Molina Healthcare Announces Second Quarter Results and Restructuring Plan

LONG BEACH, Calif.--(BUSINESS WIRE)--Aug. 2, 2017-- Molina Healthcare, Inc. (NYSE: MOH):

Net loss of $230 million for the quarter, or $4.10 per diluted share.
Restructuring plan now underway is expected to reduce annualized run-rate expenses by $300 million to $400 million upon completion in 2018.
$200 million total reduction to annualized run-rate expenses resulting from staff reductions expected to be achieved by the end of 2017 in time for full realization in 2018.
Annualized salary eliminations of $55 million achieved so far in the third quarter of 2017.
Direct delivery operations will be restructured during the second half of 2017.
2018 Marketplace participation to be terminated in Utah and Wisconsin; additional states in review.
2017 earnings per share guidance withdrawn.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2017.

“We are disappointed with our bottom-line results for this quarter and have taken aggressive and urgent steps to substantially improve our financial performance going forward,” said Joseph White, chief financial officer and interim president and chief executive officer of Molina Healthcare, Inc. “Following a thorough review of our business operations, we have begun to implement a Company-wide restructuring plan that we expect will reduce annualized run-rate expenses by between $300 million and $400 million by late 2018 when fully implemented, with approximately $200 million of these run-rate reductions expected to be achieved by the end of 2017 and in time for full realization in 2018. In the past, we have been focused on top line growth, often at the expense of bottom line results. While we expect to enjoy continued RFP and organic growth in our Medicaid managed care business, we are now intensively focused on improved operating performance and efficiency as the path to greater profitability and shareholder returns.”

Second Quarter 2017 Compared with Second Quarter 2016

Net loss per diluted share was $4.10 in the second quarter of 2017 compared with net income per diluted share of $0.58 reported for the second quarter of 2016. Loss before income tax benefit for the second quarter of 2017 was $314 million.

Certain significant items increased loss before income tax benefit in the second quarter of 2017 by approximately $330 million. Specifically:

We recorded $72 million in non-cash impairment losses for goodwill and intangibles, primarily relating to our Pathways subsidiary. In the course of developing our restructuring and profitability improvement plan, we determined that future benefits to be derived from Pathways (including integration with our health plans) will be less than previously anticipated. While such impairment losses have a short-term impact on profitability, there is no impact to our cash flows. Pathways experienced operating losses of $8 million for the quarter ended June 30, 2017 and $12 million for the six months ended June 30, 2017.

Medical care costs related to 2016 service dates were significantly in excess of what the Company usually experiences for out-of-period claims development, particularly at the Florida, Illinois, New Mexico, and Puerto Rico health plans. In total, we experienced out-of-period claims development that was approximately $85 million higher than expected at December 31, 2016.
We recorded $44 million for Marketplace changes in estimates, including risk transfer and cost sharing subsidies, related to 2016 service dates. Liabilities for risk transfer payments and cost sharing subsidies that were estimated at December 31, 2016 were finalized during the second quarter of 2017.
Loss before income tax benefit increased by $78 million as a result of an increase to the premium deficiency reserve established for the Marketplace program. The reserve, which was $22 million at March 31, 2017, increased to $100 million as of June 30, 2017. Based upon revenue and cost trends observed in the second quarter of 2017, we now believe that Marketplace performance in the second half of 2017 will fall substantially short of previous expectations. Marketplace performance has been most disappointing in Florida, Utah, Washington, and Wisconsin.
We recorded $43 million in restructuring and separation costs in the second quarter of 2017 related primarily to contractually required termination benefits paid to our former chief executive officer and chief financial officer. Also included in these costs are consulting fees incurred for the development and implementation of our corporate restructuring initiatives.

In addition to the items noted above, ongoing poor performance at our Florida, Illinois, New Mexico and Puerto Rico health plans in 2017 all contributed to our disappointing financial performance in the second quarter of 2017.

The table below summarizes the impact of these significant items on the Company’s financial performance.


Summary of Significant Items Affecting 2017 Financial Results

	Three Months Ended				Six Months Ended
	June 30, 2017				June 30, 2017
	(In millions, except per diluted share amounts)
	Amount		Per Diluted Share ⁽¹⁾		Amount			Per Diluted Share ⁽¹⁾
Impairment losses	$	72	$	1.01	$	72		$	1.02
Losses at behavioral health subsidiary exclusive of impairment	8		0.09		12			0.14
Medical care costs related to prior year service dates that were in excess of historical expectations	85		0.95		74			0.84
Marketplace adjustments related to risk transfer, cost sharing subsidies, and other items for 2016 service dates	44		0.49		47			0.53
Marketplace premium deficiency reserve for 2017 service dates	78		0.87		70			0.79
Restructuring and separation costs	43		0.68		43			0.68
Termination fee received for Terminated Medicare acquisition	—		—		(75		)	(0.84		)
	$	330	$	4.09	$	243		$	3.16

____________________
(1)	Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at our statutory income tax rate of 37%, which is in excess of the effective tax rate recorded in our consolidated statements of operations.

