UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 4, 2009
MOLINA
HEALTHCARE, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
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1-31719
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13-4204626
|
||
|
(State
of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification
Number)
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200
Oceangate, Suite 100, Long Beach, California 90802
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (562) 435-3666
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
2.02. Results of Operations and Financial
Condition.
On August
4, 2009, Molina Healthcare, Inc. issued a press release announcing its financial
results for the second quarter and six months ended June 30,
2009. The full text of the press release is included as Exhibit 99.1
to this report. The information contained in the websites cited in
the press release is not part of this report.
The
information in this Form 8-K and the exhibit attached hereto shall not be deemed
to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934
or otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except as expressly set forth by specific
reference in such a filing.
Item
9.01. Financial Statements and Exhibits.
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(d)
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Exhibits:
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Exhibit
No.
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Description
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|
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99.1
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Press
release of Molina Healthcare, Inc. issued August 4, 2009, as to financial
results for the second
quarter and six months ended June 30,
2009.
|
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
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MOLINA
HEALTHCARE, INC.
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|||
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Date:
August 4, 2009
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By: /s/
Mark L. Andrews
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||
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Mark
L. Andrews
Chief
Legal Officer, General Counsel,
and
Corporate Secretary
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EXHIBIT
INDEX
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Exhibit
No.
|
Description
|
|
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99.1
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Press
release of Molina Healthcare, Inc. issued August 4, 2009, as to financial
results for the second
quarter and six months ended June 30,
2009.
|
News
Release
Contact:
Juan José
Orellana
Investor
Relations
562-435-3666,
ext. 111143
MOLINA
HEALTHCARE REPORTS
SECOND
QUARTER 2009 RESULTS
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●
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Diluted
earnings per share of $0.56, consistent with the second quarter of
2008;
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●
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Quarterly
premium revenues of $926 million, up
22%;
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●
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Aggregate
membership up 11% over the second quarter of
2008;
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●
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Consolidated
medical care ratio increase of 2.6% from low margins in California and
from increased utilization believed to be driven by swine flu and influx
of new members; and
|
|
●
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Revised
2009 earnings guidance to $2.15 per diluted
share.
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Long Beach, California (August 4,
2009) – Molina Healthcare, Inc. (NYSE: MOH) today reported net income for
the quarter ended June 30, 2009, of $14.6 million, or $0.56 per diluted share,
compared with net income of $15.8 million, or $0.56 per diluted share, for the
quarter ended June 30, 2008.
In
commenting on the results, J. Mario Molina, M.D., president and chief executive
officer of Molina Healthcare, said, “Our results for the second quarter were
mixed. I am pleased by our strong organic membership growth and lower
administrative costs, as well as by our success in retaining our contracts in
Michigan and Missouri, the addition of a new contract in Texas for 2010, and the
Texas plan’s accreditation by the National Committee for Quality Assurance
(NCQA). However, the addition of a significant number of new members, the
emergence of the H1N1 flu, and increases in physician and outpatient utilization
led to higher overall medical costs in the quarter. Much of our efforts in
the second half of the year will be focused on addressing these
challenges.”
Revised
2009 Earnings Per Share Guidance
The
Company has revised its guidance for fiscal year 2009 earnings to $2.15 per
diluted share. Additional detail regarding the Company’s guidance is
provided below.
Overview
of Financial Results
Note: Estimates of
utilization and unit costs may not match changes in reported overall costs due
to the impact of shifts in case mix between the periods presented, prior period
development, the existence of pass-through contracts in which third parties
assume medical risk, and other factors. Additionally, estimates of
utilization for the three and six months ended June 30, 2009, exclude the month
of June 2009 due to the substantial incompleteness of claims payment data for
that month.
-MORE-
MOH
Reports Second Quarter 2009 Results
Page
2
August 4,
2009
Second
Quarter 2009 Compared with Second Quarter 2008
Net income in the second
quarter of 2009 decreased 8% to $14.6 million compared with net income of $15.8
million in the second quarter of 2008.
Premium revenue grew 22% in
the second quarter of 2009. Membership grew 11% overall, with Ohio,
Washington, and California gaining the most members. On a per-member
per-month, or PMPM, basis, consolidated premium revenue increased
10%. Increased membership contributed 52% of the growth in premium
revenue between the second quarter of 2009 and the second quarter of 2008, and
increases in PMPM revenue, as a result of both rate changes and shifts in member
mix, contributed the remaining 48%.
Investment income for the
second quarter of 2009 was $2.1 million, a $3.2 million decrease from the $5.3
million in investment income earned in the second quarter of
2008. This 61% decline was due primarily to lower interest
rates.
Medical costs increased
approximately 14% on a PMPM basis in the second quarter of 2009 compared with
the second quarter of 2008. The increased expenses were generally the
result of higher utilization rather than higher unit costs and were most
pronounced in connection with physician and outpatient costs. The
Company believes that the emergence during the quarter of the novel influenza A
(H1N1) virus, or “swine flu,” and growing enrollment contributed to these higher
costs. The Company did not experience the typical seasonal decrease
in costs associated with the second quarter.
Physician and outpatient costs
exhibited the most significant unfavorable cost trend in the second quarter of
2009. Together, these costs increased approximately 18% on a PMPM
basis compared with the second quarter of 2008. The primary drivers
of these increased costs were emergency room utilization (up approximately 17%),
and cost per visit (up approximately 8%). This increase in
utilization was most pronounced in the California and Washington health
plans.
Inpatient facility costs
increased approximately 7% PMPM compared with the second quarter of
2008. Inpatient facility utilization increased approximately 7%
during the second quarter of 2009 compared with the second quarter of
2008. Inpatient facility unit costs decreased approximately
4%.
Pharmacy costs increased
approximately 2% PMPM compared with the second quarter of
2008. Pharmacy utilization increased approximately 9% year over year,
while unit costs (excluding rebates) decreased approximately 2%.
Capitated costs increased
approximately 19% PMPM compared with the second quarter of 2008 as a result of
$21.9 million in retroactive capitation expense at the New Mexico health plan
($15.0 million related to the second half of 2008 and $6.9 million related to
the first quarter of 2009), and the transition of members into capitated
arrangements at the California health plan. The retroactive
capitation expense at the New Mexico health plan was directly related to the
receipt of $25.3 million in retroactive premium revenue.
California
and Washington Developments
Developments
at the California and Washington health plans were particularly significant in
the second quarter.
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 3
August 4,
2009
California health plan results
have contributed the most significant downward pressure on the Company’s current
quarter and year-to-date results. Year-to-date, the California plan’s
Medicaid medical margin has decreased approximately $12 million from 2008, while
the Medicaid medical margin for the second quarter has decreased approximately
$4 million from 2008.
Based on
claims paid through June 30, 2009, the Company has determined that claims
reserves for the California health plan were underestimated by $5.2 million at
December 31, 2008. At the close of the first quarter, and based on
claims paid through March 31, 2009, the Company believed that the California
claims reserve underestimation was approximately $2.8 million. Income
at the California health plan was therefore reduced by approximately $2.8
million and $2.4 million, respectively, for the quarters ended March 31, 2009
and June 30, 2009, as a result of adverse prior period claims
development. Adverse claims development in the second quarter of 2009
was offset by $3.2 million in revenue recognized by the California health plan
in connection with the settlement of a rate dispute with the state for contract
year 2002. On a consolidated basis, prior period development of
claims reserves through June 30 was consistent between 2009 and
2008.
