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Molina Healthcare Reports Third Quarter 2016 Results

Oct 27, 2016

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LONG BEACH, Calif.--(BUSINESS WIRE)--Oct. 27, 2016-- Molina Healthcare, Inc. (NYSE: MOH):

  • Net income per diluted share for the quarter of $0.76.
  • Adjusted net income per diluted share for the quarter of $0.85.
  • Net income per diluted share for the quarter up 31% over second quarter 2016.
  • Adjusted net income per diluted share for the quarter up 27% over second quarter 2016.
  • Total revenue for the quarter of $4.5 billion, up 26% over third quarter 2015.
  • Aggregate membership up 22% over third quarter 2015.

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

“Our third quarter results demonstrate continuing improvement in our overall business,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “Although these results highlight the need for programmatic adjustments to the Affordable Care Act’s health insurance Marketplaces, Molina Healthcare’s combination of product and geographic diversification, quality focused medical care, and efficient operations continues to deliver value to our members, our government partners, and our investors.”

Update on Financial Performance

Third Quarter 2016 Compared With Second Quarter 2016

Third quarter 2016 financial performance improved significantly when compared with the second quarter of 2016. Earnings per diluted share increased to $0.76 in the third quarter of 2016 from $0.58 in the second quarter. Adjusted earnings per diluted share increased to $0.85 in the third quarter of 2016 from $0.67 in the second quarter.

Higher profitability in the third quarter of 2016, when compared with the second quarter of 2016, was primarily the result of:

  • Improved profitability among products other than the Marketplace, partially offset by lower profitability for the Marketplace product. Excluding adjustments related to 2015 dates of service, the medical care ratio for all products combined (excluding Marketplace) declined to 89.6% in the third quarter from 90.3% in the second quarter. The medical care ratio for the Marketplace program (also excluding adjustments related to 2015 dates of service) increased to 89.0% in the third quarter from 79.7% in the second quarter. Although third quarter results for the Marketplace business were lower than anticipated, we believe that Marketplace performance for full year 2016 dates of service will be approximately breakeven. We continue to record substantial liabilities for Marketplace risk transfer payments. We estimate that such payments reduced our Marketplace premium revenue by approximately 25% for the nine months ended September 30, 2016. We have recommended that the risk transfer formula be modified so that payments between health plans are allocated based solely upon medical costs, rather than upon premiums. Such a change would have lowered the percentage of premium revenue returned as a result of risk transfer from 25% to 20% for the nine months ended September 30, 2016. We believe that the methodology used to calculate Marketplace risk transfer payments penalizes comparatively efficient and affordable health plans and, as a result, those purchasing affordable Marketplace policies ultimately pay higher premiums.
  • Improved administrative efficiency. Our general and administrative expense ratio fell to 7.6% in the third quarter of 2016 from 8.1% in the second quarter.
  • Lower effective tax rate. The benefit of approximately $5 million in discrete items reduced our effective tax rate to 54.0% in the third quarter of 2016, from 59.8% in the second quarter.

Net Income per Share Guidance

Our net income per share guidance for fiscal year 2016 remains unchanged. As previously disclosed, we expect the following factors, among others, to affect our financial performance in the rest of 2016:

  • The ultimate savings to be realized from various cost savings initiatives and the speed at which such savings will be realized.
  • Medicaid rate increases (excluding Medicaid Expansion) of approximately 3.0% in California (effective July 1, 2016); approximately 2.5% in Puerto Rico (effective July 1, 2016); approximately 3.0% in Texas (effective September 1, 2016); and approximately 4.0% in Florida (effective September 1, 2016). All rate changes are consistent with our previous expectations.
  • Medicaid Expansion rate decreases of approximately 11.0% in California (effective July 1, 2016) and approximately 2.0% in Ohio (effective July 1, 2016). All rate changes are consistent with our previous expectations.
  • The implementation of a medical care ratio floor of 86.0% for the South Carolina Medicaid program effective July 1, 2016.
  • Declining margins for our Marketplace business during the second half of 2016 due to normal membership attrition; the addition of higher cost members through the special enrollment process; higher costs as members reach the limits of the cost-sharing provisions of their insurance coverage; and increasing utilization as members become more engaged with our care networks.

