in Illinois, Ohio and Washington:
Inadequate premium rates limited
profitability in Illinois, Ohio and Washington in 2016. Effective
January 1, 2017, we received blended rate increases of
approximately 5% in Illinois, 4% in Ohio and 4% in Washington. We
expect improved profitability in all three plans in 2017 as a
result of these rate increases and company-wide cost containment
measures.
3. Sustain the improvements achieved in
Puerto Rico:
Results at our Puerto Rico health plan have
improved in the second half of 2016, primarily as a result of
management actions undertaken beginning in the spring of 2016. We
expect that the benefit of those actions to continue into 2017.
Conference Call
Management will host a conference call and webcast to discuss
Molina Healthcare’s fourth quarter and year-end results at 5:00
p.m. Eastern time on Wednesday, February 15, 2017. The number to
call for the interactive teleconference is (212) 231-2922. A
telephonic replay of the conference call will be available from
7:00 p.m. Eastern time on Wednesday, February 15, 2017, through
6:00 p.m. Eastern Time on Thursday, February 16, 2016, by dialing
(800) 633-8284 and entering confirmation number 21842012. 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.
2017 Business Outlook and Investor Meeting
As has been our past practice, we will discuss our 2017 business
outlook and strategy at our Investor Day Conference webcast and
presentation to be held on February 16, 2017, at the Le Parker
Meridien Hotel in New York City from 12:30 p.m. to 4:30 p.m.
Eastern Time. The Company will webcast the presentations offered by
its management team, which will be followed by question-and-answer
sessions. A 30-day online replay of the Investor Day meeting will
be available approximately one hour following the conclusion of the
live webcast. A link to this webcast can be found on the Company’s
website at molinahealthcare.com
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 12 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;
- the numerous political and market-based
uncertainties associated with the Affordable Care Act (the “ACA”)
or “Obamacare,” including any potential repeal and replacement of
the law, amendment of the law, or move to state block grants for
Medicaid;
- the market dynamics surrounding the ACA
Marketplaces, including but not limited to uncertainties associated
with risk transfer requirements, the potential for disproportionate
enrollment of higher acuity members, the withdrawal of cost sharing
subsidies and/or premium tax credits, the adequacy of agreed rates,
and potential disruption associated with market withdrawal;
- subsequent adjustments to reported
premium revenue based upon subsequent developments or new
information, including changes to estimated amounts payable or
receivable related to Marketplace risk adjustment/risk transfer,
risk corridors, and reinsurance;
- 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;
- 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 success of our efforts to retain
existing government contracts, including those in Illinois,
Washington, Florida, Texas, and New Mexico, and to obtain new
government contracts in connection with state requests for
proposals (RFPs) in both existing and new states;
- 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;
- our ability to consummate and realize
benefits from acquisitions, and to integrate acquisitions;
- 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;
- our estimates of amounts owed for such
cost expenditure floors, administrative cost and profit ceilings,
premium stabilization programs, profit-sharing arrangements, and
risk adjustment provisions;
- the Medicaid expansion cost corridors
in New Mexico and Washington, and any other retroactive adjustment
to revenue where methodologies and procedures are subject to