The
Company is currently engaged in a number of efforts to improve profitability at
the California health plan.
Washington health plan results
have deteriorated as a result of a decline of approximately $9 PMPM in premium
rates for the Company’s TANF, or Temporary Aid for Needy Families, population in
that state. The decrease in premium rates was partially linked to a
decrease in the Washington Medicaid Provider Fee Schedule; developments
year-to-date have shown that only about one-third of the $9 PMPM revenue
decrease is being offset by reduced medical costs. This resulted in a
decline in medical margin for this population of approximately $5.4 million and
$10.6 million for the quarter and six months ended June 30, 2009,
respectively.
Days in medical claims and benefits
payable were 39 days at June 30, 2009, 42 days at March 31, 2009, and 47
days at June 30, 2008.
Core G&A expenses (defined
as G&A expenses less premium taxes) were 7.0% of revenue in the second
quarter of 2009, compared with 8.2% in the second quarter of 2008 and 7.6% in
the first quarter of 2009. Premium revenue grew faster than
administrative costs, causing administrative costs, as a percentage of revenue,
to decrease.
Interest expense for
both periods presented includes non-cash interest expense relating to the
Company’s convertible senior notes, as a result of the adoption of FSP APB
14-1. The amounts recorded for this additional interest expense
totaled $1.2 million for the second quarter of 2009 ($0.03 per diluted share)
and $1.2 million for the second quarter of 2008 ($0.03 per diluted
share).
Income taxes were recorded at
an effective rate of 16.8% in the second quarter of 2009 compared with 41.0%
in the second quarter of 2008. The lower rate is primarily due to
discrete tax benefits of $4.4 million recorded in the second quarter of 2009 as
a result of settling tax examinations and the voluntary filing of certain
accounting method changes. The Company’s tax rate would have been
43.5% for the second quarter of 2009 absent these discrete tax
benefits.
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 4
August 4,
2009
Second
Quarter 2009 Compared with First Quarter 2009
Premium revenue grew
approximately 8%, or $68 million, between the first and second quarters of
2009. Membership grew approximately 5% between the first and second
quarters.
Medical costs did not
experience their normal seasonal drop between the first and second quarters of
2009. Rather, the Company’s medical care ratio increased in the
second quarter when compared with the first quarter. The Company
believes that the principal reasons for the increase in medical costs
were:
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●
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Increased physician and
outpatient costs. The Company believes that both the
H1N1 outbreak and the addition of a significant number of new members have
increased physician and outpatient costs during the second
quarter.
|
|
●
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Impact of claims reserves
established at March 31, 2009. Benefit from the run-out
of the Company’s liability for medical claims and benefits payable as of
March 31, 2009, was less than it has been in the
past.
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The benefit from the run-out of the Company’s liability for medical claims and benefits payable as of December 31, 2008, is consistent with previous experience.
Physician and outpatient costs
demonstrated the most significant unfavorable cost trend in the second quarter
of 2009 compared with the first quarter of 2009. These costs
increased about 3% on a PMPM basis compared with the first
quarter. In contrast, these costs dropped 3% from the first quarter
to the second quarter of 2008. Emergency room utilization was up
about 9% from the first to the second quarter of 2009, compared with a 4% drop
in utilization from the first to the second quarter of 2008. Emergency room cost
per visit, however, dropped 3% between the first and second quarter of 2009,
compared with a 5% increase in cost per visit between the first and second
quarters of 2008.
Inpatient costs PMPM decreased
sequentially about 2%, which is much less than the 7.5% sequential decrease
experienced in the previous year.
Pharmacy costs PMPM decreased
sequentially about 7%, which is more than the 2% sequential decrease experienced
in the previous year.
Capitated costs PMPM increased
7.7% between the first and second quarters of 2009 (excluding the impact of the
retroactive capitation expense in New Mexico discussed above), consistent with
the 8.3% increase experienced in 2008.
First
Half 2009 Compared with First Half 2008
Net income decreased 5% to
$26.8 million in the first half of 2009 compared with net income of $28.3
million in the first half of 2008. All of the factors discussed above
in comparing second quarter performance between 2009 and 2008 apply to the
comparison of performance between the first half of 2009 and the first half of
2008.
Historically,
the Company experiences a decline in medical costs from the first to the second
quarter. This was not the case during 2009. Although the
first quarter of 2009 may have benefited from a lighter flu season, the Company
believes the H1N1 epidemic was partially responsible for the absence of the
expected seasonal drop in medical costs from the first to second
quarter.
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 5
August 4,
2009
On a
consolidated basis, prior period development of claims reserves was consistent
over both years. As discussed above, however, the Company has
determined that claims reserves for the California health plan were
underestimated by $5.2 million at December 31, 2008.
Premium revenue grew nearly
20% between the first half of 2008 and the first half of
2009. Membership grew 11% overall, with Ohio, Washington, and
California gaining the most members. Consolidated premium revenue
increased 8% on a PMPM basis. Increased membership contributed 59% of
the growth in premium revenue.
Investment income for the
first half of 2009 was $5.6 million, a $7.1 million decrease from the
$12.7 million earned in the first half of 2008. This 56% decline
was primarily due to lower interest rates in 2009. The Company’s
annualized portfolio yield for the first half of 2009 decreased to 1.6%,
compared with 3.5% for the first half of 2008.
Medical costs increased
approximately 10% on a PMPM basis in the first half of 2009 compared with the
first half of 2008. The Company believes that new members and the
novel H1N1 flu contributed to the increase in physician and outpatient
costs.
Physician and outpatient costs
exhibited the most significant unfavorable cost trend in the first half of
2009. Together, these costs increased approximately 14% on a PMPM
basis compared with the first half of 2008. Consistent with the
Company’s experience in the second quarter of 2009, emergency room utilization
(up approximately 8%) and cost per visit (up approximately 13%) were primary
drivers of increased cost in the first half of 2009.
During the
first half of 2009, the Company observed providers billing for more intensive
levels of care than in the first half of 2008. The billing codes for
emergency room level of care – with level one reflecting the least intensive
care and level five reflecting the most intensive care – changed significantly
in the first half of 2009 compared with the first half of 2008.
As
indicated in the following table, level one and level two visits decreased by
16% and 10%, respectively, while level three, level four, and level five visits
increased by 13%, 13%, and 18%, respectively.
|
Emergency
Room Visits per 1,000
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||||||||||||||||||||
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Level
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||||||||||||||||||||
| 1 | 2 | 3 | 4 | 5 | ||||||||||||||||
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1st
Half 2009 v. 1st
Half 2008
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(16 | %) | (10 | %) | 13 | % | 13 | % | 18 | % | ||||||||||
Inpatient costs increased
approximately 4% PMPM year over year. Inpatient facility utilization
increased approximately 8% while unit costs were essentially flat.
Pharmacy costs increased
approximately 4% PMPM year over year. Pharmacy utilization increased
approximately 6% year over year while unit costs (excluding rebates) increased
by approximately 2%.
Capitated costs increased
approximately 11% PMPM year over year as a result of the payment of $21.9
million in retroactive capitation in New Mexico as discussed above and the
transition of members into capitated arrangements in California.
Core G&A expenses (defined
as G&A expenses less premium taxes) were 7.3% of revenue in the first half
of 2009, compared with 8.0% in the first half of 2008. The decrease
in core G&A compared with the first half of 2008 was primarily due to lower
administrative payroll as a percentage of revenue.