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare's third quarter results at 5:00 p.m. Eastern time on Thursday, October 27, 2016. The number to call for the interactive teleconference is (212) 231-2903. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Thursday, October 27, 2016, through 6:00 p.m. Eastern Time on Friday, October 28, 2016, by dialing (800) 633-8284 and entering confirmation number 21818529. A live audio broadcast of Molina Healthcare’s conference call will be available on our website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our locally operated health plans in 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;
  • uncertainties and evolving market and provider economics associated with the implementation of the Affordable Care Act (the “ACA”), the Medicaid expansion, the insurance marketplaces, the effect of various implementing regulations, and uncertainties regarding the Medicare-Medicaid dual eligible demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
  • management of our medical costs, including our ability to reduce over time the high medical costs commonly associated with new patient populations;
  • our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates in new plans, geographies, and programs where we have less experience with patient and provider populations, and also including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
  • our ability to manage growth, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives;
  • our ability to consummate and realize benefits from proposed acquisitions, including the pending Aetna-Humana Medicare Advantage divestiture transaction;
  • 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, including but not limited to cost-plus reimbursement for retroactively eligible members in New Mexico, 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 are at least partially dependent upon information about the health status of state or federal program participants who are not Molina members;
  • the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;
  • the interpretation and implementation of state contract performance requirements regarding the achievement of certain quality measures, and our ability to avoid liquidated damages associated therewith;
  • cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
  • the success of our health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under our Medicaid contract, the effect of the newly enacted PROMESA law, and our efforts to better manage the health care costs of our Puerto Rico health plan;
  • significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria, including the resolution of the Illinois budget impasse and continued payment of all amounts due to our Illinois health plan;
  • the accurate estimation of incurred but not reported or paid medical costs across our health plans;
  • subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment/risk transfer, risk corridors, and reinsurance;
  • efforts by states to recoup previously paid amounts;
  • the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states;
  • the continuation and renewal of the government contracts of our health plans, Molina Medicaid Solutions, and Pathways, and the terms under which such contracts are renewed;
  • complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
  • government audits and reviews, and any fine, enrollment freeze, or monitoring program that may result therefrom;
  • changes with respect to our provider contracts and the loss of providers;
  • approval by state regulators of dividends and distributions by our health plan subsidiaries;
  • changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
  • high dollar claims related to catastrophic illness;
  • the favorable resolution of litigation, arbitration, or administrative proceedings;
  • the relatively small number of states in which we operate health plans;
  • the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;
  • the failure of a state in which we operate to renew its federal Medicaid waiver;
  • changes generally affecting the managed care or Medicaid management information systems industries;
  • increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;
  • newly emergent viruses or widespread epidemics, including the Zika virus, public catastrophes or terrorist attacks, and associated public alarm;
  • changes in general economic conditions, including unemployment rates;
  • the sufficiency of our funds on hand to pay the amounts due upon conversion of our outstanding notes;
  • increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in our periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of our website or on the SEC’s website at sec.gov. Given these risks and uncertainties, we can give no assurances that our forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by our forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward-looking statements in this release represent our judgment as of October 27, 2016, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.

       

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 
Three Months Ended September 30, Nine Months Ended September 30,
2016     2015 2016     2015
(Dollar amounts in millions, except net income per share)
Revenue:
Premium revenue $ 4,191 $ 3,377 $ 12,215 $ 9,652
Service revenue 133 47 408 146
Premium tax revenue 127 99 345 289
Health insurer fee revenue 85 81 251 203
Investment income 9 5 25 12
Other revenue 1   2   4   5  
Total revenue 4,546   3,611   13,248   10,307  
Operating expenses:
Medical care costs 3,748 3,016 10,930 8,581
Cost of service revenue 119 34 362 103
General and administrative expenses 343 287 1,034 830
Premium tax expenses 127 99 345 289
Health insurer fee expenses 55 36 163 117
Depreciation and amortization 36   26   102   76  
Total operating expenses 4,428   3,498   12,936   9,996  
Operating income 118 113 312 311
Interest expense 26   15   76   45  
Income before income tax expense 92 98 236 266
Income tax expense 50   52   137   153  
Net income $ 42   $ 46   $ 99   $ 113  
 
Diluted net income per share $ 0.76   $ 0.77   $ 1.77   $ 2.07  
 
Diluted weighted average shares outstanding 56.1   60.0   56.2   54.7  
 
Operating Statistics:
Medical care ratio (1) 89.4 % 89.3 % 89.5 % 88.9 %
General and administrative expense ratio (2) 7.6 % 8.0 % 7.8 % 8.1 %
Premium tax ratio (1) 2.9 % 2.8 % 2.7 % 2.9 %
Effective tax rate 54.0 % 52.6 % 58.0 % 57.3 %
Net profit margin (2) 0.9 % 1.3 % 0.7 % 1.1 %

____________

(1)

Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue.