interpretation or dependent upon information about the health
status of participants other than Molina members;
- the interpretation and implementation
of at-risk premium rules and state contract performance
requirements regarding the achievement of certain quality measures,
and our ability to recognize revenue amounts 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 PROMESA law, and our efforts to better manage the
health care costs of our Puerto Rico health plan;
- the success and renewal of our duals
demonstration programs in California, Illinois, Michigan, Ohio,
South Carolina, and Texas;
- the accurate estimation of incurred but
not reported or paid medical costs across our health plans;
- efforts by states to recoup previously
paid and recognized premium amounts;
- 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, or
potential investigations, and any fine, sanction, enrollment
freeze, monitoring program, or premium recovery 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 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;
- our failure to comply with the
financial or other covenants in our credit agreement or the
indentures governing our outstanding notes;
- the sufficiency of our funds on hand to
pay the amounts due upon conversion of our outstanding notes;
- 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, public catastrophes or terrorist attacks, and associated
public alarm;
- 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 February 15, 2017, 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
OPERATIONS
Three Months EndedDecember 31, Year
EndedDecember 31, 2016 2015
2016 2015 (Dollar amounts in
millions, except per-share amounts) Revenue: Premium revenue $
4,109 $ 3,589 $ 16,324 $ 13,241 Service revenue 131 107 539 253
Premium tax revenue 120 108 465 397 Health insurer fee revenue 94
61 345 264 Investment income and other revenue 9 6 38
23 Total revenue 4,463 3,871 17,711
14,178 Operating expenses: Medical care costs 3,844
3,213 14,774 11,794 Cost of service revenue 123 90 485 193 General
and administrative expenses 359 316 1,393 1,146 Premium tax
expenses 120 108 465 397 Health insurer fee expenses 54 40 217 157
Depreciation and amortization 37 28 139 104
Total operating expenses 4,537 3,795 17,473
13,791 Operating (loss) income (74 ) 76 238
387 Other expenses, net: Interest expense 25 21 101
66 Other income, net — (1 ) — (1 ) Total other
expenses, net 25 20 101 65 (Loss)
income before income tax expense (99 ) 56 137 322 Income tax
(benefit) expense (8 ) 26 129 179 Net (loss)
income $ (91 ) $ 30 $ 8 $ 143 Diluted
net (loss) income per share $ (1.64 ) $ 0.52 $ 0.14 $
2.58 Diluted weighted average shares outstanding 55.6
57.7 56.3 55.6
Operating
Statistics: Medical care ratio (1) 93.6 % 89.5 % 90.5 % 89.1 %
General and administrative expense ratio (2) 8.0 % 8.2 % 7.9 % 8.1
% Premium tax ratio (1) 2.8 % 2.9 % 2.8 % 2.9 % Effective tax rate
7.9 % 46.9 % 94.1 % 55.5 % Net profit margin (2) (2.0 )% 0.8 % — %
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) General and administrative
expense ratio represents general and administrative expenses as a
percentage of total revenue. Net profit margin represents net
(loss) income as a percentage of total revenue.
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED BALANCE
SHEETS
December 31, 2016 2015
(In millions,except per-share
data)
ASSETS Current assets: Cash and cash equivalents $ 2,819 $
2,329 Investments 1,758 1,801 Receivables 974 597 Income taxes
refundable 63 13 Prepaid expenses and other current assets 131 192
Derivative asset 267 374 Total current assets 6,012
5,306 Property, equipment, and capitalized software, net 454 393
Deferred contract costs 86 81 Intangible assets, net 140 122
Goodwill 620 519 Restricted investments 110 109 Deferred income
