Molina Healthcare Announces Fourth Quarter and Year-End 2017 Results and Provides Fiscal Year 2018 Preliminary Guidance

LONG BEACH, Calif.--(BUSINESS WIRE)--Feb. 12, 2018-- Molina Healthcare, Inc. (NYSE: MOH):

Net loss of $4.59 per diluted share for the quarter.
Medical care ratio excluding Marketplace declines to 88.8% from 90.9% in the third quarter of 2017.
General and administrative expense ratio declines to 7.4% from 7.6% in the third quarter of 2017.
Fourth quarter results include $356 million of impairment losses, restructuring and separation costs, and loss on debt extinguishment.
Fourth quarter results include $53 million increased medical care costs for termination of cost sharing reduction (CSR) subsidy payments effective October 1, 2017, and other Marketplace reserve adjustments.
2018 preliminary guidance of $3.00 - $3.50 net income per diluted share and $3.23 - $3.73 adjusted net income per diluted share. Preliminary guidance has been developed with conservative views of medical cost trends, Marketplace pricing adequacy, and the ultimate outcome of numerous profit improvement initiatives. Preliminary guidance will be updated once the Company has the benefit of first quarter earnings and further insight into the execution of these profit improvement initiatives.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the fourth quarter and year ended December 31, 2017, and provided its preliminary guidance for fiscal year 2018.

“Our fourth quarter results are emblematic of the significant transition Molina is undertaking,” said Joe Zubretsky, president and CEO. “The disappointment of contract losses and related goodwill charges, continued restructuring costs, and catch up adjustments to unacceptable Marketplace results are legacies of the past. Looking forward, the core business results showed improvement quarter over quarter, and we took steps to strengthen the quality of the balance sheet, all of which serve as a solid platform to achieve our margin recovery and sustainability plan we outlined for investors last month. Medical cost control, administrative cost discipline, and capital strength remain at the fore of our plan.”

Fourth Quarter 2017 and Full Year Highlights

	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(Dollar amounts in millions, except per-share amounts)
Premium revenue	$	4,689		$	4,190		$	18,854		$	16,445
Operating (loss) income	$	(269	)	$	(6	)	$	(555	)	$	306
Net (loss) income	$	(262	)	$	(47	)	$	(512	)	$	52
Net (loss) income per diluted share	$	(4.59	)	$	(0.85	)	$	(9.07	)	$	0.92

Diluted weighted average shares outstanding		57.1			55.6			56.5			56.3

Operating Statistics:
Medical care ratio ⁽¹⁾		90.7	%		91.7	%		90.6	%		89.8	%
G&A ratio ⁽²⁾		7.4	%		7.9	%		8.0	%		7.8	%
Premium tax ratio ⁽¹⁾		2.2	%		2.9	%		2.3	%		2.8	%
Effective income tax (benefit) expense rate		(17.2	)%		54.5	%		(16.4	)%		74.8	%
Net (loss) profit margin ⁽²⁾		(5.3	)%		(1.0	)%		(2.6	)%		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.
(2)		G&A ratio represents general and administrative expenses as a percentage of total revenue. Net (loss) profit margin represents net (loss) income as a percentage of total revenue.

Summary of Significant Items Affecting 2017 Financial Results

	Three Months Ended December 31,						Year Ended December 31,
	(In millions, except per diluted share amounts)
	Amount			Per Diluted Share ⁽¹⁾			Amount			Per Diluted Share ⁽¹⁾
Termination of CSR subsidy payments for the fourth quarter of 2017	$	73		$	0.81		$	73		$	0.82
Marketplace adjustments for CSR subsidies, risk adjustment and medical loss ratio (MLR) floor liabilities for January through September 2017 dates of service		50			0.55			N/A			N/A
Marketplace adjustments related to risk adjustment, CSR subsidies, and other items for 2016 dates of service		—			—			47			0.52
Change in Marketplace premium deficiency reserve for 2017 dates of service		(70	)		(0.77	)		(30	)		(0.33	)
Impairment losses		269			3.22			470			6.01
Restructuring and separation costs		73			0.81			234			2.86
Loss on debt extinguishment		14			0.24			14			0.24
Fee received for terminated Medicare acquisition		—			—			(75	)		(0.84	)
	$	409		$	4.86		$	733		$	9.28

__________________

(1)		Amounts shown are before considering revaluation of related deferred tax assets as a result of the Tax Cuts and Jobs Act of 2017, as applicable, and which is described further below. Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at a statutory income tax rate of 37%, which is in excess of the effective tax rate recorded in our consolidated statements of operations.

Fourth Quarter 2017 Compared With Third Quarter 2017

Developments in our business during 2017 limit the value of comparisons to 2016 performance. The Company believes that the comparison of 2017 fourth quarter performance with 2017 third quarter performance provides the most meaningful context for fourth quarter results.