Income Tax (Benefit) Expense

The effective tax rate benefit for 2017 was less than the statutory tax rate benefit due to the relatively large amount of our reported expenses that are not deductible for tax purposes.

Restructuring and Profit Improvement Plan

As a result of our poor operating performance and catalyzed by our change in management, we accelerated the implementation of a comprehensive restructuring and profitability improvement plan (the Restructuring Plan). Under the Restructuring Plan, we are taking the following actions:

We are streamlining our organizational structure, including the elimination of redundant layers of management, the consolidation of regional support services, and other reductions to our workforce, to improve efficiency as well as the speed and quality of our decision-making.
We are re-designing core operating processes such as provider payment, utilization management, quality monitoring and improvement, and information technology to achieve more effective and cost efficient outcomes.
We are remediating high cost provider contracts and building around high quality, cost-effective networks.
We are restructuring our existing direct delivery operations.
We are reviewing our vendor base to ensure that we are partnering with the lowest-cost, most-effective vendors.
Throughout this process, we are taking precautions to ensure that our actions do not impede our ability to continue to deliver quality health care, retain existing managed care contracts, and to secure new managed care contracts.

In total, we estimate that the Restructuring Plan will reduce annualized run-rate expenses by approximately $300 million to $400 million upon its completion in late 2018. $200 million of these run-rate reductions, which are a result of staff reductions, will be in place by December 2017, and therefore will fully contribute to our 2018 results. Since the close of the second quarter, we have already achieved $55 million of our annualized run-rate reduction target as a result of staff reductions taken on July 27^th. All savings targets discussed in regards to the Restructuring Plan represent annualized run-rate savings that we expect to achieve during the year following the indicated implementation date. One-time costs associated with the Restructuring Plan are expected to exceed the benefits realized in 2017 due to the upfront payment of implementation costs and the delayed benefit of full savings until the beginning of 2018.

We estimate that total pre-tax costs associated with the Restructuring Plan will be approximately $130 million to $150 million for the second half of 2017, with an additional $40 million to be incurred in 2018.

As part of the Restructuring Plan, we are reducing our corporate and health plans workforce by approximately 10%, or 1,500 full-time-equivalent employees. This workforce rightsizing, which represents 7% of the total number of our employees, is expected to be completed by the end of 2017. Affected employees will be offered severance and outplacement assistance.

“This reduction in our workforce is a difficult, but necessary, step as we concentrate our efforts on achieving operational excellence and improved efficiency. By transforming the entire enterprise into a leaner, more streamlined organization, we can enhance our decision-making, improve our operating performance, and grow our margins,” said Mr. White.

Actions Taken to Remediate 2018 Marketplace Performance

In addition to the Restructuring Plan, we are taking these further steps to improve profitability in 2018:

We are exiting the Utah and Wisconsin ACA Marketplaces effective December 31, 2017. For the three months ended June 30, 2017, these two health plans reported a total of $127 million in Marketplace premium revenue (16% of consolidated Marketplace premium revenue), and a combined Marketplace medical care ratio of 128%.
In our remaining Marketplace plans, we are increasing 2018 premiums by 55%. The increase takes into account the absence of cost sharing reduction subsidies. Had we assumed that cost sharing reduction subsidies would be funded for 2018, the premium increase would have been 30%.
We are also reducing the scope of our 2018 participation in the Washington Marketplace.
We continue to closely monitor the current political and programmatic developments pertaining to our 2018 participation in other Marketplace states, and subject to those developments, will withdraw from 2018 participation as may be necessary.

Withdrawing 2017 Outlook

We are withdrawing our previously issued 2017 full-year earnings per diluted share and adjusted earnings per diluted share guidance. Among the reasons for withdrawing guidance are:

Our results for the quarter ended June 30, 2017.
Uncertain medical cost trends in the Florida, Illinois, New Mexico, and Puerto Rico health plans.
Uncertainty around the funding of Marketplace cost sharing subsidies.
Potential variability in the timing of benefits achieved and costs incurred as a result of the Restructuring Plan.

Update on Search for Permanent Chief Executive Officer

Our search for a permanent chief executive officer is well underway and we are encouraged by the response.