taxes 10 18 Other assets 41 28 $ 7,473 $ 6,576
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Medical claims and benefits payable $ 1,929 $ 1,685
Amounts due government agencies 1,273 729 Accounts payable and
accrued liabilities 382 362 Deferred revenue 315 223 Current
portion of long-term debt 472 449 Derivative liability 267
374 Total current liabilities 4,638 3,822 Senior notes 975
962 Lease financing obligations 198 198 Deferred income taxes 15 —
Other long-term liabilities 42 37 Total liabilities
5,868 5,019 Stockholders’ equity: Common stock,
$0.001 par value; 150 shares authorized; outstanding: 57 shares at
December 31, 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 841 803 Accumulated
other comprehensive loss (2 ) (4 ) Retained earnings 766 758
Total stockholders’ equity 1,605 1,557 $ 7,473
$ 6,576
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Three Months EndedDecember 31, Year
EndedDecember 31, 2016 2015
2016 2015 (In millions)
Operating activities: Net (loss) income $ (91 ) $ 30 $ 8 $ 143
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation and amortization 47 33 182 126
Deferred income taxes 2 5 22 (7 ) Share-based compensation 2 7 26
23 Amortization of convertible senior notes and lease financing
obligations 8 8 31 30 Other, net 2 6 16 19 Changes in operating
assets and liabilities: Receivables 79 79 (348 ) 56 Prepaid
expenses and other assets 47 28 (69 ) (35 ) Medical claims and
benefits payable 58 123 226 482 Amounts due government agencies 41
(251 ) 544 202 Accounts payable and accrued liabilities (8 ) 50 (7
) 84 Deferred revenue (65 ) 153 92 24 Income taxes (82 ) (52 ) (50
) (22 ) Net cash provided by operating activities 40 219
673 1,125 Investing activities: Purchases of
investments (485 ) (612 ) (1,929 ) (1,923 ) Proceeds from sales and
maturities of investments 454 263 1,966 1,126 Purchases of
property, equipment, and capitalized software (33 ) (31 ) (176 )
(132 ) Change in restricted investments — (1 ) 4 (6 ) Net cash paid
in business combinations — (373 ) (48 ) (450 ) Other, net (7 ) (1 )
(19 ) (35 ) Net cash used in investing activities (71 ) (755 ) (202
) (1,420 ) Financing activities: Proceeds from senior notes
offerings, net of issuance costs — 689 — 689 Proceeds from common
stock offering, net of issuance costs — — — 373 Proceeds from
employee stock plans 8 10 18 18 Other, net — 2 1
5 Net cash provided by financing activities 8
701 19 1,085 Net (decrease) increase in cash
and cash equivalents (23 ) 165 490 790 Cash and cash equivalents at
beginning of period 2,842 2,164 2,329 1,539
Cash and cash equivalents at end of period $ 2,819 $
2,329 $ 2,819 $ 2,329
MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT
MEMBERSHIP
As of December 31, 2016
2015 2014 Ending Membership by
Health Plan: California 683,000 620,000 531,000 Florida 553,000
440,000 164,000 Illinois 195,000 98,000 100,000 Michigan 391,000
328,000 242,000 New Mexico 254,000 231,000 212,000 New York (1)
35,000 — — Ohio 332,000 327,000 347,000 Puerto Rico (2) 330,000
348,000 — South Carolina 109,000 99,000 118,000 Texas 337,000
260,000 245,000 Utah 146,000 102,000 83,000 Washington 736,000
582,000 497,000 Wisconsin 126,000 98,000 84,000
4,227,000 3,533,000 2,623,000
Ending Membership by
Program: Temporary Assistance for Needy Families (TANF) and
Children’s Health Insurance Program (CHIP) 2,536,000 2,312,000
1,809,000 Medicaid Expansion 673,000 557,000 385,000 Marketplace
526,000 205,000 15,000 Aged, Blind or Disabled (ABD) 396,000
366,000 347,000 Medicare-Medicaid Plan (MMP) - Integrated 51,000
51,000 18,000 Medicare Special Needs Plans 45,000 42,000
49,000 4,227,000 3,533,000 2,623,000
________________________
(1)
The New York health plan was acquired on August 1, 2016.
(2)
The Puerto Rico health plan began serving members effective April
1, 2015.