Loss before income tax benefit for the fourth quarter of 2017 was $316 million, compared with a loss before income tax benefit of $113 million for the third quarter of 2017. Net loss per diluted share was $4.59 for the fourth quarter of 2017 compared with net loss per diluted share of $1.70 reported for the third quarter of 2017.

Despite the loss reported for the quarter, the performance of core operations and overall administrative cost efficiency improved in the fourth quarter when compared with the third quarter of 2017.

Marketplace performance deteriorated due to normal seasonality and other matters discussed below. The Company has increased premium rates and reduced its Marketplace presence effective January 1, 2018 as part of its overall program to improve profitability.

Among the key developments affecting fourth quarter 2017 results were:

The medical care ratio for the Company’s Medicaid and Medicare programs combined (“core operations”) declined to 88.8% in the fourth quarter of 2017, from 90.9% in the third quarter of 2017.
The general and administrative expense ratio declined to 7.4% in the fourth quarter of 2017 from 7.6% in the third quarter of 2017.
The decision by the federal government to cease payment of Marketplace CSR subsidies in the fourth quarter of 2017 increased loss before income tax benefit for the quarter by approximately $73 million ($0.81 per diluted share). Despite its decision to record a charge in the fourth quarter for this item, the Company believes that it is legally entitled to these federal payments and will pursue all available means to collect them.
Increases to Marketplace risk transfer and CSR liabilities related to the first three quarters of 2017 increased loss before income tax benefit by approximately $50 million ($0.55 per diluted share) in the fourth quarter.
The reduction of the Marketplace-related premium deficiency reserve to zero as of December 31, 2017 reduced loss before income tax benefit by $70 million ($0.77 per diluted share) in the fourth quarter.
Non-cash goodwill and intangible asset impairment charges of $269 million ($3.22 per diluted share) were incurred at the Florida, Illinois, and New Mexico health plans in the fourth quarter.
Approximately $73 million ($0.81 per diluted share) of restructuring costs were recognized in the fourth quarter.
Approximately $14 million ($0.24 per diluted share) of non-cash costs were recognized in the fourth quarter in connection with the issuance of our common shares in exchange for $141 million face value of our 1.625% convertible senior notes.

Income Tax (Benefit) Expense

The revaluation of deferred tax assets in connection with the Tax Cuts and Jobs Act of 2017 resulted in $54 million additional income tax expense in the fourth quarter and year ended December 31, 2017 ($0.94 per diluted share and $0.95 per diluted share, respectively). In addition, the effective tax benefit for 2017 is less than the statutory tax benefit due to the relatively large amount of reported expenses that are not deductible for tax purposes, primarily relating to goodwill impairment losses and separation costs.

2018 Preliminary Guidance

The Company has offered guidance on a preliminary basis because of the inherent uncertainty around achievement and the timing of its numerous profit improvement initiatives. While those initiatives extend across the various dimensions of managed care fundamentals, many are in the early stages of development and implementation.

Therefore, the Company’s guidance should be viewed as a preliminary estimate of what it expects to achieve until the profit improvement initiatives manifest themselves in the earnings stream. Once it has the benefit of first quarter earnings and further insight into the execution of the profit improvement initiatives, the Company will be able to provide a firmer view of 2018 guidance.

To provide for an appropriate amount of execution risk, the Company’s preliminary guidance has been developed with appropriately conservative views of:

Medical cost baseline in 2017;
Medical cost trend for 2018;
Potential rate increases and retained amounts of revenue at risk; and
The turnaround of the Marketplace business until the achievement of the margins implicit in 2018 pricing is observed.

The following table summarizes 2018 Preliminary Guidance ⁽¹⁾:

Premium revenue					~ $17.5B
Service revenue					~ $525M
Premium tax revenue					~ $410M
Health insurer fees reimbursed					~ $295M
Investment income and other revenue					~ $85M
Total revenue					~$18.8B
Medical care costs					~ $15.6B
Medical care ratio ⁽²⁾					~ 89%
Cost of service revenue					~ $480M
General and administrative expenses					~ $1.4B
G&A ratio ⁽³⁾					~ 7.3%
Premium tax expenses					~ $410M
Health insurer fees					~ $310M
Depreciation and amortization					~ $115M
Interest expense and other income					~ $125M
Income before income taxes					$355M - $400M
Net income					$202M - $236M
EBITDA ⁽⁴⁾					$632M - $676M
Effective tax rate					41% - 43%
Net profit margin ⁽³⁾					1.1% - 1.3%
Diluted weighted average shares					~ 67.3M
Net income per share					$3.00 - $3.50
Adjusted net income per share ⁽⁴⁾					$3.23 - $3.73
End-of-year Marketplace membership					303,000
End-of-year Non-Marketplace membership					3,738,000

__________________

(1)		All amounts are estimates; actual results may differ materially. See our risk factors as discussed in our Form 10-K and other filings and the statements below in this press release after the heading “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.”
(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 reconciliation of non-GAAP financial measures at the end of this release.