(2)

Computed as a percentage of total revenue.

 
       

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

 
September 30, December 31,
2016 2015
(Unaudited)
(Amounts in millions,
except per-share data)
ASSETS
Current assets:
Cash and cash equivalents $ 2,842 $ 2,329
Investments 1,735 1,801
Receivables 1,053 597
Income taxes refundable — 13
Prepaid expenses and other current assets 169 192
Derivative asset 314   374  
Total current assets 6,113 5,306
Property, equipment, and capitalized software, net 450 393
Deferred contract costs 83 81
Intangible assets, net 149 122
Goodwill 619 519
Restricted investments 116 109
Deferred income taxes — 18
Other assets 40   28  
$ 7,570   $ 6,576  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable $ 1,871 $ 1,685
Amounts due government agencies 1,232 729
Accounts payable and accrued liabilities 383 362
Deferred revenue 380 223
Income taxes payable 19 —
Current portion of long-term debt 466 449
Derivative liability 314   374  
Total current liabilities 4,665 3,822
Senior notes 971 962
Lease financing obligations 198 198
Deferred income taxes 6 —
Other long-term liabilities 39   37  
Total liabilities 5,879   5,019  
Stockholders’ equity:
Common stock, $0.001 par value; 150 shares authorized; outstanding: 57 shares at September 30, 2016 and 56 shares at December 31, 2015 — —
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding — —
Additional paid-in capital 831 803
Accumulated other comprehensive gain (loss) 3 (4 )
Retained earnings 857   758  
Total stockholders’ equity 1,691   1,557  
$ 7,570   $ 6,576  
 
       

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three Months Ended
September 30,

Nine Months Ended
September 30,

2016     2015 2016     2015
(Amounts in millions)
Operating activities:
Net income $ 42 $ 46 $ 99 $ 113
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 46 31 135 93
Deferred income taxes (19 ) (19 ) 20 (12 )
Share-based compensation 8 7 24 16
Amortization of convertible senior notes and lease financing obligations 8 7 23 22
Other, net 3 4 14 13
Changes in operating assets and liabilities:
Receivables (12 ) 12 (427 ) (23 )
Prepaid expenses and other assets 27 34 (116 ) (63 )
Medical claims and benefits payable 86 67 168 359
Amounts due government agencies (6 ) 155 503 453
Accounts payable and accrued liabilities (146 ) (124 ) 1 34
Deferred revenue 276 9 157 (129 )
Income taxes 42   29   32   30  
Net cash provided by operating activities 355   258   633   906  
Investing activities:
Purchases of investments (470 ) (318 ) (1,444 ) (1,311 )
Proceeds from sales and maturities of investments 700 322 1,512 863
Purchases of property, equipment, and capitalized software (41 ) (35 ) (143 ) (101 )
Change in restricted investments (1 ) 9 4 (5 )
Net cash paid in business combinations (40 ) (69 ) (48 ) (77 )
Other, net (6 ) (17 ) (12 ) (34 )
Net cash provided by (used in) investing activities 142   (108 ) (131 ) (665 )
Financing activities:
Proceeds from common stock offering, net of issuance costs — — — 373
Proceeds from employee stock plans — — 10 8
Other, net —   —   1   3  
Net cash provided by financing activities —   —   11   384  
Net increase in cash and cash equivalents 497 150 513 625
Cash and cash equivalents at beginning of period 2,345   2,014   2,329   1,539  
Cash and cash equivalents at end of period $ 2,842   $ 2,164   $ 2,842   $ 2,164  
 

MOLINA HEALTHCARE, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES

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

The first of these non-GAAP measures is earnings before interest, taxes, depreciation and amortization (EBITDA). We believe that EBITDA is particularly helpful in assessing our ability to meet the cash demands of our operating units. The following table reconciles net income, which we believe to be the most comparable GAAP measure, to EBITDA.