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s second quarter results at 5:00 p.m. Eastern time on Wednesday, August 2, 2017. The number to call for the interactive teleconference is (212) 231-2909. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Wednesday, August 2, 2017, through 6:00 p.m. Eastern Time on Thursday, August 3, 2017, by dialing (800) 633-8284 and entering confirmation number 21855049. A live audio broadcast of Molina Healthcare’s conference call will be available on our website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our health plans operating in 12 states across the nation and in the Commonwealth of Puerto Rico, Molina currently serves approximately 4.7 million members. Dr. C. David Molina founded our company in 1980 to serve 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 the Restructuring Plan, including the timing of the benefits realized;
the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare,” including any potential repeal and replacement of the law, amendment of the law, or move to state block grants for Medicaid;
the market dynamics surrounding the ACA Marketplaces, including but not limited to uncertainties associated with risk transfer requirements, the potential for disproportionate enrollment of higher acuity members, the withdrawal of cost sharing subsidies and/or premium tax credits, the adequacy of agreed rates, and potential disruption associated with market withdrawal;
subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment/risk transfer, risk corridors, and reinsurance;
effective management of our medical costs;
our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria, including the payment of all amounts due to our Illinois health plan following the resolution of the Illinois budget impasse;
the success of our efforts to retain existing government contracts, including those in Florida, Illinois, New Mexico, Puerto Rico, and Texas, and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states;
any adverse impact resulting from the significant changes to our executive leadership team and the rightsizing of our workforce;
the impact of our decision to exit the Utah and Wisconsin ACA Marketplace markets effective December 31, 2017;
our ability to manage our operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives;
our ability to consummate and realize benefits from acquisitions or divestitures;
our receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;
our ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions;
our estimates of amounts owed for such cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions;
the Medicaid expansion cost corridors in California, New Mexico, and Washington, and any other retroactive adjustment to revenue where methodologies and procedures are subject to interpretation or dependent upon information about the health status of participants other than Molina members;
the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;
cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
the success of our health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under our Medicaid contract, the effect of the PROMESA law, and our efforts to better manage the health care costs of our Puerto Rico health plan;
the success and renewal of our duals demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
the accurate estimation of incurred but not reported or paid medical costs across our health plans;
efforts by states to recoup previously paid and recognized premium amounts;
the continuation and renewal of the government contracts of our health plans, Molina Medicaid Solutions, and Pathways, and the terms under which such contracts are renewed;
complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
government audits and reviews, or potential investigations, and any fine, sanction, enrollment freeze, monitoring program, or premium recovery that may result therefrom, including any potential demand by the state of New Mexico to recover purportedly underpaid premium taxes;
changes with respect to our provider contracts and the loss of providers;
approval by state regulators of dividends and distributions by our health plan subsidiaries;
changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
high dollar claims related to catastrophic illness;
the favorable resolution of litigation, arbitration, or administrative proceedings;
the relatively small number of states in which we operate health plans;
the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;
our failure to comply with the financial or other covenants in our credit agreement or the indentures governing our outstanding notes;
the sufficiency of our funds on hand to pay the amounts due upon conversion or maturity of our outstanding notes;
the failure of a state in which we operate to renew its federal Medicaid waiver;
changes generally affecting the managed care or Medicaid management information systems industries;
increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;
newly emergent viruses or widespread epidemics, public catastrophes or terrorist attacks, and associated public alarm;
increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in our periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of our website or on the SEC’s website at sec.gov. Given these risks and uncertainties, we can give no assurances that our forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by our forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward-looking statements in this release represent our judgment as of August 2, 2017, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.


MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(Dollar amounts in millions, except per-share amounts)
Revenue:
Premium revenue	$	4,740		$	4,029		$	9,388		$	8,024
Service revenue	129			135			260			275
Premium tax revenue	114			109			225			218
Health insurer fee revenue	—			76			—			166
Investment income and other revenue	16			10			30			19
Total revenue	4,999			4,359			9,903			8,702
Operating expenses:
Medical care costs	4,491			3,594			8,602			7,182
Cost of service revenue	124			116			246			243
General and administrative expenses	405			351			844			691
Premium tax expenses	114			109			225			218
Health insurer fee expenses	—			50			—			108
Depreciation and amortization	37			34			76			66
Impairment losses	72			—			72			—
Restructuring and separation costs	43			—			43			—
Total operating expenses	5,286			4,254			10,108			8,508
Operating (loss) income	(287		)	105			(205		)	194
Other expenses (income), net:
Interest expense	27			25			53			50
Other income, net	—			—			(75		)	—
Total other expenses (income), net	27			25			(22		)	50
(Loss) income before income tax (benefit) expense	(314		)	80			(183		)	144
Income tax (benefit) expense	(84		)	47			(30		)	87
Net (loss) income	$	(230	)	$	33		$	(153	)	$	57

Net (loss) income per diluted share	$	(4.10	)	$	0.58		$	(2.74	)	$	1.01

Diluted weighted average shares outstanding	56.2			55.5			56.1			56.3

Operating Statistics:
Medical care ratio ⁽¹⁾	94.8		%	89.2		%	91.6		%	89.5		%
G&A ratio ⁽²⁾	8.1		%	8.1		%	8.5		%	7.9		%
Premium tax ratio ⁽¹⁾	2.4		%	2.6		%	2.3		%	2.6		%
Effective tax rate	26.8		%	59.8		%	16.0		%	60.7		%
Net profit margin ⁽²⁾	(4.6		)%	0.7		%	(1.5		)%	0.7		%

__________________
⁽¹⁾	Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue.
⁽²⁾	G&A ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net (loss) income as a percentage of total revenue.


MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2017			2016
	(In millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents	$	2,979		$	2,819
Investments	2,192			1,758
Restricted investments	325			—
Receivables	1,006			974
Income taxes refundable	68			39
Prepaid expenses and other current assets	159			131
Derivative asset	440			267
Total current assets	7,169			5,988
Property, equipment, and capitalized software, net	449			454
Deferred contract costs	93			86
Intangible assets, net	112			140
Goodwill	559			620
Restricted investments	118			110
Deferred income taxes	36			10
Other assets	47			41
	$	8,583		$	7,449
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	2,077		$	1,929
Amounts due government agencies	1,844			1,202
Accounts payable and accrued liabilities	375			385
Deferred revenue	284			315
Current portion of long-term debt	773			472
Derivative liability	440			267
Total current liabilities	5,793			4,570
Senior notes	1,017			975
Lease financing obligations	198			198
Deferred income taxes	—			15
Other long-term liabilities	54			42
Total liabilities	7,062			5,800
Stockholders’ equity:
Common stock, $0.001 par value; 150 shares authorized; outstanding: 57 shares at June 30, 2017 and December 31, 2016	—			—
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding	—			—
Additional paid-in capital	865			841
Accumulated other comprehensive loss	(1		)	(2		)
Retained earnings	657			810
Total stockholders’ equity	1,521			1,649
	$	8,583		$	7,449


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

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(In millions)
Operating activities:
Net (loss) income	$	(230	)	$	33		$	(153	)	$	57
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	47			45			96			89
Impairment losses	72			—			72			—
Deferred income taxes	(36		)	9			(41		)	39
Share-based compensation, including accelerated share-based compensation	29			9			35			16
Amortization of convertible senior notes and lease financing obligations	8			7			16			15
Other, net	4			5			7			11
Changes in operating assets and liabilities:
Receivables	—			(149		)	(32		)	(415		)
Prepaid expenses and other assets	(26		)	59			(38		)	(143		)
Medical claims and benefits payable	151			(173		)	148			82
Amounts due government agencies	269			328			642			509
Accounts payable and accrued liabilities	(68		)	(58		)	(18		)	147
Deferred revenue	(178		)	10			(32		)	(119		)
Income taxes	(89		)	14			(30		)	(10		)
Net cash (used in) provided by operating activities	(47		)	139			672			278
Investing activities:
Purchases of investments	(903		)	(363		)	(1,636		)	(974		)
Proceeds from sales and maturities of investments	441			464			874			812
Purchases of property, equipment, and capitalized software	(34		)	(56		)	(60		)	(102		)
(Increase) decrease in restricted investments held-to-maturity	(3		)	9			(10		)	5
Net cash paid in business combinations	—			(6		)	—			(8		)
Other, net	(7		)	(7		)	(13		)	(6		)
Net cash (used in) provided by investing activities	(506		)	41			(845		)	(273		)
Financing activities:
Proceeds from senior notes offerings, net of issuance costs	325			—			325			—
Proceeds from employee stock plans	10			10			11			10
Other, net	(1		)	(1		)	(3		)	1
Net cash provided by financing activities	334			9			333			11
Net (decrease) increase in cash and cash equivalents	(219		)	189			160			16
Cash and cash equivalents at beginning of period	3,198			2,156			2,819			2,329
Cash and cash equivalents at end of period	$	2,979		$	2,345		$	2,979		$	2,345


MOLINA HEALTHCARE, INC. UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

	June 30, 2017	December 31, 2016	June 30, 2016
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP)	2,517,000	2,536,000	2,500,000
Marketplace	949,000	526,000	597,000
Medicaid Expansion	678,000	673,000	654,000
Aged, Blind or Disabled (ABD)	408,000	396,000	387,000
Medicare-Medicaid Plan (MMP) - Integrated	54,000	51,000	51,000
Medicare Special Needs Plans	44,000	45,000	44,000
	4,650,000	4,227,000	4,233,000
Ending Membership by Health Plan:
California	766,000	683,000	680,000
Florida	672,000	553,000	565,000
Illinois	163,000	195,000	201,000
Michigan	414,000	391,000	393,000
New Mexico	266,000	254,000	251,000
New York ⁽¹⁾	34,000	35,000	—
Ohio	351,000	332,000	341,000
Puerto Rico	322,000	330,000	336,000
South Carolina	112,000	109,000	105,000
Texas	465,000	337,000	367,000
Utah	167,000	146,000	151,000
Washington	788,000	736,000	709,000
Wisconsin	130,000	126,000	134,000
	4,650,000	4,227,000	4,233,000