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s fourth quarter and year-end 2017 results at 8:30 a.m. Eastern time on Tuesday, February 13, 2018. The number to call for the interactive teleconference is (888) 317-6003 and entering confirmation number 5278774. A telephonic replay of the conference call will be available through Tuesday, February 20, 2018, by dialing (877) 344-7529 and entering confirmation number 10116226. 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 health plans operating in 13 states across the nation and in the Commonwealth of Puerto Rico, Molina serves approximately 4.5 million members. 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 2018 preliminary guidance, as well as 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 maintenance initiatives, including the timing and amounts of the benefits realized, and administrative savings achieved;
the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare;”
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 discontinuation of premium tax credits, the adequacy of agreed rates, and potential disruption associated with market withdrawal from Utah, Wisconsin, or other states;
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;
effective management of our medical costs;
our ability to predict with a reasonable degree of accuracy utilization rates, 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;
the full reimbursement of the ACA health insurer fee, or HIF;
the success of our efforts to retain existing government contracts, including those in Florida, New Mexico, Puerto Rico, Texas, and Washington, including the success of any protest filings;
our ability to manage our operations, 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 or divestitures;
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 and requirements;
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 California, 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, the impact of Hurricane Maria 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;
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, including the greater scale and revenues of our California, Ohio, Texas, and Washington 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 or maturity 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 12, 2018, 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 Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(Dollar amounts in millions, except per-share amounts)
Revenue:
Premium revenue ⁽¹⁾	$	4,689		$	4,190		$	18,854		$	16,445
Service revenue		131			131			521			539
Premium tax revenue		107			123			438			468
Health insurer fees reimbursed ⁽¹⁾		—			81			—			292
Investment income and other revenue		22			9			70			38
Total revenue		4,949			4,534			19,883			17,782
Operating expenses:
Medical care costs		4,251			3,844			17,073			14,774
Cost of service revenue		123			123			492			485
General and administrative expenses		367			359			1,594			1,393
Premium tax expenses		107			123			438			468
Health insurer fees		—			54			—			217
Depreciation and amortization		28			37			137			139
Impairment losses		269			—			470			—
Restructuring and separation costs		73			—			234			—
Total operating expenses		5,218			4,540			20,438			17,476
Operating (loss) income		(269	)		(6	)		(555	)		306
Other expenses, net:
Interest expense		33			25			118			101
Other expense (income), net		14			—			(61	)		—
Total other expenses, net		47			25			57			101
(Loss) income before income tax (benefit) expense		(316	)		(31	)		(612	)		205
Income tax (benefit) expense		(54	)		16			(100	)		153
Net (loss) income	$	(262	)	$	(47	)	$	(512	)	$	52

Net (loss) income per diluted share	$	(4.59	)	$	(0.85	)	$	(9.07	)	$	0.92

Diluted weighted average shares outstanding		57.1			55.6			56.5			56.3

Operating Statistics:
Medical care ratio		90.7	%		91.7	%		90.6	%		89.8	%
G&A ratio		7.4	%		7.9	%		8.0	%		7.8	%
Premium tax ratio		2.2	%		2.9	%		2.3	%		2.8	%
Effective income tax (benefit) expense rate		(17.2	)%		54.5	%		(16.4	)%		74.8	%
Net (loss) profit margin		(5.3	)%		(1.0	)%		(2.6	)%		0.3	%

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(1)		The Centers for Medicare and Medicaid Services (CMS) incorporates the Health Insurer Fee in our Medicare and Marketplace premium rates. We have therefore reclassified such amounts to premium revenue, from health insurer fees reimbursed, for all applicable periods presented.


MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS

	December 31,
	2017			2016
	(In millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents	$	3,186		$	2,819
Investments		2,524			1,758
Restricted investments		169			—
Receivables		871			974
Income taxes refundable		54			39
Prepaid expenses and other current assets		185			131
Derivative asset		522			267
Total current assets		7,511			5,988
Property, equipment, and capitalized software, net		342			454
Deferred contract costs		101			86
Intangible assets, net		69			140
Goodwill		186			620
Restricted investments		119			110
Deferred income taxes		103			10
Other assets		40			41
	$	8,471		$	7,449
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	2,192		$	1,929
Amounts due government agencies		1,542			1,202
Accounts payable and accrued liabilities		366			385
Deferred revenue		282			315
Current portion of long-term debt		653			472
Derivative liability		522			267
Total current liabilities		5,557			4,570
Long-term debt		1,318			975
Lease financing obligations		198			198
Deferred income taxes		—			15
Other long-term liabilities		61			42
Total liabilities		7,134			5,800
Stockholders’ equity:
Common stock, $0.001 par value; 150 shares authorized; outstanding: 60 at December 31, 2017 and 57 shares at December 31, 2016		—			—
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding		—			—
Additional paid-in capital		1,044			841
Accumulated other comprehensive loss		(5	)		(2	)
Retained earnings		298			810
Total stockholders’ equity		1,337			1,649
	$	8,471		$	7,449


MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(In millions)
Operating activities:
Net (loss) income	$	(262	)	$	(47	)	$	(512	)	$	52
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		39			47			178			182
Impairment losses		269			—			470			—
Deferred income taxes		(26	)		2			(94	)		22
Share-based compensation, including accelerated share-based compensation		8			2			46			26
Non-cash restructuring charges		11			—			60			—
Amortization of convertible senior notes and lease financing obligations		8			8			32			31
Loss on debt extinguishment		14			—			14			—
Other, net		8			2			21			16
Changes in operating assets and liabilities:
Receivables		131			79			103			(348	)
Prepaid expenses and other assets		(3	)		47			(56	)		(69	)
Medical claims and benefits payable		(286	)		58			263			226
Amounts due government agencies		219			(30	)		341			473
Accounts payable and accrued liabilities		(102	)		(5	)		(12	)		(4	)
Deferred revenue		(187	)		(65	)		(34	)		92
Income taxes		6			(58	)		(16	)		(26	)
Net cash (used in) provided by operating activities		(153	)		40			804			673
Investing activities:
Purchases of investments		(822	)		(485	)		(2,718	)		(1,929	)
Proceeds from sales and maturities of investments		233			454			1,771			1,966
Purchases of property, equipment, and capitalized software		(1	)		(33	)		(86	)		(176	)
(Increase) decrease in restricted investments held-to-maturity		(2	)		—			(12	)		4
Net cash paid in business combinations		—			—			—			(48	)
Other, net		(7	)		(7	)		(28	)		(19	)
Net cash used in investing activities		(599	)		(71	)		(1,073	)		(202	)
Financing activities:
Proceeds from senior notes offering, net of issuance costs		—			—			325			—
Proceeds from borrowings under credit facility		—			—			300			—
Proceeds from employee stock plans		8			8			19			18
Cash paid for financing transaction fees		(7	)		—			(7	)		—
Other, net		3			—			(1	)		1
Net cash provided by financing activities		4			8			636			19
Net (decrease) increase in cash and cash equivalents		(748	)		(23	)		367			490
Cash and cash equivalents at beginning of period		3,934			2,842			2,819			2,329
Cash and cash equivalents at end of period	$	3,186		$	2,819		$	3,186		$	2,819


MOLINA HEALTHCARE, INC. UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

	As of December 31,
	2017	2016	2015
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP)	2,457,000	2,536,000	2,312,000
Marketplace	815,000	526,000	205,000
Medicaid Expansion	668,000	673,000	557,000
Aged, Blind or Disabled (ABD)	412,000	396,000	366,000
Medicare-Medicaid Plan (MMP) - Integrated	57,000	51,000	51,000
Medicare Special Needs Plans	44,000	45,000	42,000
	4,453,000	4,227,000	3,533,000
Ending Membership by Health Plan:
California	746,000	683,000	620,000
Florida	625,000	553,000	440,000
Illinois	165,000	195,000	98,000
Michigan	398,000	391,000	328,000
New Mexico	253,000	254,000	231,000
New York	32,000	35,000	—
Ohio	327,000	332,000	327,000
Puerto Rico	314,000	330,000	348,000
South Carolina	116,000	109,000	99,000
Texas	430,000	337,000	260,000
Utah	152,000	146,000	102,000
Washington	777,000	736,000	582,000
Wisconsin	118,000	126,000	98,000
	4,453,000	4,227,000	3,533,000


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, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	7.4	$	1,369	$	183.95	$	1,250	$	168.00	91.3	%	$	119
Medicaid Expansion	2.0		774		386.22		629		313.89	81.3			145
ABD	1.3		1,366		1,100.22		1,229		989.56	89.9			137
Total Medicaid	10.7		3,509		328.28		3,108		290.76	88.6			401
MMP	0.2		363		2,142.07		341		2,006.07	93.7			22
Medicare	0.1		152		1,155.15		124		948.16	82.1			28
Total Medicare	0.3		515		1,710.94		465		1,543.93	90.2			50
Excluding Marketplace	11.0		4,024		366.18		3,573		325.12	88.8			451
Marketplace	2.4		665		268.39		678		273.92	102.1			(13	)
	13.4	$	4,689	$	348.20	$	4,251	$	315.70	90.7	%	$	438


	Three Months Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	7.7	$	1,404	$	183.96	$	1,304	$	170.83	92.9	%	$	100
Medicaid Expansion	2.0		768		383.19		625		311.57	81.3			143
ABD	1.2		1,200		1,003.09		1,104		921.69	91.9			96
Total Medicaid	10.9		3,372		311.31		3,033		279.82	89.9			339
MMP	0.1		319		2,076.73		274		1,785.00	86.0			45
Medicare	0.1		150		1,114.69		130		966.81	86.7			20
Total Medicare	0.2		469		1,626.50		404		1,402.09	86.2			65
Excluding Marketplace	11.1		3,841		345.40		3,437		308.91	89.4			404
Marketplace	1.6		349		221.05		407		258.71	117.0			(58	)
	12.7	$	4,190	$	329.96	$	3,844	$	302.68	91.7	%	$	346