       
Three Months Ended September 30, Nine Months Ended September 30,
2016     2015 2016     2015
(Amounts in millions)
Net income $ 42 $ 46 $ 99 $ 113
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software 42 29 118 87
Interest expense 26 15 76 45
Income tax expense 50   52   137   153
EBITDA $ 160   $ 142   $ 430   $ 398
 

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

       
Three Months Ended September 30, Nine Months Ended September 30,
2016     2015 2016     2015
(In millions, except per diluted share amounts)
Amount     Per share Amount     Per share Amount     Per share Amount     Per share
Net income $ 42 $ 0.76 $ 46 $ 0.77 $ 99 $ 1.77 $ 113 $ 2.07
Adjustment, net of tax:
Amortization of intangible assets 5   0.09   2   0.04   15   0.26   8   0.15
Adjusted net income $ 47   $ 0.85   $ 48   $ 0.81   $ 114   $ 2.03   $ 121   $ 2.22
 
           

MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

 
September 30, December 31, September 30,
2016 2015 2015
Ending Membership by Health Plan:
California 683,000 620,000 611,000
Florida 563,000 440,000 349,000
Illinois 195,000 98,000 101,000
Michigan 387,000 328,000 340,000
New Mexico 253,000 231,000 231,000
New York (1) 37,000 — —
Ohio 339,000 327,000 344,000
Puerto Rico 331,000 348,000 356,000
South Carolina 109,000 99,000 102,000
Texas 352,000 260,000 263,000
Utah 150,000 102,000 102,000
Washington 716,000 582,000 568,000
Wisconsin 131,000   98,000   103,000
4,246,000   3,533,000   3,470,000
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children's Health Insurance Program (CHIP) 2,529,000 2,312,000 2,249,000
Medicaid Expansion 658,000 557,000 540,000
Marketplace 568,000 205,000 226,000
Aged, Blind or Disabled (ABD) 395,000 366,000 359,000
Medicare-Medicaid Plan (MMP) - Integrated 51,000 51,000 56,000
Medicare Special Needs Plans 45,000   42,000   40,000
4,246,000   3,533,000   3,470,000

____________

(1)

The New York health plan was acquired on August 1, 2016.

 
   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

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

 
Three Months Ended September 30, 2016
Member

Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)    

Medical
Margin

Total     PMPM Total     PMPM
California 2.1 $ 612 $ 298.05 $ 523 $ 254.11 85.3 % $ 89
Florida 1.6 494 297.24 462 277.79 93.5 32
Illinois 0.6 163 275.26 145 244.86 89.0 18
Michigan 1.2 387 334.25 337 290.16 86.8 50
New Mexico 0.8 338 440.12 304 396.35 90.1 34
New York(3) 0.1 32 427.40 30 403.71 94.5 2
Ohio 1.0 501 491.51 424 415.87 84.6 77
Puerto Rico 1.0 184 183.46 167 167.44 91.3 17
South Carolina 0.3 102 312.28 94 285.97 91.6 8
Texas 1.1 597 559.98 525 493.07 88.1 72
Utah 0.4 106 236.31 104 230.53 97.6 2
Washington 2.1 569 265.48 521 243.49 91.7 48
Wisconsin 0.4 103 262.32 90 231.86 88.4 13
Other(4) —   3   — 22   — — (19 )
12.7   $ 4,191   $ 329.88 $ 3,748   $ 295.01 89.4 % $ 443  
 
 
Three Months Ended September 30, 2015
Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
California 1.9 $ 524 $ 288.45 $ 438 $ 241.09 83.6 % $ 86
Florida 0.9 300 299.33 265 264.39 88.3 35
Illinois 0.3 106 347.34 100 327.61 94.3 6
Michigan 0.9 281 330.00 236 276.61 83.8 45
New Mexico 0.7 297 421.76 275 390.26 92.5 22

New York(3)

— — — — — — —
Ohio 1.0 510 498.36 436 425.98 85.5 74
Puerto Rico 1.0 181 170.91 162 152.69 89.3 19
South Carolina 0.3 86 264.37 68 211.76 80.1 18
Texas 0.8 524 661.69 493 622.84 94.1 31
Utah 0.3 85 276.72 77 250.50 90.5 8
Washington 1.7 400 238.03 371 221.14 92.9 29
Wisconsin 0.3 71 232.32 57 184.94 79.6 14
Other(4) —   12   — 38   — — (26 )
10.1   $ 3,377   $ 332.05 $ 3,016   $ 296.49 89.3 % $ 361  