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT
FINANCIAL DATA
(In millions, except percentages and
per-member per-month amounts)
Three Months Ended December 31, 2016 Member
Months (1)
Premium Revenue Medical Care
Costs MCR (2)
MedicalMargin
Total PMPM Total
PMPM California 2.1 $ 595 $ 287.80 $ 544 $ 263.64 91.6 % $
51 Florida 1.7 479 288.69 464 279.69 96.9 15 Illinois 0.5 135
233.43 154 265.84 113.9 (19 ) Michigan 1.1 377 321.47 327 278.89
86.8 50 New Mexico 0.7 288 378.29 304 399.29 105.5 (16 ) New York
(3) 0.1 50 460.08 49 451.09 98.0 1 Ohio 1.0 489 486.36 441 439.09
90.3 48 Puerto Rico 1.0 191 193.54 178 179.02 92.5 13 South
Carolina 0.4 105 318.27 88 267.65 84.1 17 Texas 1.0 602 588.83 511
499.56 84.8 91 Utah 0.5 114 257.97 111 252.85 98.0 3 Washington 2.2
584 267.50 536 245.11 91.6 48 Wisconsin 0.4 96 254.50 110 288.94
113.5 (14 ) Other (4) — 4 — 27 — — (23 ) 12.7
$ 4,109 $ 323.54 $ 3,844 $ 302.68 93.6 % $ 265
Three Months Ended December 31, 2015
Member
Months (1)
Premium Revenue Medical Care Costs MCR
(2)
MedicalMargin
Total PMPM Total PMPM California 1.8 $
662 $ 363.57 $ 577 $ 316.97 87.2 % $ 85 Florida 1.2 331 279.37 318
268.98 96.3 13 Illinois 0.3 85 287.88 79 266.91 92.7 6 Michigan 1.0
329 334.44 282 287.00 85.8 47 New Mexico 0.7 304 438.82 263 379.10
86.4 41 New York (3) — — — — — — — Ohio 1.0 500 501.11 437 436.77
87.2 63 Puerto Rico 1.1 192 184.79 159 153.04 82.8 33 South
Carolina 0.3 78 261.07 69 229.48 87.9 9 Texas 0.7 543 693.55 496
633.77 91.4 47 Utah 0.4 89 290.05 77 251.55 86.7 12 Washington 1.7
416 241.28 376 217.77 90.3 40 Wisconsin 0.3 55 186.57 53 182.41
97.8 2 Other (4) — 5 — 27 — — (22 ) 10.5
$ 3,589 $ 344.32 $ 3,213 $ 308.31 89.5 % $ 376
________________________
(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)
The New York health plan was acquired on August 1, 2016.
(4)
“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)
Year Ended December 31, 2016 Member
Months (1)
Premium Revenue Medical Care
Costs MCR (2)
MedicalMargin
Total PMPM Total
PMPM California 8.2 $ 2,302 $ 282.14 $ 2,029 $ 248.70 88.1 %
$ 273 Florida 6.7 1,926 288.73 1,765 264.60 91.6 161 Illinois 2.3
601 257.99 568 243.71 94.5 33 Michigan 4.7 1,520 321.93 1,345
284.82 88.5 175 New Mexico 3.0 1,304 429.81 1,209 398.49 92.7 95
New York (3) 0.2 82 446.72 79 431.73 96.6 3 Ohio 4.0 1,961 485.20
1,747 432.36 89.1 214 Puerto Rico 4.0 726 180.65 694 172.57 95.5 32
South Carolina 1.3 378 296.54 320 250.97 84.6 58 Texas 4.3 2,454
575.01 2,110 494.41 86.0 344 Utah 1.8 444 249.56 423 238.03 95.4 21
Washington 8.4 2,218 263.36 2,015 239.21 90.8 203 Wisconsin 1.6 395
252.94 388 248.28 98.2 7 Other (4) — 13 — 82 —
— (69 ) 50.5 $ 16,324 $ 323.46 $ 14,774 $
292.75 90.5 % $ 1,550
Year Ended December 31,
2015 Member
Months (1)
Premium Revenue Medical Care Costs MCR
(2)
MedicalMargin
Total PMPM Total PMPM California 7.1 $
2,200 $ 310.89 $ 1,926 $ 272.22 87.6 % $ 274 Florida 4.1 1,199
289.85 1,081 261.49 90.2 118 Illinois 1.2 397 328.93 367 303.72
92.3 30 Michigan 3.4 1,067 317.15 903 268.27 84.6 164 New Mexico
2.8 1,237 446.27 1,106 398.98 89.4 131 New York (3) — — — — — — —
Ohio 4.1 2,034 499.34 1,718 421.61 84.4 316 Puerto Rico 3.2 567
178.31 505 158.80 89.1 62 South Carolina 1.3 348 267.25 278 213.30
79.8 70 Texas 3.1 1,961 621.37 1,809 573.32 92.3 152 Utah 1.2 331
286.22 300 259.32 90.6 31 Washington 6.6 1,602 242.36 1,470 222.36
91.7 132 Wisconsin 1.2 261 213.48 215 176.01 82.4 46 Other (4) —
37 — 116 — — (79 ) 39.3 $ 13,241
$ 337.28 $ 11,794 $ 300.43 89.1 % $ 1,447
________________________
(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)
The New York health plan was acquired on August 1, 2016.