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 6
August
4, 2009
Interest expense for
both periods presented includes non-cash interest expense relating to the
Company’s convertible senior notes, as a result of the adoption of FSP APB
14-1. The amounts recorded for this additional interest expense
totaled $2.4 million for the first half of 2009 ($0.06 per diluted share) and
$2.3 million for the first half of 2008 ($0.05 per diluted share).
Income taxes were
recorded at an effective rate of 29.9% for the first half of 2009 compared with
40.9% in the first half of 2008. The lower rate is primarily due to
discrete tax benefits recorded in the second quarter of 2009 as described
above. The Company’s tax rate would have been 42% for the first half
of 2009 absent these discrete tax benefits.
Cash
Flow
Cash
provided by operating activities for the six months ended June 30, 2009, was
$94.8 million, compared with cash provided by operating activities of $39.3
million for 2008, an increase of $55.5 million.
Significant
contributors to this increase included the following:
|
●
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Increased
deferred revenue of $44.6 million, primarily due to the timing of the Ohio
health plan’s receipt of premium payments from the state of Ohio;
and
|
|
●
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Increased
medical claims and benefits payable of $22.3 million, primarily due to the
commencement of operations of the Company’s Florida health plan in
2009.
|
These
increases were offset by increased receivables of $20.8 million, primarily in
California and Utah.
At June
30, 2009, the Company had cash and investments (not including restricted
investments) of $660.3 million, including non-current auction rate securities
with a fair value of $62.0 million. At June 30, 2009, the parent
company had unrestricted cash and investments of $48.7 million, including
auction rate securities with a fair value of $18.4 million. At
December 31, 2008, the parent company had cash and investments of $68.9
million.
EBITDA
(1)
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(in
thousands)
|
Three
Months Ended
June
30,
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Six
Months Ended
June
30,
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||||||||||||||
|
2009
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2008
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2009
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2008
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|||||||||||||
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Operating
income
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$ | 20,726 | $ | 30,258 | $ | 44,841 | $ | 54,709 | ||||||||
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Add
back:
|
||||||||||||||||
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Depreciation and amortization
expense
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9,584 | 8,330 | 18,636 | 16,482 | ||||||||||||
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EBITDA
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$ | 30,310 | $ | 38,588 | $ | 63,477 | $ | 71,191 | ||||||||
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(1)
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The
Company calculates EBITDA by adding back depreciation and amortization
expense to operating income. EBITDA is not prepared in
conformity with GAAP since it excludes the provisions for income taxes,
interest expense, and depreciation and amortization
expense. This non-GAAP financial measure should not be
considered as an alternative to net income, operating income, operating
margin, or cash provided by operating activities. Management
uses EBITDA as a metric in evaluating the Company’s financial performance,
in evaluating financing and business development decisions, and in
forecasting and analyzing future periods. For these reasons,
management believes that EBITDA is a useful supplemental measure to
investors in evaluating the Company’s performance and the performance of
other companies in our industry.
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-MORE-
MOH
Reports Second Quarter 2009 Results
Page 7
August
4, 2009
Securities
Purchase Program
During the
second quarter of 2009, the Company purchased 544,000 shares of its common stock
for $12.7 million (average cost of $23.41 per share). These purchases
increased diluted earnings per share for the second quarter of 2009 by less than
$0.01. Year-to-date, the Company has purchased approximately 1.4
million shares of its common stock for $27.7 million (average cost of $20.49 per
share). These purchases increased diluted earnings per share for the
first half of 2009 by $0.02. A total of approximately $12.3 million currently
remains available under the Company's securities purchase program.
Health
Plan Contracts
During the
second quarter of 2009, the Company’s Missouri health plan was notified that its
Medicaid contract with the Department of Social Services for the Eastern,
Central, and Western regions of the state will be renewed effective as of
October 1, 2009. The contract will be renewable on an annual basis through
September 30, 2012.
In
addition, on August 3, 2009, the Company’s Michigan health plan was notified
that its Medicaid contract with the Michigan Department of Community Health will
be renewed effective as of October 1, 2009. The new contract will
expand the Michigan plan’s service area from 42 to 46 counties in the
state. The contract will have an initial term of three years, with
three annual renewals thereafter, extending the full contract term through
September 30, 2015.
Further,
the Texas Health and Human Services Commission (HHSC) has issued a tentative
contract award to the Company’s Texas health plan under the CHIP Rural Services
Area Managed Care Organization Procurement. The award is contingent
on the plan’s successful negotiation and execution of a contract with
HHSC. The Texas plan will begin serving members under the new
contract on September 1, 2010, with the contract’s term continuing through
August 31, 2013. The award covers up to 170 rural Texas
counties.
Finally,
the New Mexico Retiree Health Care Authority has notified the Company’s New
Mexico health plan that the plan’s Medicare product will be offered as an option
to the state’s employee retiree group business. The potential market for
this contract includes New Mexico Retiree Health Care Authority members who are
over 65 and/or are Medicare eligible.
Health
Plan Accreditation
The
Company’s Texas health plan has earned a new health plan accreditation status
from the NCQA. The Company is proud to be the first and only Medicaid
health plan in Texas to achieve this distinction. Molina Healthcare
continues to be among the leaders in health plans achieving NCQA accreditation,
with seven Company health plans accredited in the states of California,
Michigan, New Mexico, Ohio, Texas, Utah, and Washington. Currently, only
22% of the nation’s Medicaid health plans are NCQA accredited.
Adoption
of Convertible Debt Accounting
The
Company’s 2008 results have been recast to reflect the adoption of FASB Staff
Position (FSP) APB 14-1, Accounting for Convertible Debt
Instruments That May be Settled in Cash upon Conversion (Including Partial Cash
Settlement).
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 8
August
4, 2009
Revised
Guidance 2009 Details
The
Company is revising its guidance for fiscal year 2009 as follows (all amounts
are approximate):
|
Earnings
per diluted share
|
$2.15
|
|
|
Net
income
|
$56
million
|
|
|
Premium
revenue
|
$3.6
billion
|
|
|
Investment
income
|
$10
million
|
|
|
EBITDA
|
$142
million
|
|
|
EBITDA
as a percentage of premium revenue
|
3.9%
|
|
|
Medical
care costs as a percentage of premium revenue
|
86%
|
|
|
Core
G&A (administrative expenses excluding premium taxes)
|
7.2%
|
|
|
Administrative
expenses as a % of total revenue
|
10.3%
|
|
|
Depreciation
and amortization
|
$40
million
|
|
|
Interest
expense
|
$13
million
|
|
|
Total
membership
|
1.46
million
|
|
|
Diluted
shares outstanding
|
26
million
|
|
|
Effective
tax rate for full year
|
37.1%
|
|
|
Effective
tax rate for second half of 2009
|
42.5%
|
The
Company’s guidance for diluted shares outstanding does not include any potential
dilution from its convertible senior notes.
The
Company’s guidance assumes that influenza disease patterns in the second half of
2009 will be consistent with that experienced prior to the H1N1 outbreak in the
second quarter.