__________________

(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)

	Year Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	30.2	$	5,554	$	183.75	$	5,111	$	169.09	92.0	%	$	443
Medicaid Expansion	8.1		3,150		388.42		2,674		329.73	84.9			476
ABD	4.9		5,135		1,050.41		4,863		994.80	94.7			272
Total Medicaid	43.2		13,839		320.16		12,648		292.61	91.4			1,191
MMP	0.7		1,446		2,177.72		1,317		1,982.36	91.0			129
Medicare	0.5		601		1,143.63		493		939.67	82.2			108
Total Medicare	1.2		2,047		1,722.47		1,810		1,523.15	88.4			237
Excluding Marketplace	44.4		15,886		357.68		14,458		325.53	91.0			1,428
Marketplace	10.8		2,968		274.47		2,615		241.84	88.1			353
	55.2	$	18,854	$	341.39	$	17,073	$	309.14	90.6	%	$	1,781


	Year Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	30.2	$	5,403	$	179.21	$	4,950	$	164.18	91.6	%	$	453
Medicaid Expansion	7.8		2,952		378.58		2,475		317.37	83.8			477
ABD	4.7		4,666		991.24		4,277		908.39	91.6			389
Total Medicaid	42.7		13,021		305.28		11,702		274.33	89.9			1,319
MMP	0.6		1,321		2,160.94		1,141		1,866.93	86.4			180
Medicare	0.5		558		1,063.44		515		981.36	92.3			43
Total Medicare	1.1		1,879		1,653.73		1,656		1,457.67	88.1			223
Excluding Marketplace	43.8		14,900		340.28		13,358		305.03	89.6			1,542
Marketplace	6.7		1,545		231.38		1,416		212.17	91.7			129
	50.5	$	16,445	$	325.87	$	14,774	$	292.75	89.8	%	$	1,671

__________________

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

	Three Months Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	1.8	$	621	$	335.46	$	531	$	286.70	85.5	%	$	90
Florida	1.1		390		358.34		349		320.47	89.4			41
Illinois	0.5		146		294.68		146		295.25	100.2			—
Michigan	1.1		383		339.23		325		287.60	84.8			58
New Mexico	0.7		325		465.52		279		400.84	86.1			46
New York ⁽³⁾	0.1		46		465.75		42		432.25	92.8			4
Ohio	1.0		532		555.50		460		480.48	86.5			72
Puerto Rico	0.9		179		187.49		178		187.68	100.1			1
South Carolina	0.4		116		337.14		111		320.47	95.1			5
Texas	0.7		558		796.86		510		728.72	91.4			48
Utah	0.3		88		319.80		71		259.95	81.3			17
Washington	2.2		610		275.76		540		243.70	88.4			70
Wisconsin	0.2		30		162.36		27		139.38	85.9			3
Other ⁽⁴⁾	—		—		—		4		—	—			(4	)
	11.0	$	4,024	$	366.18	$	3,573	$	325.12	88.8	%	$	451


	Three Months Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	1.9	$	639	$	342.41	$	489	$	261.60	76.4	%	$	150
Florida	1.1		374		348.59		335		312.59	89.7			39
Illinois	0.5		136		234.17		154		265.84	113.5			(18	)
Michigan	1.1		376		323.24		326		279.55	86.5			50
New Mexico	0.7		270		380.36		289		406.50	106.9			(19	)
New York ⁽³⁾	0.1		50		460.08		49		451.09	98.0			1
Ohio	1.0		479		489.73		432		442.31	90.3			47
Puerto Rico	1.0		191		193.54		178		179.02	92.5			13
South Carolina	0.4		105		318.31		88		267.65	84.1			17
Texas	0.7		528		738.53		460		643.05	87.1			68
Utah	0.2		87		302.48		75		263.94	87.3			12
Washington	2.1		568		268.88		505		238.99	88.9			63
Wisconsin	0.3		34		166.56		28		131.60	79.0			6
Other ⁽⁴⁾	—		4		—		29		—	—			(25	)
	11.1	$	3,841	$	345.40	$	3,437	$	308.91	89.4	%	$	404

__________________

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

	Year Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	7.4	$	2,392	$	321.46	$	2,117	$	284.53	88.5	%	$	275
Florida	4.3		1,522		350.15		1,461		335.97	96.0			61
Illinois	2.1		593		286.69		638		308.41	107.6			(45	)
Michigan	4.6		1,545		334.22		1,360		294.15	88.0			185
New Mexico	2.9		1,258		439.95		1,166		407.94	92.7			92
New York ⁽³⁾	0.4		181		449.85		170		424.17	94.3			11
Ohio	3.9		2,130		544.98		1,894		484.66	88.9			236
Puerto Rico	3.8		732		190.13		691		179.65	94.5			41
South Carolina	1.4		445		328.41		412		304.04	92.6			33
Texas	2.8		2,150		769.82		1,978		708.20	92.0			172
Utah	1.1		355		316.44		290		258.96	81.8			65
Washington	8.9		2,445		275.64		2,143		241.55	87.6			302
Wisconsin	0.8		131		168.64		107		136.84	81.1			24
Other ⁽⁴⁾	—		7		—		31		—	—			(24	)
	44.4	$	15,886	$	357.68	$	14,458	$	325.53	91.0	%	$	1,428