____________________
(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 June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	7.6	$	1,391	$	182.47	$	1,315	$	172.48	94.5	%	$	76
Medicaid Expansion	2.1	786		383.07		689		335.26		87.5		97
ABD	1.2	1,285		1,053.89		1,245		1,020.85		96.9		40
Total Medicaid	10.9	3,462		317.79		3,249		298.10		93.8		213
MMP	0.1	361		2,217.44		333		2,050.20		92.5		28
Medicare	0.2	148		1,126.14		126		963.34		85.5		22
Total Medicare	0.3	509		1,730.91		459		1,565.65		90.5		50
Excluding Marketplace	11.2	3,971		354.87		3,708		331.36		93.4		263
Marketplace	2.8	769		267.37		783		272.37		101.9		(14		)
	14.0	$	4,740	$	336.98	$	4,491	$	319.29	94.8	%	$	249


	Three Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	7.5	$	1,302	$	173.57	$	1,202	$	160.26	92.3	%	$	100
Medicaid Expansion	1.9	742		378.19		634		323.56		85.6		108
ABD	1.2	1,168		991.38		1,038		881.80		88.9		130
Total Medicaid	10.6	3,212		301.86		2,874		270.27		89.5		338
MMP	0.2	315		2,093.29		270		1,792.78		85.6		45
Medicare	0.2	129		997.44		127		974.30		97.7		2
Total Medicare	0.4	444		1,584.77		397		1,412.96		89.2		47
Excluding Marketplace	11.0	3,656		334.86		3,271		299.67		89.5		385
Marketplace	1.8	373		206.88		323		178.79		86.4		50
	12.8	$	4,029	$	316.72	$	3,594	$	282.54	89.2	%	$	435

____________________
(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)

	Six Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	15.3	$	2,793	$	182.58	$	2,619	$	171.25	93.8	%	$	174
Medicaid Expansion	4.1	1,603		390.88		1,378		335.88		85.9		225
ABD	2.4	2,481		1,030.68		2,375		986.54		95.7		106
Total Medicaid	21.8	6,877		315.39		6,372		292.22		92.7		505
MMP	0.3	705		2,152.75		640		1,954.15		90.8		65
Medicare	0.3	286		1,097.36		243		933.20		85.0		43
Total Medicare	0.6	991		1,685.72		883		1,502.36		89.1		108
Excluding Marketplace	22.4	7,868		351.35		7,255		323.98		92.2		613
Marketplace	5.7	1,520		264.77		1,347		234.62		88.6		173
	28.1	$	9,388	$	333.68	$	8,602	$	305.74	91.6	%	$	786


	Six Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
TANF and CHIP	14.9	$	2,626	$	176.00	$	2,400	$	160.85	91.4	%	$	226
Medicaid Expansion	3.8	1,421		371.82		1,208		316.13		85.0		213
ABD	2.4	2,280		976.58		2,079		890.71		91.2		201
Total Medicaid	21.1	6,327		300.19		5,687		269.86		89.9		640
MMP	0.3	655		2,157.55		587		1,932.73		89.6		68
Medicare	0.3	260		1,013.04		251		977.35		96.5		9
Total Medicare	0.6	915		1,633.08		838		1,494.92		91.5		77
Excluding Marketplace	21.7	7,242		334.74		6,525		301.61		90.1		717
Marketplace	3.4	782		228.19		657		191.62		84.0		125
	25.1	$	8,024	$	320.17	$	7,182	$	286.57	89.5	%	$	842

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—NON-MARKETPLACE (In millions, except percentages and per-member per-month amounts)

	Three Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	1.9	$	598	$	318.89	$	539	$	287.36	90.1	%	$	59
Florida	1.1	380		347.20		370		337.92		97.3		10
Illinois	0.5	149		289.51		174		336.76		116.3		(25		)
Michigan	1.1	390		333.26		358		305.40		91.6		32
New Mexico	0.8	321		443.13		311		428.58		96.7		10
New York ⁽³⁾	0.1	46		457.96		45		442.16		96.5		1
Ohio	1.0	529		536.90		489		496.41		92.5		40
Puerto Rico	0.9	179		184.28		189		194.42		105.5		(10		)
South Carolina	0.4	111		326.57		102		304.14		93.1		9
Texas	0.7	524		752.01		473		679.43		90.3		51
Utah	0.3	89		313.93		76		267.15		85.1		13
Washington	2.2	618		276.90		546		244.58		88.3		72
Wisconsin	0.2	34		170.98		26		130.54		76.3		8
Other ⁽⁴⁾	—	3		—		10		—		—		(7		)
	11.2	$	3,971	$	354.87	$	3,708	$	331.36	93.4	%	$	263