(4)
“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 December 31, 2016
MemberMonths (1)
Premium Revenue Medical Care
Costs MCR (2)
MedicalMargin
Total PMPM Total
PMPM TANF and CHIP 7.7 $ 1,404 $ 183.96 $ 1,304 $ 170.83
92.9 % $ 100 Medicaid Expansion 2.0 700 349.12 625 311.57 89.2 75
Marketplace 1.6 344 217.94 407 258.71 118.7 (63 ) ABD 1.2 1,200
1,003.09 1,104 921.69 91.9 96 MMP 0.1 314 2,047.88 274 1,785.00
87.2 40 Medicare 0.1 147 1,085.22 130 966.81
89.1 17 12.7 $ 4,109 $ 323.54 $ 3,844 $
302.68 93.6 % $ 265
Three Months Ended December
31, 2015 Member
Months (1)
Premium Revenue Medical Care Costs MCR
(2)
MedicalMargin
Total PMPM Total PMPM TANF and CHIP 6.9
$ 1,203 $ 175.96 $ 1,092 $ 159.83 90.8 % $ 111 Medicaid Expansion
1.7 735 446.24 606 367.76 82.4 129 Marketplace 0.6 127 223.57 111
194.80 87.1 16 ABD 1.1 1,061 969.51 995 910.11 93.9 66 MMP 0.1 330
2,163.47 290 1,905.00 88.1 40 Medicare 0.1 133
1,076.00 119 954.40 88.7 14 10.5 $ 3,589
$ 344.32 $ 3,213 $ 308.31 89.5 % $ 376
Year Ended December 31, 2016
MemberMonths (1)
Premium Revenue Medical Care Costs MCR
(2)
MedicalMargin
Total PMPM Total PMPM TANF and CHIP
30.2 $ 5,403 $ 179.21 $ 4,950 $ 164.18 91.6 % $ 453 Medicaid
Expansion 7.8 2,884 369.82 2,475 317.37 85.8 409 Marketplace 6.7
1,525 228.44 1,416 212.17 92.9 109 ABD 4.7 4,666 991.24 4,277
908.39 91.6 389 MMP 0.6 1,303 2,131.97 1,141 1,866.93 87.6 162
Medicare 0.5 543 1,033.15 515 981.36 95.0 28
50.5 $ 16,324 $ 323.46 $ 14,774 $
292.75 90.5 % $ 1,550
Year Ended December 31,
2015
MemberMonths (1)
Premium Revenue Medical Care Costs MCR
(2)
MedicalMargin
Total PMPM Total PMPM TANF and CHIP
25.5 $ 4,483 $ 175.64 $ 4,122 $ 161.50 92.0 % $ 361 Medicaid
Expansion 5.9 2,389 408.51 1,931 330.18 80.8 458 Marketplace 2.6
652 251.96 481 185.85 73.8 171 ABD 4.3 4,124 966.83 3,784 887.27
91.8 340 MMP 0.5 1,063 2,034.51 974 1,863.93 91.6 89 Medicare 0.5
530 1,038.15 502 982.50 94.6 28 39.3
$ 13,241 $ 337.28 $ 11,794 $ 300.43 89.1 % $
1,447 ________________________
(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 December 31, 2016
2015 Amount PMPM
% of
Total
Amount PMPM % of
Total
Fee for service $ 2,837 $ 223.43 73.8 % $ 2,297 $ 220.34
71.5 % Pharmacy 592 46.57 15.4 449 43.08 14.0 Capitation 317 24.93
8.2 257 24.69 8.0 Direct delivery 23 1.80 0.6 43 4.14 1.3 Other 75
5.95 2.0 167 16.06 5.2 $
3,844 $ 302.68 100.0 % $ 3,213 $ 308.31
100.0 %
Year Ended December 31, 2016
2015 Amount PMPM % of
Total