____________

(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)

 
Nine Months Ended September 30, 2016
Member

Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)    

Medical
Margin

Total     PMPM Total     PMPM
California 6.1 $ 1,707 $ 280.21 $ 1,485 $ 243.64 86.9 % $ 222
Florida 5.0 1,447 288.74 1,301 259.60 89.9 146
Illinois 1.8 466 266.11 414 236.39 88.8 52
Michigan 3.6 1,143 322.08 1,018 286.77 89.0 125
New Mexico 2.3 1,016 447.07 905 398.22 89.1 111

New York(3)

0.1 32 427.40 30 403.71 94.5 2
Ohio 3.0 1,472 484.82 1,306 430.14 88.7 166
Puerto Rico 3.0 535 176.44 516 170.46 96.6 19
South Carolina 0.9 273 288.93 232 245.13 84.8 41
Texas 3.3 1,852 570.65 1,599 492.79 86.4 253
Utah 1.3 330 246.78 312 233.14 94.5 18
Washington 6.2 1,634 261.91 1,479 237.15 90.5 155
Wisconsin 1.2 299 252.45 278 235.25 93.2 21

Other(4)

—   9   — 55   — — (46 )
37.8   $ 12,215   $ 323.44 $ 10,930   $ 289.41 89.5 % $ 1,285  
 
Nine Months Ended September 30, 2015
Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
California 5.3 $ 1,538 $ 292.64 $ 1,349 $ 256.71 87.7 % $ 189
Florida 2.9 868 294.05 763 258.49 87.9 105
Illinois 0.9 312 342.27 288 315.68 92.2 24
Michigan 2.4 738 310.01 621 260.53 84.0 117
New Mexico 2.1 933 448.75 843 405.60 90.4 90

New York(3)

— — — — — — —
Ohio 3.1 1,534 498.76 1,281 416.69 83.5 253
Puerto Rico 2.1 375 175.17 346 161.60 92.3 29
South Carolina 1.0 270 269.11 209 208.45 77.5 61
Texas 2.4 1,418 597.53 1,313 553.35 92.6 105
Utah 0.8 242 284.83 223 262.14 92.0 19
Washington 4.9 1,186 242.75 1,094 223.99 92.3 92
Wisconsin 0.9 206 221.97 162 173.99 78.4 44

Other(4)

—   32   — 89   — — (57 )
28.8   $ 9,652   $ 334.74 $ 8,581   $ 297.58 88.9 % $ 1,071  

____________

(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 September 30, 2016
Member

Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)    

Medical
Margin

Total     PMPM Total     PMPM
TANF and CHIP 7.6 $ 1,373 $ 180.74 $ 1,246 $ 164.04 90.8 % $ 127
Medicaid Expansion 2.0 763 386.98 642 325.68 84.2 121
Marketplace 1.7 399 238.86 352 210.38 88.1 47
ABD 1.1 1,186 1,008.28 1,094 929.93 92.2 92
MMP 0.2 334 2,165.26 280 1,818.75 84.0 54
Medicare 0.1   136   1,019.19 134   1,003.85 98.5 2
12.7   $ 4,191   $ 329.88 $ 3,748   $ 295.01 89.4 % $ 443
 
Three Months Ended September 30, 2015
Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
TANF and CHIP 6.6 $ 1,139 $ 171.16 $ 1,070 $ 160.85 94.0 % $ 69
Medicaid Expansion 1.5 565 366.80 458 297.16 81.0 107
Marketplace 0.6 170 262.74 124 192.21 73.2 46
ABD 1.1 1,070 1,017.68 979 931.11 91.5 91
MMP 0.2 310 1,975.10 271 1,718.13 87.0 39
Medicare 0.1   123   1,002.50 114   930.43 92.8 9
10.1   $ 3,377   $ 332.05 $ 3,016   $ 296.49 89.3 % $ 361
 