	Three Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	1.9	$	519	$	281.99	$	472	$	256.37	90.9	%	$	47
Florida	1.0	314		312.23		289		287.84		92.2		25
Illinois	0.6	154		256.17		137		227.71		88.9		17
Michigan	1.2	366		312.88		332		283.89		90.7		34
New Mexico	0.7	328		468.35		296		422.37		90.2		32
New York ⁽³⁾	—	—		—		—		—		—		—
Ohio	0.9	474		479.41		427		431.46		90.0		47
Puerto Rico	1.0	170		169.04		175		173.49		102.6		(5		)
South Carolina	0.3	87		277.22		71		226.27		81.6		16
Texas	0.8	580		784.32		470		633.94		80.8		110
Utah	0.3	86		293.39		74		254.59		86.8		12
Washington	2.1	538		263.41		484		237.43		90.1		54
Wisconsin	0.2	36		166.95		27		120.69		72.3		9
Other ⁽⁴⁾	—	4		—		17		—		—		(13		)
	11.0	$	3,656	$	334.86	$	3,271	$	299.67	89.5	%	$	385

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.
(3)	The New York health plan was acquired on August 1, 2016.
(4)	“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—NON-MARKETPLACE (In millions, except percentages and per-member per-month amounts)

	Six Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	3.7	$	1,170	$	313.76	$	1,023	$	274.42	87.5	%	$	147
Florida	2.2	744		343.29		722		333.23		97.1		22
Illinois	1.1	310		282.66		354		322.63		114.1		(44		)
Michigan	2.3	772		330.34		690		295.02		89.3		82
New Mexico	1.5	629		432.98		610		419.65		96.9		19
New York ⁽³⁾	0.2	92		449.48		87		425.72		94.7		5
Ohio	2.0	1,049		532.35		951		482.73		90.7		98
Puerto Rico	1.9	362		185.40		354		181.24		97.8		8
South Carolina	0.7	216		321.85		200		298.79		92.8		16
Texas	1.4	1,051		751.94		962		687.96		91.5		89
Utah	0.6	178		313.56		148		260.43		83.1		30
Washington	4.4	1,223		275.05		1,081		243.18		88.4		142
Wisconsin	0.4	67		168.16		53		133.25		79.2		14
Other ⁽⁴⁾	—	5		—		20		—		—		(15		)
	22.4	$	7,868	$	351.35	$	7,255	$	323.98	92.2	%	$	613


	Six Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	3.7	$	1,028	$	281.37	$	918	$	251.15	89.3	%	$	110
Florida	2.0	639		322.01		575		290.08		90.1		64
Illinois	1.2	303		261.43		269		232.06		88.8		34
Michigan	2.4	751		317.13		678		286.40		90.3		73
New Mexico	1.4	651		465.65		580		414.80		89.1		71
New York ⁽³⁾	—	—		—		—		—		—		—
Ohio	1.9	952		485.86		869		443.08		91.2		83
Puerto Rico	2.0	351		172.98		349		171.95		99.4		2
South Carolina	0.6	171		276.61		138		223.58		80.8		33
Texas	1.5	1,116		752.54		982		661.63		87.9		134
Utah	0.6	172		295.69		150		259.29		87.7		22
Washington	4.0	1,030		259.79		931		234.95		90.4		99
Wisconsin	0.4	72		164.90		52		118.37		71.8		20
Other ⁽⁴⁾	—	6		—		34		—		—		(28		)
	21.7	$	7,242	$	334.74	$	6,525	$	301.61	90.1	%	$	717

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.
(3)	The New York health plan was acquired on August 1, 2016.
(4)	“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE (In millions, except percentages and per-member per-month amounts)

	Three Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue					Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total			PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.5	$	81		$	186.90	$	67		$	154.23	82.5	%	$	14
Florida	0.9	269			284.60		317			336.78		118.3		(48		)
Michigan	0.1	16			204.15		10			135.89		66.6		6
New Mexico	—	31			367.98		23			266.91		72.5		8
Ohio	—	24			377.94		27			404.20		106.9		(3		)
Texas	0.7	177			247.49		129			180.92		73.1		48
Utah	0.2	41			186.87		53			239.50		128.2		(12		)
Washington	0.2	44			317.42		49			359.87		113.4		(5		)
Wisconsin	0.2	86			434.01		109			550.81		126.9		(23		)
Other ⁽³⁾	—	—			—		(1		)	—		—		1
	2.8	$	769		$	267.37	$	783		$	272.37	101.9	%	$	(14	)