The
Company’s guidance includes the following assumptions for rate changes it
expects to receive in the second half of 2009:
|
California:
|
||
|
●
|
Increase of approximately 4.5% effective October 1, 2009. | |
|
Michigan:
|
||
|
●
|
Decrease
of approximately 1.4% effective July 1, 2009. Substantially all
of this decrease is expected to be passed on in lower provider payments
due to reductions to the Medicaid fee schedule.
|
|
|
●
|
Increase
of approximately 4% effective October 1, 2009.
|
|
|
Missouri:
|
||
|
●
|
Increase
of approximately 4.5% effective July 1, 2009.
|
|
|
●
|
Decrease
of approximately 1% effective October 1, 2009.
|
|
|
New
Mexico:
|
||
|
●
|
Increase
of approximately 2.4% (blended across product lines) effective July 1,
2009.
|
|
|
Texas:
|
||
|
●
|
Increase
of approximately 0.2% (blended across product lines) effective September
1, 2009.
|
|
|
Washington:
|
||
|
●
|
Decrease
of approximately 7.5% effective July 1, 2009. Substantially all
of this decrease is expected
to be passed on in lower provider payments due to reductions to the
Medicaid fee schedule.
|
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 9
August
4, 2009
Conference
Call
The Company’s management will host a conference call and webcast to discuss its second quarter results at 5:00 p.m. Eastern Time on Tuesday, August 4, 2009. The telephone number for this interactive conference call is 212-231-2906, and the live webcast of the call can be accessed on the Company’s website at www.molinahealthcare.com, or at www.earnings.com. An online replay will be available beginning about one hour following the conclusion of the call and webcast.
Molina
Healthcare, Inc. is a multi-state managed care organization that arranges for
the delivery of healthcare services to persons eligible for Medicaid, Medicare,
and other government-sponsored programs for low-income families and
individuals. Molina Healthcare’s ten licensed health plan
subsidiaries in California, Florida, Michigan, Missouri, Nevada, New Mexico,
Ohio, Texas, Utah, and Washington currently serve approximately 1.4 million
members. More information about Molina Healthcare can be obtained at
www.molinahealthcare.com.
Safe Harbor Statement under the
Private Securities Litigation Reform Act of 1995: This press release
contains “forward-looking statements” identified by words such as “will,”
“believed” or “believes,” “expects” or ”expectations,” “projects,” “estimates,”
and similar words and expressions. In addition, any statements that
explicitly or implicitly refer to 2009 earnings guidance, expectations,
projections, or their underlying assumptions, or other characterizations of
future events or circumstances, are forward-looking statements. All
of our forward-looking statements are based on our current expectations and
assumptions which are subject to numerous known and unknown risks,
uncertainties, and other factors that could cause actual results to differ
materially. Such factors include, without limitation, risks related
to: budgetary pressures on the federal and state governments and their resulting
inability to fully fund Medicaid, Medicare, or CHIP or to maintain membership
eligibility levels, thresholds, or criteria, including ongoing budget issues in
California and the resulting pressure on all its healthcare and social service
programs; the successful management of our medical costs and the achievement of
our projected medical care ratios in all our health plans; both the novel H1N1
(swine) flu and the seasonal flu, including utilization rates at variance with
historic seasonal patterns; the leveraging of our administrative costs to
address the needs associated with increased enrollment; growth in our Medicaid
and Medicare enrollment consistent with our expectations; uncertainties
regarding the impact of federal healthcare reform efforts; rate revisions and
the maintenance of existing rate levels that are consistent with our assumptions
and expectations; our ability to pass on to providers any rate cuts under our
government contracts, including the reduction in provider payment levels under
the Washington Medicaid fee schedule that are commensurate with the reduced
rates paid to our Washington health plan; the renewal of the provider premium
tax beyond October 1, 2009 as it affects our California, Missouri, and Ohio
health plans; our ability to accurately estimate incurred but not reported
medical costs across all health plans; the successful renewal and continuation
of the government contracts of all of our health plans; our limited experience
operating in Florida; the transition from a non-risk to a risk-based capitation
contract by our Utah health plan; the availability of financing to fund and
capitalize our acquisitions and start-up activities and to meet our liquidity
needs; the illiquidity of our auction rate securities; the successful and
cost-effective integration of our acquisitions; earnings seasonality; high
profile qui tam matters and negative publicity regarding Medicaid managed care
and Medicare Advantage; changes in funding under our contracts as a result of
regulatory and programmatic adjustments and reforms; approval by state
regulators of dividends and distributions by our subsidiaries; unexpected
changes in member utilization patterns, healthcare practices, or healthcare
technologies; high dollar claims related to catastrophic illness; changes in
federal or state laws or regulations or in their interpretation; the favorable
resolution of litigation or arbitration matters; and other risks and
uncertainties as detailed in our reports and filings with the Securities and
Exchange Commission and available on its website at www.sec.gov. All
forward-looking statements in this release represent our judgment as of the date
of this release. We disclaim any obligation to update any
forward-looking statement to conform the statement to actual results or changes
in our expectations.
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 10
August
4, 2009
MOLINA
HEALTHCARE, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts
in thousands, except share and per-share data)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Revenue:
|
||||||||||||||||
|
Premium
revenue
|
$ | 925,507 | $ | 761,153 | $ | 1,782,991 | $ | 1,490,791 | ||||||||
|
Investment
income
|
2,082 | 5,338 | 5,629 | 12,742 | ||||||||||||
|
Total operating
revenue
|
927,589 | 766,491 | 1,788,620 | 1,503,533 | ||||||||||||
|
Expenses:
|
||||||||||||||||
|
Medical
care costs
|
803,206 | 640,829 | 1,541,094 | 1,267,176 | ||||||||||||
|
General
and administrative expenses
|
94,073 | 87,074 | 185,581 | 165,166 | ||||||||||||
|
Depreciation
and amortization
|
9,584 | 8,330 | 18,636 | 16,482 | ||||||||||||
|
Total expenses
|
906,863 | 736,233 | 1,745,311 | 1,448,824 | ||||||||||||
|
Gain
on retirement of convertible senior notes
|
− | − | 1,532 | − | ||||||||||||
|
Operating
income
|
20,726 | 30,258 | 44,841 | 54,709 | ||||||||||||
|
Interest
expense (1)
|
(3,223 | ) | (3,425 | ) | (6,638 | ) | (6,793 | ) | ||||||||
|
Income
before income taxes (1)
|
17,503 | 26,833 | 38,203 | 47,916 | ||||||||||||
|
Income
tax expense (1),
(2)
|
2,938 | 11,010 | 11,427 | 19,618 | ||||||||||||
|
Net
income (1)
|
$ | 14,565 | $ | 15,823 | $ | 26,776 | $ | 28,298 | ||||||||
|
Net
income per share: (1)
|
||||||||||||||||
|
Basic
|
$ | 0.56 | $ | 0.57 | $ | 1.02 | $ | 1.00 | ||||||||
|
Diluted
|
$ | 0.56 | $ | 0.56 | $ | 1.02 | $ | 1.00 | ||||||||
|
Weighted
average number of common shares and potentially dilutive common shares
outstanding
|
25,870 | 28,044 | 26,241 | 28,324 | ||||||||||||
|
Operating
Statistics:
|
||||||||||||||||
|
Ratio
of medical care costs paid directly to providers to premium
revenue
|
84.8 | % | 81.9 | % | 84.4 | % | 82.5 | % | ||||||||
|
Ratio
of medical care costs not paid directly to providers to premium
revenue
|
2.0 | % | 2.3 | % | 2.0 | % | 2.5 | % | ||||||||
|
Medical
care ratio
(3)
|
86.8 | % | 84.2 | % | 86.4 | % | 85.0 | % | ||||||||
|
General
and administrative expense
ratio excluding premium
taxes
(core G&A ratio)
(4)
|
7.0 | % | 8.2 | % | 7.3 | % | 8.0 | % | ||||||||
|
Premium
taxes included in G&A expense (4)
|
3.1 | % | 3.2 | % | 3.1 | % | 3.0 | % | ||||||||
|
Total general and
administrative
expense ratio (4)
|
10.1 | % | 11.4 | % | 10.4 | % | 11.0 | % | ||||||||
|
Depreciation
and amortization expense ratio (4)
|
1.0 | % | 1.1 | % | 1.0 | % | 1.1 | % | ||||||||
|
Effective
tax rate (1),(2)
|
16.8 | % | 41.0 | % | 29.9 | % | 40.9 | % | ||||||||
|
(1)
|
The
Company’s 2008 results have been recast to reflect the adoption of FSP APB
14-1. This resulted in additional interest expense of $1.2
million ($0.03 per diluted share) for the three months ended June 30,
2008, and $2.3 million ($0.05 per diluted share) for the six months ended
June 30, 2008.