	Year Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	7.4	$	2,247	$	304.83	$	1,900	$	257.72	84.5	%	$	347
Florida	4.1		1,348		329.58		1,227		299.94	91.0			121
Illinois	2.3		603		258.72		568		243.71	94.2			35
Michigan	4.7		1,517		324.18		1,339		286.00	88.2			178
New Mexico	2.8		1,245		440.63		1,162		411.30	93.3			83
New York ⁽³⁾	0.2		82		446.72		79		431.73	96.6			3
Ohio	3.9		1,927		490.71		1,718		437.56	89.2			209
Puerto Rico	4.0		726		180.65		694		172.57	95.5			32
South Carolina	1.3		378		296.58		320		250.97	84.6			58
Texas	2.9		2,182		744.65		1,926		657.38	88.3			256
Utah	1.1		344		297.68		296		256.31	86.1			48
Washington	8.1		2,146		263.50		1,936		237.66	90.2			210
Wisconsin	1.0		142		165.95		106		123.44	74.4			36
Other ⁽⁴⁾	—		13		—		87		—	—			(74	)
	43.8	$	14,900	$	340.28	$	13,358	$	305.03	89.6	%	$	1,542

__________________

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

	Three Months Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.5	$	68	$	163.41	$	75		$	181.70	111.2	%	$	(7	)
Florida	0.8		225		283.63		251			316.67	111.6			(26	)
Michigan	0.1		10		153.52		11			166.49	108.5			(1	)
New Mexico	0.1		28		387.65		22			291.42	75.2			6
Ohio	—		18		355.81		17			317.65	89.3			1
Texas	0.5		146		242.38		166			276.16	113.9			(20	)
Utah	0.2		45		238.32		43			227.77	95.6			2
Washington	0.1		40		321.91		28			233.26	72.5			12
Wisconsin	0.1		85		505.67		67			401.16	79.3			18
Other ⁽³⁾	—		—		—		(2	)		—	—			2
	2.4	$	665	$	268.39	$	678		$	273.92	102.1	%	$	(13	)


	Three Months Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.2	$	26	$	127.99	$	55		$	282.83	221.0	%	$	(29	)
Florida	0.6		108		183.99		129			219.31	119.2			(21	)
Michigan	—		3		285.50		1			204.16	71.6			2
New Mexico	—		18		353.63		15			294.95	83.3			3
Ohio	—		11		420.48		9			325.28	77.2			2
Texas	0.3		76		245.20		51			164.54	67.1			25
Utah	0.3		27		181.65		36			232.38	127.9			(9	)
Washington	0.1		18		239.89		31			424.83	177.0			(13	)
Wisconsin	0.1		62		366.22		82			479.24	130.9			(20	)
Other ⁽³⁾	—		—		—		(2	)		—	—			2
	1.6	$	349	$	221.05	$	407		$	258.71	117.0	%	$	(58	)

__________________

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

	Year Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	1.7	$	309	$	185.88	$	231		$	138.61	74.6	%	$	78
Florida	3.6		1,046		293.35		1,009			283.17	96.5			37
Michigan	0.3		51		180.26		38			135.64	75.2			13
New Mexico	0.3		110		349.50		84			264.14	75.6			26
Ohio	0.2		86		363.24		81			340.44	93.7			5
Texas	2.6		663		250.08		517			195.20	78.1			146
Utah	0.9		180		215.93		178			213.33	98.8			2
Washington	0.5		163		317.39		156			304.74	96.0			7
Wisconsin	0.7		360		477.53		327			433.98	90.9			33
Other ⁽³⁾	—		—		—		(6	)		—	—			6
	10.8	$	2,968	$	274.47	$	2,615		$	241.84	88.1	%	$	353


	Year Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.8	$	131	$	166.01	$	129		$	164.35	99.0	%	$	2
Florida	2.6		590		228.65		538			208.53	91.2			52
Michigan	—		10		232.88		6			154.32	66.3			4
New Mexico	0.2		60		287.37		47			223.85	77.9			13
Ohio	0.1		40		348.06		29			254.78	73.2			11
Texas	1.4		279		208.48		184			137.13	65.8			95
Utah	0.7		103		166.21		127			204.14	122.8			(24	)
Washington	0.3		76		272.48		79			284.87	104.5			(3	)
Wisconsin	0.6		256		363.54		282			399.51	109.9			(26	)
Other ⁽³⁾	—		—		—		(5	)		—	—			5
	6.7	$	1,545	$	231.38	$	1,416		$	212.17	91.7	%	$	129