Nine Months Ended September 30, 2016
Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
TANF and CHIP 22.5 $ 3,999 $ 177.60 $ 3,646 $ 161.93 91.2 % $ 353
Medicaid Expansion 5.8 2,184 376.98 1,850 319.38 84.7 334
Marketplace 5.1 1,181 231.69 1,009 197.77 85.4 172
ABD 3.5 3,466 987.20 3,173 903.85 91.6 293
MMP 0.5 989 2,160.14 867 1,894.38 87.7 122
Medicare 0.4   396   1,015.14 385   986.40 97.2 11
37.8   $ 12,215   $ 323.44 $ 10,930   $ 289.41 89.5 % $ 1,285
 
Nine Months Ended September 30, 2015
Member

Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
TANF and CHIP 18.6 $ 3,280 $ 175.52 $ 3,030 $ 162.16 92.4 % $ 250
Medicaid Expansion 4.2 1,654 393.71 1,325 315.33 80.1 329
Marketplace 2.0 525 259.97 370 183.33 70.5 155
ABD 3.2 3,063 965.91 2,789 879.27 91.0 274
MMP 0.4 733 1,981.40 684 1,847.03 93.2 49
Medicare 0.4   397   1,026.00 383   991.53 96.6 14
28.8   $ 9,652   $ 334.74 $ 8,581   $ 297.58 88.9 % $ 1,071

____________

(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 September 30,
2016     2015
Amount     PMPM     % of

Total

Amount     PMPM   % of

Total

Fee for service $ 2,799 $ 220.29 74.7 % $ 2,224 $ 218.69 73.8 %
Pharmacy 567 44.65 15.1 418 41.07 13.9
Capitation 302 23.83 8.1 260 25.57 8.6
Direct delivery 21 1.66 0.5 31 2.97 1.0
Other 59   4.58   1.6   83   8.19   2.7  
$ 3,748   $ 295.01   100.0 % $ 3,016   $ 296.49   100.0 %
 
Nine Months Ended September 30,
2016 2015
Amount PMPM % of

Total

Amount PMPM % of

Total

Fee for service $ 8,156 $ 215.96 74.6 % $ 6,275 $ 217.63 73.1 %
Pharmacy 1,621 42.93 14.8 1,161 40.26 13.5
Capitation 901 23.86 8.3 725 25.13 8.5
Direct delivery 55 1.46 0.5 85 2.94 1.0
Other 197   5.20   1.8   335   11.62   3.9  
$ 10,930   $ 289.41   100.0 % $ 8,581   $ 297.58   100.0 %
 

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

 
    September 30, December 31,
2016 2015
Fee-for-service claims incurred but not paid (IBNP) $ 1,333 $ 1,191
Pharmacy payable 114 88
Capitation payable 27 140
Other (1) 397   266
$ 1,871   $   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 September 30, 2016 and December 31, 2015, we had recorded non-risk provider payables of approximately $237 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
Nine Months Ended September 30, December 31,
2016     2015 2015
 
Medical claims and benefits payable, beginning balance $ 1,685 $ 1,201 $ 1,201
Components of medical care costs related to:
Current period 11,120 8,724 11,935
Prior period (190 ) (143 ) (141 )
Total medical care costs 10,930   8,581   11,794  
 
Change in non-risk provider payables 70   42   48  
Payments for medical care costs related to:
Current period 9,536 7,372 10,448
Prior period 1,278   892   910  
Total paid 10,814   8,264   11,358  
Medical claims and benefits payable, ending balance $ 1,871   $ 1,560   $ 1,685  
 
Benefit from prior period as a percentage of:
Balance at beginning of period 11.3 % 11.9 % 11.8 %
Premium revenue, trailing twelve months 1.2 % 1.2 % 1.1 %
Medical care costs, trailing twelve months 1.3 % 1.3 % 1.2 %
 
Fee-For-Service Claims Data:
Days in claims payable, fee for service 47 49 48
Number of members at end of period 4,246,000 3,470,000 3,533,000
Number of claims in inventory at end of period 580,200 408,100 380,800
Billed charges of claims in inventory at end of period $ 1,346 $ 908 $ 816
Claims in inventory per member at end of period 0.14 0.12 0.11
Billed charges of claims in inventory per member at end of period $ 316.89 $ 261.73 $ 230.91
Number of claims received during the period 39,683,800 29,084,100 40,173,300
Billed charges of claims received during the period $ 48,017 $ 33,517 $ 46,211

Source: Molina Healthcare, Inc.

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

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