|
|
(2)
|
The Company recorded tax benefits totaling $4.4 million in the second quarter of 2009 as a result of settling tax examinations and the voluntary filing of certain accounting method changes. |
|
(3)
|
Medical
care ratio represents medical care costs as a percentage of premium
revenue.
|
|
(4)
|
Computed
as a percentage of total operating
revenue.
|
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 11
August
4, 2009
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Amounts
in thousands, except per-share data)
|
June
30,
2009
|
Dec.
31,
2008
(1)
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 417,837 | $ | 387,162 | ||||
|
Investments
|
180,398 | 189,870 | ||||||
|
Receivables
|
151,440 | 128,562 | ||||||
|
Income
taxes refundable
|
− | 4,019 | ||||||
|
Deferred
income taxes (1)
|
6,829 | 9,071 | ||||||
|
Prepaid
expenses and other current assets
|
14,034 | 14,766 | ||||||
|
Total
current assets
|
770,538 | 733,450 | ||||||
|
Property
and equipment, net
|
73,957 | 65,058 | ||||||
|
Goodwill
and intangible assets, net
|
204,040 | 192,599 | ||||||
|
Investments
|
62,017 | 58,169 | ||||||
|
Restricted
investments
|
44,736 | 38,202 | ||||||
|
Receivable
for ceded life and annuity contracts
|
26,153 | 27,367 | ||||||
|
Other
assets (1)
|
21,718 | 33,223 | ||||||
|
Total
assets
|
$ | 1,203,159 | $ | 1,148,068 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Medical
claims and benefits payable
|
$ | 308,707 | $ | 292,442 | ||||
|
Accounts
payable and accrued liabilities
|
60,016 | 66,247 | ||||||
|
Deferred
revenue
|
84,176 | 29,538 | ||||||
|
Income
taxes payable
|
5,401 | − | ||||||
|
Total
current liabilities
|
458,300 | 388,227 | ||||||
|
Long-term
debt (1)
|
156,484 | 164,873 | ||||||
|
Deferred
income taxes (1)
|
13,891 | 12,911 | ||||||
|
Liability
for ceded life and annuity contracts
|
26,153 | 27,367 | ||||||
|
Other
long-term liabilities
|
14,156 | 22,928 | ||||||
|
Total
liabilities
|
668,984 | 616,306 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Common
stock, $0.001 par value; 80,000 shares authorized, outstanding 25,529
shares at June 30, 2009, and 26,725 shares at December 31,
2008
|
26 | 27 | ||||||
|
Preferred
stock, $0.001 par value; 20,000 shares authorized,
no shares
outstanding
|
− | − | ||||||
|
Additional
paid-in capital (1)
|
138,058 | 170,681 | ||||||
|
Accumulated
other comprehensive loss
|
(1,702 | ) | (2,310 | ) | ||||
|
Retained
earnings (1)
|
410,530 | 383,754 | ||||||
|
Treasury
stock, at cost; 544 shares at June 30, 2009, and 1,201 shares
at
December 31,
2008
|
(12,737 | ) | (20,390 | ) | ||||
|
Total
stockholders’ equity
|
534,175 | 531,762 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 1,203,159 | $ | 1,148,068 | ||||
|
(1)
|
The
Company’s financial position as of December 31, 2008, has been recast to
reflect adoption of FSP APB 14-1. The cumulative adjustments to
reduce retained earnings were $3.4 million as of January 1,
2009.
|
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 12
August
4, 2009
MOLINA
HEALTHCARE, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
|
2009
|
2008
(1)
|
2009
|
2008
(1)
|
|||||||||||||
|
Operating
activities:
|
||||||||||||||||
|
Net
income (1)
|
$ | 14,565 | $ | 15,823 | $ | 26,776 | $ | 28,298 | ||||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
9,584 | 8,330 | 18,636 | 16,482 | ||||||||||||
|
Unrealized
loss (gain) on trading securities
|
29 | − | (3,610 | ) | − | |||||||||||
|
(Gain)
loss on rights agreement
|
(27 | ) | − | 3,296 | − | |||||||||||
|
Deferred
income taxes
|
(1,743 | ) | (1,716 | ) | 3,245 | (6,490 | ) | |||||||||
|
Stock-based
compensation
|
2,024 | 2,076 | 3,458 | 3,587 | ||||||||||||
|
Non-cash
interest on convertible senior notes (1)
|
1,172 | 1,166 | 2,366 | 2,310 | ||||||||||||
|
Gain
on purchase and retirement of convertible senior notes
|
− | − | (1,532 | ) | − | |||||||||||
|
Amortization
of deferred financing costs (1)
|
344 | 359 | 696 | 717 | ||||||||||||
|
Tax
deficiency from employee stock compensation recorded as
additional
paid-in capital
|
(14 | ) | (142 | ) | (547 | ) | (156 | ) | ||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Receivables
|
6,735 | 3,956 | (22,878 | ) | (2,060 | ) | ||||||||||
|
Prepaid
expenses and other current assets
|
3,644 | (706 | ) | 732 | (1,963 | ) | ||||||||||
|
Medical
claims and benefits payable
|
(2,920 | ) | (6,235 | ) | 16,265 | (6,065 | ) | |||||||||
|
Accounts
payable and accrued liabilities
|
(12,804 | ) | (6,343 | ) | (15,726 | ) | (10,620 | ) | ||||||||
|
Deferred
revenue
|
1,670 | 48,128 | 54,638 | 10,066 | ||||||||||||
|
Income
taxes
|
5,666 | (1,943 | ) | 9,025 | 5,191 | |||||||||||
|
Net
cash provided by operating activities
|
27,925 | 62,753 | 94,840 | 39,297 | ||||||||||||
|
Investing
activities:
|
||||||||||||||||
|
Purchases
of property and equipment
|
(9,557 | ) | (8,921 | ) | (19,924 | ) | (17,098 | ) | ||||||||
|
Purchases
of investments
|
(24,055 | ) | (67,630 | ) | (72,182 | ) | (163,447 | ) | ||||||||
|
Sales
and maturities of investments
|
46,665 | 55,452 | 82,292 | 137,805 | ||||||||||||
|
Cash
paid in business purchase transactions
|
− | (1,000 | ) | − | (1,000 | ) | ||||||||||
|
Increase
in restricted investments
|
(6,979 | ) | (69 | ) | (6,534 | ) | (856 | ) | ||||||||
|
Increase
in other assets
|
(1,053 | ) | (615 | ) | (2,761 | ) | (2,177 | ) | ||||||||
|
(Decrease)
increase in other long-term liabilities
|
(8,641 | ) | 2,247 | (8,772 | ) | 2,610 | ||||||||||
|
Net
cash used in investing activities
|
(3,620 | ) | (20,536 | ) | (27,881 | ) | (44,163 | ) | ||||||||
|
Financing
activities:
|
||||||||||||||||
|
Treasury
stock purchases
|
(12,736 | ) | (29,966 | ) | (27,712 | ) | (29,966 | ) | ||||||||
|
Purchase
and retirement of convertible
senior notes
|
− | − | (9,653 | ) | − | |||||||||||
|
Proceeds
from exercise of stock options and employee stock plan
purchases
|
1,081 | 1,020 | 1,081 | 1,192 | ||||||||||||
|
Net
cash used in financing activities
|
(11,655 | ) | (28,946 | ) | (36,284 | ) | (28,774 | ) | ||||||||
|
Net
increase (decrease) in cash and cash equivalents
|
12,650 | 13,271 | 30,675 | (33,640 | ) | |||||||||||
|
Cash
and cash equivalents at beginning of period
|
405,187 | 412,153 | 387,162 | 459,064 | ||||||||||||
|
Cash
and cash equivalents at end of period
|
$ | 417,837 | $ | 425,424 | $ | 417,837 | $ | 425,424 | ||||||||
|
(1)
|
The
Company’s 2008 cash flows have been recast to reflect the adoption of FSP
APB 14-1.