Amount PMPM % of
Total
Fee for service $ 10,993 $ 217.84 74.4 % $ 8,572 $ 218.35
72.7 % Pharmacy 2,213 43.84 15.0 1,610 41.01 13.7 Capitation 1,218
24.13 8.2 982 25.02 8.3 Direct delivery 78 1.55 0.5 128 3.26 1.1
Other 272 5.39 1.9 502 12.79 4.2
$ 14,774 $ 292.75 100.0 % $ 11,794 $
300.43 100.0 % The following table provides the
details of our medical claims and benefits payable as of the dates
indicated:
December 31, 2016
2015 Fee-for-service claims incurred but not paid
(IBNP) $ 1,352 $ 1,191 Pharmacy payable 112 88 Capitation payable
37 140 Other (1) 428 266 $ 1,929 $ 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 December 31, 2016 and 2015, we had recorded non-risk
provider payables of approximately $225 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 December 31, 2016
2015 Medical claims and benefits payable, beginning
balance $ 1,685 $ 1,201 Components of medical care costs related
to: Current period 14,966 11,935 Prior period (192 ) (141 ) Total
medical care costs 14,774 11,794 Change in
non-risk provider payables 58 48 Payments for medical
care costs related to: Current period 13,296 10,448 Prior period
1,292 910 Total paid 14,588 11,358
Medical claims and benefits payable, ending balance $ 1,929
$ 1,685 Benefit from prior period as a percentage of:
Balance at beginning of period 11.4 % 11.8 % Premium revenue,
trailing twelve months 1.2 % 1.1 % Medical care costs, trailing
twelve months 1.3 % 1.2 % Fee-For-Service Claims Data: (1)
Days in claims payable, fee for service (2) 47 48 Number of members
at end of year 4,227,000 3,533,000 Number of claims in inventory at
end of year 554,700 380,800 Billed charges of claims in inventory
at end of year $ 1,307 $ 816 Claims in inventory per member at end
of year 0.13 0.11 Billed charges of claims in inventory per member
at end of year $ 309.09 $ 230.91 Number of claims received during
the year 53,360,600 40,173,300 Billed charges of claims received
during the year $ 64,388 $ 46,211 ________________________
(1)
Claims data includes inpatient and outpatient claims only. Pharmacy
and other claims are not included.
(2)
Claims payable at December 31, 2016 includes IBNP and $94 million
of fee-for-service payables included in “Other” medical claims and
benefits payable.
MOLINA HEALTHCARE, INC.UNAUDITED
NON-GAAP FINANCIAL MEASURES
We use 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. See further information regarding non-GAAP measures below
the tables.