__________________

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

	Three Months Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	2.3	$	689	$	303.98	$	606	$	267.49	88.0	%	$	83
Florida	1.9		615		326.80		600		318.86	97.6			15
Illinois	0.5		146		294.68		146		295.25	100.2			—
Michigan	1.2		393		329.50		336		281.26	85.4			57
New Mexico	0.8		353		458.22		301		390.58	85.2			52
New York ⁽³⁾	0.1		46		465.75		42		432.25	92.8			4
Ohio	1.0		550		545.09		477		471.99	86.6			73
Puerto Rico	0.9		179		187.49		178		187.68	100.1			1
South Carolina	0.4		116		337.14		111		320.47	95.1			5
Texas	1.2		704		541.55		676		520.34	96.1			28
Utah	0.5		133		286.70		114		246.88	86.1			19
Washington	2.3		650		278.21		568		243.15	87.4			82
Wisconsin	0.3		115		324.48		94		263.00	81.1			21
Other ⁽⁴⁾	—		—		—		2		—	—			(2	)
	13.4	$	4,689	$	348.20	$	4,251	$	315.70	90.7	%	$	438


	Three Months Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	2.1	$	665	$	321.74	$	544	$	263.64	81.9	%	$	121
Florida	1.7		482		290.53		464		279.69	96.3			18
Illinois	0.5		136		234.17		154		265.84	113.5			(18	)
Michigan	1.1		379		322.91		327		278.89	86.4			52
New Mexico	0.7		288		378.63		304		399.29	105.5			(16	)
New York ⁽³⁾	0.1		50		460.08		49		451.09	98.0			1
Ohio	1.0		490		487.83		441		439.09	90.0			49
Puerto Rico	1.0		191		193.54		178		179.02	92.5			13
South Carolina	0.4		105		318.31		88		267.65	84.1			17
Texas	1.0		604		590.59		511		499.56	84.6			93
Utah	0.5		114		260.05		111		252.85	97.2			3
Washington	2.2		586		267.92		536		245.11	91.5			50
Wisconsin	0.4		96		256.93		110		288.94	112.5			(14	)
Other ⁽⁴⁾	—		4		—		27		—	—			(23	)
	12.7	$	4,190	$	329.96	$	3,844	$	302.68	91.7	%	$	346

__________________

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

	Year Ended December 31, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	9.1	$	2,701	$	296.68	$	2,348	$	257.86	86.9	%	$	353
Florida	7.9		2,568		324.56		2,470		312.18	96.2			98
Illinois	2.1		593		286.69		638		308.41	107.6			(45	)
Michigan	4.9		1,596		325.43		1,398		285.11	87.6			198
New Mexico	3.2		1,368		430.97		1,250		393.67	91.3			118
New York ⁽³⁾	0.4		181		449.85		170		424.17	94.3			11
Ohio	4.1		2,216		534.56		1,975		476.39	89.1			241
Puerto Rico	3.8		732		190.13		691		179.65	94.5			41
South Carolina	1.4		445		328.41		412		304.04	92.6			33
Texas	5.4		2,813		516.84		2,495		458.50	88.7			318
Utah	2.0		535		273.55		468		239.49	87.5			67
Washington	9.4		2,608		277.93		2,299		245.01	88.2			309
Wisconsin	1.5		491		320.71		434		283.14	88.3			57
Other ⁽⁴⁾	—		7		—		25		—	—			(18	)
	55.2	$	18,854	$	341.39	$	17,073	$	309.14	90.6	%	$	1,781


	Year Ended December 31, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	8.2	$	2,378	$	291.41	$	2,029	$	248.70	85.3	%	$	349
Florida	6.7		1,938		290.56		1,765		264.60	91.1			173
Illinois	2.3		603		258.72		568		243.71	94.2			35
Michigan	4.7		1,527		323.36		1,345		284.82	88.1			182
New Mexico	3.0		1,305		430.15		1,209		398.49	92.6			96
New York ⁽³⁾	0.2		82		446.72		79		431.73	96.6			3
Ohio	4.0		1,967		486.66		1,747		432.36	88.8			220
Puerto Rico	4.0		726		180.65		694		172.57	95.5			32
South Carolina	1.3		378		296.58		320		250.97	84.6			58
Texas	4.3		2,461		576.69		2,110		494.41	85.7			351
Utah	1.8		447		251.63		423		238.03	94.6			24
Washington	8.4		2,222		263.80		2,015		239.21	90.7			207
Wisconsin	1.6		398		255.30		388		248.28	97.2			10
Other ⁽⁴⁾	—		13		—		82		—	—			(69	)
	50.5	$	16,445	$	325.87	$	14,774	$	292.75	89.8	%	$	1,671

__________________

(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)

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

	Three Months Ended December 31,
	2017						2016
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	3,052	$	226.66	71.8	%	$	2,837	$	223.43	73.8	%
Pharmacy		659		48.88	15.4			592		46.57	15.4
Capitation		338		25.13	8.0			317		24.93	8.2
Direct delivery		11		0.80	0.3			23		1.80	0.6
Other		191		14.23	4.5			75		5.95	2.0
	$	4,251	$	315.70	100.0	%	$	3,844	$	302.68	100.0	%