|
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 13
August
4, 2009
MOLINA
HEALTHCARE, INC.
UNAUDITED
MEMBERSHIP DATA
|
Total
Ending Membership By Health Plan:
|
June
30,
2009
|
March
31,
2009
|
Dec.
31,
2008
|
June
30,
2008
|
||||||||||||
|
California
|
349,000 | 327,000 | 322,000 | 310,000 | ||||||||||||
|
Florida
(1)
|
29,000 | 17,000 | − | – | ||||||||||||
|
Michigan
|
207,000 | 207,000 | 206,000 | 212,000 | ||||||||||||
|
Missouri
|
78,000 | 77,000 | 77,000 | 76,000 | ||||||||||||
|
Nevada
(2)
|
– | – | − | – | ||||||||||||
|
New
Mexico
|
85,000 | 83,000 | 84,000 | 81,000 | ||||||||||||
|
Ohio
|
203,000 | 190,000 | 176,000 | 173,000 | ||||||||||||
|
Texas
|
30,000 | 33,000 | 31,000 | 29,000 | ||||||||||||
|
Utah
|
64,000 | 60,000 | 61,000 | 57,000 | ||||||||||||
|
Washington
|
323,000 | 309,000 | 299,000 | 296,000 | ||||||||||||
|
Total
|
1,368,000 | 1,303,000 | 1,256,000 | 1,234,000 | ||||||||||||
|
Total
Ending Membership By State
for the Medicare Advantage
Plans:
|
||||||||||||||||
|
California
|
1,600 | 1,500 | 1,500 | 1,400 | ||||||||||||
|
Michigan
|
2,100 | 2,000 | 1,700 | 1,500 | ||||||||||||
|
Nevada
|
400 | 400 | 700 | 700 | ||||||||||||
|
New
Mexico
|
400 | 400 | 300 | 100 | ||||||||||||
|
Texas
|
400 | 400 | 400 | 400 | ||||||||||||
|
Utah
|
3,100 | 2,800 | 2,400 | 2,100 | ||||||||||||
|
Washington
|
1,000 | 1,000 | 1,000 | 900 | ||||||||||||
|
Total
|
9,000 | 8,500 | 8,000 | 7,100 | ||||||||||||
|
Total
Ending Membership By State
for the Aged, Blind or Disabled
Population:
|
||||||||||||||||
|
California
|
13,100 | 12,600 | 12,700 | 12,100 | ||||||||||||
|
Florida
(1)
|
6,000 | 4,200 | − | – | ||||||||||||
|
Michigan
|
29,900 | 30,100 | 30,300 | 30,900 | ||||||||||||
|
New
Mexico
|
5,700 | 6,200 | 6,300 | 6,700 | ||||||||||||
|
Ohio
|
19,700 | 19,700 | 19,000 | 15,400 | ||||||||||||
|
Texas
|
17,000 | 16,700 | 16,200 | 16,000 | ||||||||||||
|
Utah
|
7,600 | 7,500 | 7,300 | 7,000 | ||||||||||||
|
Washington
|
3,000 | 3,000 | 3,000 | 3,000 | ||||||||||||
|
Total
|
102,000 | 100,000 | 94,800 | 91,100 | ||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||
|
Total
Member Months (3)
by Health Plan:
|
June
30,
2009
|
March
31,
2009
|
June
30,
2008
|
June
30,
2009
|
June
30,
2008
|
|||||||||||||||
|
California
|
1,031,000 | 980,000 | 921,000 | 2,011,000 | 1,829,000 | |||||||||||||||
|
Florida
(1)
|
75,000 | 61,000 | – | 136,000 | – | |||||||||||||||
|
Michigan
|
623,000 | 620,000 | 639,000 | 1,243,000 | 1,277,000 | |||||||||||||||
|
Missouri
|
232,000 | 231,000 | 227,000 | 463,000 | 450,000 | |||||||||||||||
|
Nevada
|
1,000 | 1,000 | 2,000 | 2,000 | 4,000 | |||||||||||||||
|
New
Mexico
|
251,000 | 248,000 | 239,000 | 499,000 | 467,000 | |||||||||||||||
|
Ohio
|
596,000 | 560,000 | 522,000 | 1,156,000 | 935,000 | |||||||||||||||
|
Texas
|
92,000 | 98,000 | 85,000 | 190,000 | 170,000 | |||||||||||||||
|
Utah
|
200,000 | 184,000 | 164,000 | 384,000 | 321,000 | |||||||||||||||
|
Washington
|
952,000 | 919,000 | 879,000 | 1,871,000 | 1,738,000 | |||||||||||||||
|
Total
|
4,053,000 | 3,902,000 | 3,678,000 | 7,955,000 | 7,191,000 | |||||||||||||||
|
(1)
|
The
Florida health plan began serving members in late December
2008.
|
|
(2)
|
Less
than 1,000 members.
|
|
(3)
|
A
total member month is defined as the aggregate of each month’s ending
membership for the period
presented.
|
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 14
August
4, 2009
MOLINA
HEALTHCARE, INC.