Three Months EndedDecember
31, Year EndedDecember 31, 2016
2015 2016 2015 (In
millions) Net (loss) income $ (91 ) $ 30 $ 8 $ 143 Adjustments:
Depreciation, and amortization of intangible assets and capitalized
software 43 33 161 120 Interest expense 25 21 101 66 Income tax
(benefit) expense (8 ) 26 129 179 EBITDA $ (31 ) $
110 $ 399 $ 508
Three Months Ended December 31, Year Ended December
31, 2016 2015 2016
2015 (In millions, except per diluted share
amounts) Amount
Pershare
Amount
Pershare
Amount
Pershare
Amount
Pershare
Net (loss) income $ (91 ) $ (1.64 ) $ 30 $ 0.52 $ 8 $ 0.14 $ 143 $
2.58 Adjustment: Amortization of intangible assets 8 0.16 5 0.09 32
0.57 18 0.32 Income tax effect (1) (3 ) (0.06 ) (2 ) (0.03 ) (12 )
(0.21 ) (7 ) (0.12 ) Amortization of intangible assets, net of tax
effect 5 0.10 3 0.06 20 0.36
11 0.20 Adjusted net (loss) income $ (86 ) $
(1.54 ) $ 33 $ 0.58 $ 28 $ 0.50 $ 154
$ 2.78 ________________________
(1)
Income tax effect of adjustments calculated at the statutory tax
rate of 37%.
The following are descriptions of the adjustments made to GAAP
measures used to calculate the non-GAAP measures used in this news
release:
Earnings before interest, taxes, depreciation and
amortization (EBITDA): Net income (GAAP) less
depreciation, and amortization of intangible assets and capitalized
software, interest expense and income tax expense. We believe that
EBITDA is particularly helpful in assessing our ability to meet the
cash demands of our operating units.
Adjusted net (loss) income: Net income (GAAP) less
amortization of intangible assets, net of income tax effect
calculated at the statutory tax rate of 37%. We believe that
adjusted net income is very helpful in assessing our financial
performance exclusive of the non-cash impact of the amortization of
purchased intangibles.
Adjusted net (loss) income per diluted share: Adjusted
net income divided by weighted average common shares outstanding on
a fully diluted basis.
MOLINA HEALTHCARE, INC.
2017 OUTLOOK AND GUIDANCE
The following table presents the
Company’s outlook for fiscal year 2017:(1)
Premium revenue $18.4B Premium tax revenue $460M Service
revenue $570M Investment income and other revenue
$40M
Total revenue $19.5B Medical care costs
$16.3B Medical care ratio (2) 88.5% Cost of service revenue
$520M
General and administrative expenses
$1.8B G&A ratio (3) 9.0% Premium tax expenses $460M
Depreciation and amortization $160M Interest expense and other
income $100M Income before income taxes $175M
Net income
$100M EBITDA (4) $465M Effective tax
rate 44.0% Net profit margin (3) 0.5% Diluted weighted average
shares 58.2M Net income per share $1.72 Adjusted net income per
share (4) $2.09 ________________________
(1)
All amounts are estimates; actual results may differ materially.
Does not include Aetna/Humana Medicare transaction break-up fee.
See our risk factors as discussed in our Form 10-K and other
filings.
(2)
Medical care ratio represents medical care costs as a percentage of
premium revenue.
(3)
G&A expense ratio represents general and administrative
expenses as a percentage of total revenue. Net profit margin
represents net income as a percentage of total revenue.
(4)
See below for a reconciliation of non-GAAP financial measures.
Reconciliation of Non-GAAP Financial
Measures – 2017 Outlook (in millions, except per-share
amounts)
Net income $ 100 Adjustments: Depreciation, and amortization
of intangible assets and capitalized software 190 Interest expense
100 Income tax expense 75 EBITDA $ 465
Amount
Per share (2)
Net income $ 100 $ 1.72 Adjustments: Amortization of intangible
assets 34 0.59 Income tax effect (1) (12 ) (0.22 ) Amortization of
intangible assets, net of tax effect 22 0.37 Adjusted
net income $ 122 $ 2.09 ________________________
(1)
Income tax effect calculated at the statutory tax rate of 37%.
(2)
Computation assumes 58.2 million diluted weighted average shares
outstanding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170215006170/en/
Molina Healthcare, Inc.Juan José Orellana, 562-435-3666, ext.
111143Investor Relations
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