	Year Ended December 31,
	2017						2016
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	12,682	$	229.63	74.3	%	$	10,993	$	217.84	74.4	%
Pharmacy		2,563		46.40	15.0			2,213		43.84	15.0
Capitation		1,360		24.63	8.0			1,218		24.13	8.2
Direct delivery		73		1.33	0.4			78		1.55	0.5
Other		395		7.15	2.3			272		5.39	1.9
	$	17,073	$	309.14	100.0	%	$	14,774	$	292.75	100.0	%


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

	December 31,
	2017		2016
Fee-for-service claims incurred but not paid (IBNP)	$	1,717	$	1,352
Pharmacy payable		112		112
Capitation payable		67		37
Other ⁽¹⁾		296		428
	$	2,192	$	1,929

__________________

(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 operations. As of December 31, 2017 and 2016, we had recorded non-risk provider payables of approximately $122 million and $225 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 was less (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,
	2017			2016
Medical claims and benefits payable, beginning balance	$	1,929		$	1,685
Components of medical care costs related to:
Current period		17,037			14,966
Prior period		36			(192	)
Total medical care costs		17,073			14,774

Change in non-risk provider payables		(106	)		58
Payments for medical care costs related to:
Current period		15,130			13,304
Prior period		1,574			1,284
Total paid		16,704			14,588
Medical claims and benefits payable, ending balance	$	2,192		$	1,929

Benefit from prior period as a percentage of:
Balance at beginning of period		(1.9	)%		11.4	%
Premium revenue, trailing twelve months		(0.2	)%		1.2	%
Medical care costs, trailing twelve months		(0.2	)%		1.3	%

Days in claims payable, fee for service ⁽¹⁾		54			47

__________________

(1)		Claims payable includes primarily IBNP. Additionally, it includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $99 million and $94 million, as of December 31, 2017 and 2016, respectively.

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 (in millions, except per diluted share amounts).

	Three Months Ended December 31,												Year Ended December 31,
	2017						2016						2017						2016

Net (loss) income	$(262					)	$(47					)	$(512					)	$52
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	36						43						165						161
Interest expense	33						25						118						101
Income tax (benefit) expense	(54					)	16						(100					)	153
EBITDA	$(247					)	$37						$(329					)	$467


	Three Months Ended December 31,												Year Ended December 31,
	2017						2016						2017						2016

	Amount			Per Diluted share			Amount			Per Diluted share			Amount			Per Diluted share			Amount			Per Diluted share
Net (loss) income	$	(262	)	$	(4.59	)	$	(47	)	$	(0.85	)	$	(512	)	$	(9.07	)	$	52		$	0.92
Adjustment:
Amortization of intangible assets		6			0.11			8			0.16			30			0.55			32			0.57
Income tax effect ⁽¹⁾		(2	)		(0.04	)		(3	)		(0.06	)		(11	)		(0.20	)		(12	)		(0.21	)
Amortization of intangible assets, net of tax effect		4			0.07			5			0.10			19			0.35			20			0.36
Adjusted net (loss) income	$	(258	)	$	(4.52	)	$	(42	)	$	(0.75	)	$	(493	)	$	(8.72	)	$	72		$	1.28

__________________

(1)		Income tax effect of adjustment calculated at the blended federal and state 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 (loss) income (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax (benefit) expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.

Adjusted net (loss) income: Net (loss) 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 (loss) income is 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 (loss) income divided by weighted average common shares outstanding on a fully diluted basis.


MOLINA HEALTHCARE, INC. 2018 PRELIMINARY GUIDANCE

Reconciliation of Non-GAAP Financial Measures (in millions, except per-share amounts)

							Low End			High End
Net income							$	202		$	236
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software								150			150
Interest expense								125			125
Income tax expense								155			165
EBITDA							$	632		$	676


	Low End						High End
	Amount			Per share ⁽²⁾			Amount			Per share ⁽²⁾
Net income	$	202		$	3.00		$	236		$	3.50
Adjustments:
Amortization of intangible assets		20			0.30			20			0.30
Income tax effect ⁽¹⁾		(5	)		(0.07	)		(5	)		(0.07	)
Amortization of intangible assets, net of tax effect		15			0.23			15			0.23
Adjusted net income	$	217		$	3.23		$	251		$	3.73

__________________

(1)		Income tax effect calculated at the statutory tax rate of 22.5%.
(2)		Computation assumes 67.3 million diluted weighted average shares outstanding.

View source version on businesswire.com: http://www.businesswire.com/news/home/20180212006254/en/

Source: Molina Healthcare, Inc.

Molina Healthcare, Inc.
Ryan Kubota, 562-435-3666, ext. 119057
Investor Relations

News Release

Molina Healthcare Announces Fourth Quarter and Year-End 2017 Results and Provides Fiscal Year 2018 Preliminary Guidance