UNAUDITED
SELECTED FINANCIAL DATA BY HEALTH PLAN
(Dollars
in thousands except per member per month amounts)
|
Three
Months Ended June 30, 2009
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
(1)
|
$ | 121,918 | $ | 118.23 | $ | 111,750 | $ | 108.37 | 91.7 | % | $ | 3,395 | ||||||||||||
|
Florida
(2)
|
19,339 | 257.22 | 17,355 | 230.83 | 89.7 | – | ||||||||||||||||||
|
Michigan
|
136,549 | 219.44 | 112,402 | 180.64 | 82.3 | 8,300 | ||||||||||||||||||
|
Missouri
|
58,141 | 251.06 | 48,582 | 209.78 | 83.6 | — | ||||||||||||||||||
|
Nevada
|
1,494 | 1,348.22 | 769 | 694.07 | 51.5 | — | ||||||||||||||||||
|
New
Mexico (3)
|
114,408 | 456.80 | 100,255 | 400.30 | 87.6 | 2,989 | ||||||||||||||||||
|
Ohio
|
194,885 | 327.02 | 168,639 | 282.98 | 86.5 | 10,731 | ||||||||||||||||||
|
Texas
|
34,345 | 372.13 | 24,851 | 269.26 | 72.4 | 572 | ||||||||||||||||||
|
Utah
|
57,918 | 288.99 | 53,182 | 265.35 | 91.8 | — | ||||||||||||||||||
|
Washington
|
183,720 | 192.96 | 156,981 | 164.88 | 85.5 | 3,064 | ||||||||||||||||||
|
Other
(4)
|
2,790 | — | 8,440 | — | — | 11 | ||||||||||||||||||
|
Consolidated
|
$ | 925,507 | $ | 228.38 | $ | 803,206 | $ | 198.20 | 86.8 | % | $ | 29,062 | ||||||||||||
|
Three
Months Ended June 30, 2008
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 104,136 | $ | 113.00 | $ | 88,449 | $ | 95.98 | 84.9 | % | $ | 3,242 | ||||||||||||
|
Florida
(1)
|
– | – | – | – | – | – | ||||||||||||||||||
|
Michigan
|
125,382 | 196.37 | 100,273 | 157.05 | 80.0 | 6,625 | ||||||||||||||||||
|
Missouri
|
54,250 | 238.84 | 45,050 | 198.34 | 83.0 | — | ||||||||||||||||||
|
Nevada
|
2,243 | 1,303.04 | 2,506 | 1,456.25 | 111.8 | — | ||||||||||||||||||
|
New
Mexico
|
89,279 | 374.58 | 69,593 | 291.99 | 78.0 | 4,184 | ||||||||||||||||||
|
Ohio
|
147,114 | 281.73 | 133,816 | 256.26 | 91.0 | 6,672 | ||||||||||||||||||
|
Texas
|
25,742 | 303.09 | 19,669 | 231.58 | 76.4 | 460 | ||||||||||||||||||
|
Utah
|
35,385 | 214.89 | 31,932 | 193.92 | 90.2 | — | ||||||||||||||||||
|
Washington
|
177,619 | 202.11 | 145,840 | 165.95 | 82.1 | 2,993 | ||||||||||||||||||
|
Other
(2)
|
3 | — | 3,701 | — | — | (5 | ) | |||||||||||||||||
|
Consolidated
|
$ | 761,153 | $ | 206.96 | $ | 640,829 | $ | 174.24 | 84.2 | % | $ | 24,171 | ||||||||||||
|
(1)
|
The
year-over-year increase in the California health plan’s medical care ratio
was caused primarily by higher fee-for-service costs. Of the
$5.2 million in negative prior period development experienced by the
California health plan during the six months ended June 30, 2009, $2.4
million was recognized in the second quarter. Absent the $2.4
million in prior period development and the $3.2 million of revenue
recognized in connection with the settlement of a rate dispute with the
state, the medical care ratio for the second quarter of 2009 would have
been 92.1%.
|
|
(2)
|
The
Florida health plan began serving members in late December
2008.
|
|
(3)
|
The
year-over-year increase in the New Mexico health plan’s medical care ratio
was due to increased professional fees and outpatient facility costs in
2009, as well as the recognition in 2008 of revenue related to a medical
cost floor provision of the Company’s contract with the state of New
Mexico. During the second quarter of 2008, the New Mexico
health plan had recognized $6.2 million of premium revenue due to the
reversal of amounts previously recorded as payable to the
state. Absent this revenue adjustment, the New Mexico health
plan’s medical care ratio would have been 83.8% in the second quarter of
2008.
|
|
(4)
|
“Other”
medical care costs represent primarily medically related administrative
costs at the parent company.
|
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 15
August
4, 2009
MOLINA
HEALTHCARE, INC.
UNAUDITED
SELECTED FINANCIAL DATA BY HEALTH PLAN
(Dollars
in thousands except per member per month amounts)
|
Six
Months Ended June 30, 2009
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 231,953 | $ | 115.34 | $ | 215,723 | $ | 107.27 | 93.0 | % | $ | 6,711 | ||||||||||||
|
Florida
(1)
|
39,030 | 287.03 | 35,123 | 258.29 | 90.0 | – | ||||||||||||||||||
|
Michigan
|
269,314 | 216.71 | 222,397 | 178.96 | 82.6 | 15,184 | ||||||||||||||||||
|
Missouri
|
116,848 | 252.53 | 95,556 | 206.51 | 81.8 | — | ||||||||||||||||||
|
Nevada
|
2,724 | 1,220.55 | 1,203 | 539.19 | 44.2 | — | ||||||||||||||||||
|
New
Mexico
|
196,226 | 393.53 | 172,276 | 345.50 | 87.8 | 5,082 | ||||||||||||||||||
|
Ohio
|
382,107 | 330.46 | 326,419 | 282.30 | 85.4 | 20,923 | ||||||||||||||||||
|
Texas
|
67,356 | 354.66 | 52,257 | 275.15 | 77.6 | 1,256 | ||||||||||||||||||
|
Utah
|
108,536 | 282.34 | 97,445 | 253.49 | 89.8 | — | ||||||||||||||||||
|
Washington
|
364,424 | 194.78 | 306,526 | 163.83 | 84.1 | 6,011 | ||||||||||||||||||
|
Other
(2)
|
4,473 | — | 16,169 | — | — | (4 | ) | |||||||||||||||||
|
Consolidated
|
$ | 1,782,991 | $ | 224.14 | $ | 1,541,094 | $ | 193.73 | 86.4 | % | $ | 55,163 | ||||||||||||
|
Six
Months Ended June 30, 2008
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
(1)
|
$ | 205,756 | $ | 112.49 | $ | 178,103 | $ | 97.37 | 86.6 | % | $ | 6,201 | ||||||||||||
|
Florida
(2)
|
– | – | – | – | – | – | ||||||||||||||||||
|
Michigan
|
250,134 | 195.89 | 203,173 | 159.12 | 81.2 | 13,565 | ||||||||||||||||||
|
Missouri
|
106,286 | 236.29 | 91,732 | 203.93 | 86.3 | — | ||||||||||||||||||
|
Nevada
|
4,187 | 1,267.13 | 4,133 | 1,250.76 | 98.7 | — | ||||||||||||||||||
|
New
Mexico (3)
|
177,928 | 381.45 | 141,518 | 303.40 | 79.5 | 5,686 | ||||||||||||||||||
|
Ohio
|
271,720 | 290.54 | 246,354 | 263.42 | 90.7 | 12,277 | ||||||||||||||||||
|
Texas
|
49,174 | 288.81 | 37,499 | 220.24 | 76.3 | 936 | ||||||||||||||||||
|
Utah
|
72,731 | 226.40 | 64,923 | 202.10 | 89.3 | — | ||||||||||||||||||
|
Washington
|
352,817 | 202.97 | 290,353 | 167.03 | 82.3 | 5,838 | ||||||||||||||||||
|
Other
(4)
|
58 | — | 9,388 | — | — | 20 | ||||||||||||||||||
|
Consolidated
|
$ | 1,490,791 | $ | 207.33 | $ | 1,267,176 | $ | 176.23 | 85.0 | % | $ | 44,523 | ||||||||||||
|
(1)
|
The
medical care ratio of the California health plan was 93.0% for the first
half of 2009, up from 86.6% in first half of 2008. Rising
fee-for-service costs combined with flat per member per month revenue
(compared with the first half of 2008) drove the medical care ratio of the
California health plan up for the first half of 2009. Absent
the $5.2 million in negative prior period development experience in 2009
and the $3.2 million of revenue recognized in connection with the
settlement of a rate dispute with the state, the medical care ratio for
the California health plan for the first half of 2009 would have been
92.0%.
|
| (2) |
The
Florida health plan began serving members in late December
2008.
|
|
(3)
|
The
medical care ratio of the New Mexico health plan was 87.8% for the first
half of 2009, up from 79.5% in the first half of 2008. During
the first half of 2008, the New Mexico health plan had recognized $12.9
million of premium revenue due to the reversal of amounts previously
recorded as payable to the state of New Mexico. Absent this
revenue adjustment, the New Mexico health plan’s medical care ratio would
have been 85.8% in the first half of
2008.
|
|
(4)
|
“Other”
medical care costs represent primarily medically related administrative
costs at the parent company.
|
-MORE-
MOH Reports Second Quarter
2009 Results
Page 16
August
4, 2009
MOLINA
HEALTHCARE, INC.