	Three Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue					Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total			PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.1	$	35		$	159.56	$	21		$	99.15	62.1	%	$	14
Florida	0.8	150			217.96		137			198.93		91.3		13
Michigan	—	3			235.15		2			176.34		75.0		1
New Mexico	0.1	14			240.40		9			164.00		68.2		5
Ohio	0.1	9			294.90		6			210.36		71.3		3
Texas	0.3	55			146.76		29			78.56		53.5		26
Utah	0.2	24			146.37		32			195.18		133.3		(8		)
Washington	—	21			291.91		16			205.59		70.4		5
Wisconsin	0.2	63			335.32		69			369.55		110.2		(6		)
Other ⁽³⁾	—	(1		)	—		2			—		—		(3		)
	1.8	$	373		$	206.88	$	323		$	178.79	86.4	%	$	50

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.
(3)	“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE (In millions, except percentages and per-member per-month amounts)

	Six Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.9	$	153	$	185.68	$	93		$	112.20	60.4	%	$	60
Florida	1.9	561		288.81		523			269.48		93.3		38
Michigan	0.2	27		177.12		17			116.21		65.6		10
New Mexico	0.1	53		317.10		42			249.90		78.8		11
Ohio	0.1	45		356.20		44			339.26		95.2		1
Texas	1.4	334		235.07		242			171.07		72.8		92
Utah	0.4	86		194.68		104			233.85		120.1		(18		)
Washington	0.3	81		310.26		95			362.78		116.9		(14		)
Wisconsin	0.4	180		443.86		190			469.01		105.7		(10		)
Other ⁽³⁾	—	—		—		(3		)	—		—		3
	5.7	$	1,520	$	264.77	$	1,347		$	234.62	88.6	%	$	173

	Six Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs					MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total			PMPM		MCR ⁽²⁾		Medical Margin
California	0.3	$	67	$	173.55	$	44		$	115.80	66.7	%	$	23
Florida	1.4	314		230.11		264			193.24		84.0		50
Michigan	—	5		208.83		3			141.43		67.7		2
New Mexico	0.1	27		251.96		21			192.53		76.4		6
Ohio	0.1	19		330.26		13			241.55		73.1		6
Texas	0.7	139		199.62		92			132.77		66.5		47
Utah	0.3	52		169.84		58			187.64		110.5		(6		)
Washington	0.1	35		267.82		27			200.50		74.9		8
Wisconsin	0.4	124		348.84		136			382.15		109.5		(12		)
Other ⁽³⁾	—	—		—		(1		)	—		—		1
	3.4	$	782	$	228.19	$	657		$	191.62	84.0	%	$	125

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.
(3)	“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL (In millions, except percentages and per-member per-month amounts)

	Three Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	2.4	$	679	$	294.09	$	606	$	262.34	89.2	%	$	73
Florida	2.0	649		318.21		687		337.39		106.0		(38		)
Illinois	0.5	149		289.51		174		336.76		116.3		(25		)
Michigan	1.2	406		325.38		368		295.06		90.7		38
New Mexico	0.8	352		435.34		334		411.83		94.6		18
New York ⁽³⁾	0.1	46		457.96		45		442.16		96.5		1
Ohio	1.0	553		527.14		516		490.75		93.1		37
Puerto Rico	0.9	179		184.28		189		194.42		105.5		(10		)
South Carolina	0.4	111		326.57		102		304.14		93.1		9
Texas	1.4	701		495.93		602		426.41		86.0		99
Utah	0.5	130		258.10		129		255.00		98.8		1
Washington	2.4	662		279.21		595		251.16		90.0		67
Wisconsin	0.4	120		303.59		135		342.43		112.8		(15		)
Other ⁽⁴⁾	—	3		—		9		—		—		(6		)
	14.0	$	4,740	$	336.98	$	4,491	$	319.29	94.8	%	$	249


	Three Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	2.0	$	554	$	268.95	$	493	$	239.63	89.1	%	$	61
Florida	1.8	464		273.90		426		251.69		91.9		38
Illinois	0.6	154		256.17		137		227.71		88.9		17
Michigan	1.2	369		312.18		334		282.86		90.6		35
New Mexico	0.8	342		451.72		305		403.52		89.3		37
New York ⁽³⁾	—	—		—		—		—		—		—
Ohio	1.0	483		473.91		433		424.87		89.7		50
Puerto Rico	1.0	170		169.04		175		173.49		102.6		(5		)
South Carolina	0.3	87		277.22		71		226.27		81.6		16
Texas	1.1	635		571.14		499		448.23		78.5		136
Utah	0.5	110		240.26		106		233.12		97.0		4
Washington	2.1	559		264.40		500		236.32		89.4		59
Wisconsin	0.4	99		244.88		96		235.88		96.3		3
Other ⁽⁴⁾	—	3		—		19		—		—		(16		)
	12.8	$	4,029	$	316.72	$	3,594	$	282.54	89.2	%	$	435