UNAUDITED
SELECTED FINANCIAL DATA
(Dollars
in thousands except per member per month amounts)
The
following tables provide the details of the Company’s medical care costs for the
periods indicated:
|
Three
Months Ended
June
30, 2009
|
Three
Months Ended
June
30, 2008
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 517,066 | $ | 127.59 | 64.4 | % | $ | 410,619 | $ | 111.65 | 64.1 | % | ||||||||||||
|
Capitation
|
154,386 | 38.10 | 19.2 | 117,707 | 32.00 | 18.4 | ||||||||||||||||||
|
Pharmacy
|
99,256 | 24.49 | 12.4 | 88,676 | 24.11 | 13.8 | ||||||||||||||||||
|
Other
|
32,498 | 8.02 | 4.0 | 23,827 | 6.48 | 3.7 | ||||||||||||||||||
|
Total
|
$ | 803,206 | $ | 198.20 | 100.0 | % | $ | 640,829 | $ | 174.24 | 100.0 | % | ||||||||||||
|
Six
Months Ended
June
30, 2009
|
Six
Months Ended
June
30, 2008
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 1,006,207 | $ | 126.49 | 65.3 | % | $ | 822,628 | $ | 114.40 | 64.9 | % | ||||||||||||
|
Capitation
|
272,800 | 34.29 | 17.7 | 221,498 | 30.80 | 17.5 | ||||||||||||||||||
|
Pharmacy
|
201,894 | 25.38 | 13.1 | 174,958 | 24.33 | 13.8 | ||||||||||||||||||
|
Other
|
60,193 | 7.57 | 3.9 | 48,092 | 6.70 | 3.8 | ||||||||||||||||||
|
Total
|
$ | 1,541,094 | $ | 193.73 | 100.0 | % | $ | 1,267,176 | $ | 176.23 | 100.0 | % | ||||||||||||
The
following table provides the details of the Company’s medical claims and
benefits payable as of the dates indicated:
|
June
30, 2009
|
March
31, 2009
|
June
30, 2008
|
||||||||||
|
Fee-for-service
claims incurred but not paid (IBNP)
|
$ | 244,987 | $ | 247,111 | $ | 248,698 | ||||||
|
Capitation
payable
|
34,657 | 31,815 | 32,906 | |||||||||
|
Pharmacy
payable
|
22,367 | 24,047 | 16,107 | |||||||||
|
Other
|
6,696 | 8,654 | 7,830 | |||||||||
|
Total medical claims and
benefits payable
|
$ | 308,707 | $ | 311,627 | $ | 305,541 | ||||||
-MORE-
MOH
Reports Second Quarter 2009 Results
Page 17
August
4, 2009
MOLINA
HEALTHCARE, INC.
CHANGE
IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars
in thousands, except per-member amounts)
(Unaudited)
The
Company’s claims liability includes an allowance for adverse claims development
based on historical experience and other factors including, but not limited to,
variation in claims payment patterns, changes in utilization and cost trends,
known outbreaks of disease, and large claims. The Company’s reserving
methodology is consistently applied across all periods presented. The
negative amounts displayed for “Components of medical care costs
related to: Prior periods” represent the amount by which the Company’s
original estimate of claims and benefits payable at the beginning of the period
exceeded the actual amount of the liability based on information (principally
the payment of claims) developed since that liability was first
reported. The benefit of this prior period development may be offset
by the addition of a reserve for adverse claims development when estimating the
liability at the end of the period (captured in “Components of medical care costs
related to: Current period”). The following table shows the
components of the change in medical claims and benefits payable as of the
periods indicated:
|
Six
Months Ended
|
Three
Months Ended
|
|||||||||||||||
|
June
30,
2009
|
June
30,
2008
|
June
30,
2009
|
March
31,
2009
|
|||||||||||||
|
Balances
at beginning of period
|
$ | 292,442 | $ | 311,606 | $ | 311,627 | $ | 292,442 | ||||||||
|
Components
of medical care costs related to:
|
||||||||||||||||
|
Current period
|
1,587,469 | 1,315,469 | 826,819 | 780,112 | ||||||||||||
|
Prior periods
|
(46,375 | ) | (48,293 | ) | (23,613 | ) | (42,224 | ) | ||||||||
|
Total
medical care costs
|
1,541,094 | 1,267,176 | 803,206 | 737,888 | ||||||||||||
|
Payments
for medical care costs related to:
|
||||||||||||||||
|
Current period
|
1,297,946 | 1,043,522 | 562,395 | 510,075 | ||||||||||||
|
Prior periods
|
226,883 | 229,719 | 243,731 | 208,628 | ||||||||||||
|
Total
paid
|
1,524,829 | 1,273,241 | 806,126 | 718,703 | ||||||||||||
|
Balances
at end of period
|
$ | 308,707 | $ | 305,541 | $ | 308,707 | $ | 311,627 | ||||||||
|
Benefit
from prior period as a percentage of:
|
||||||||||||||||
|
Balance at beginning of
period
|
15.9 | % | 15.5 | % | 7.6 | % | 14.4 | % | ||||||||
|
Premium revenue
|
2.6 | % | 3.2 | % | 2.6 | % | 4.9 | % | ||||||||
|
Total medical care
costs
|
3.0 | % | 3.8 | % | 2.9 | % | 5.7 | % | ||||||||
|
Days
in claims payable
|
39 | 47 | 39 | 42 | ||||||||||||
|
Number
of members at end of period
|
1,368,000 | 1,234,000 | 1,368,000 | 1,303,000 | ||||||||||||
|
Number
of claims in inventory at end of period
|
117,100 | 151,500 | 117,100 | 158,900 | ||||||||||||
|
Billed
charges of claims in inventory
at end of
period
|
$ | 173,400 | $ | 209,100 | $ | 173,400 | $ | 208,900 | ||||||||
|
Claims
in inventory per member at end of period
|
0.09 | 0.12 | 0.09 | 0.12 | ||||||||||||
|
Billed
charges of claims in inventory
per member at end of
period
|
$ | 126.75 | $ | 169.45 | $ | 126.75 | $ | 160.32 | ||||||||
|
Number
of claims received during the period
|
6,287,300 | 5,483,600 | 3,235,700 | 3,051,600 | ||||||||||||
|
Billed
charges of claims received
during the
period
|
$ | 4,707,200 | $ | 3,758,600 | $ | 2,427,100 | $ | 2,280,100 | ||||||||
-END-