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.
(3)	The New York health plan was acquired on August 1, 2016.
(4)	“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL (In millions, except percentages and per-member per-month amounts)

	Six Months Ended June 30, 2017
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	4.6	$	1,323	$	290.56	$	1,116	$	245.02	84.3	%	$	207
Florida	4.1	1,305		317.53		1,245		303.09		95.5		60
Illinois	1.1	310		282.66		354		322.63		114.1		(44		)
Michigan	2.5	799		321.10		707		284.24		88.5		92
New Mexico	1.6	682		421.11		652		402.27		95.5		30
New York ⁽³⁾	0.2	92		449.48		87		425.72		94.7		5
Ohio	2.1	1,094		521.57		995		473.95		90.9		99
Puerto Rico	1.9	362		185.40		354		181.24		97.8		8
South Carolina	0.7	216		321.85		200		298.79		92.8		16
Texas	2.8	1,385		491.46		1,204		427.48		87.0		181
Utah	1.0	264		261.42		252		248.77		95.2		12
Washington	4.7	1,304		276.99		1,176		249.79		90.2		128
Wisconsin	0.8	247		307.50		243		302.95		98.5		4
Other ⁽⁴⁾	—	5		—		17		—		—		(12		)
	28.1	$	9,388	$	333.68	$	8,602	$	305.74	91.6	%	$	786


	Six Months Ended June 30, 2016
	Member Months ⁽¹⁾	Premium Revenue				Medical Care Costs				MCR ⁽²⁾		Medical Margin
	Member Months ⁽¹⁾	Total		PMPM		Total		PMPM		MCR ⁽²⁾		Medical Margin
California	4.0	$	1,095	$	271.14	$	962	$	238.30	87.9	%	$	133
Florida	3.4	953		284.53		839		250.58		88.1		114
Illinois	1.2	303		261.43		269		232.06		88.8		34
Michigan	2.4	756		316.18		681		285.13		90.2		75
New Mexico	1.5	678		450.62		601		399.17		88.6		77
New York ⁽³⁾	—	—		—		—		—		—		—
Ohio	2.0	971		481.44		882		437.35		90.8		89
Puerto Rico	2.0	351		172.98		349		171.95		99.4		2
South Carolina	0.6	171		276.61		138		223.58		80.8		33
Texas	2.2	1,255		575.87		1,074		492.65		85.5		181
Utah	0.9	224		252.08		208		234.46		93.0		16
Washington	4.1	1,065		260.05		958		233.84		89.9		107
Wisconsin	0.8	196		247.57		188		236.92		95.7		8
Other ⁽⁴⁾	—	6		—		33		—		—		(27		)
	25.1	$	8,024	$	320.17	$	7,182	$	286.57	89.5	%	$	842

____________________
(1)	A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)	The MCR represents medical costs as a percentage of premium revenue.
(3)	The New York health plan was acquired on August 1, 2016.
(4)	“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA (In millions, except percentages and per-member per-month amounts)

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

	Three Months Ended June 30,
	2017						2016
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	3,348	$	238.04	74.5	%	$	2,620	$	206.01		72.9	%
Pharmacy		650		46.23	14.5			529		41.59		14.7
Capitation		356		25.29	7.9			304		23.87		8.5
Direct delivery		22		1.54	0.5			18		1.39		0.5
Other		115		8.19	2.6			123		9.68		3.4
	$	4,491	$	319.29	100.0	%	$	3,594	$	282.54		100.0	%


	Six Months Ended June 30,
	2017						2016
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	6,434	$	228.68	74.8	%	$	5,357	$	213.77		74.6	%
Pharmacy		1,266		45.00	14.7			1,054		42.05		14.7
Capitation		680		24.17	7.9			599		23.87		8.3
Direct delivery		44		1.56	0.5			34		1.36		0.5
Other		178		6.33	2.1			138		5.52		1.9
	$	8,602	$	305.74	100.0	%	$	7,182	$	286.57		100.0	%


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

									June 30,		December 31,
									2017		2016
Fee-for-service claims incurred but not paid (IBNP)									$	1,478	$	1,352
Pharmacy payable										121		112
Capitation payable										45		37
Other ⁽¹⁾										433		428
									$	2,077	$	1,929

____________________
(1)	“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of operations. As of June 30, 2017 and December 31, 2016, we had recorded non-risk provider payables of approximately $111 million and $225 million, respectively.


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

Our claims liability includes a provision for adverse claims deviation based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. Our reserving methodology is consistently applied across all periods presented. The amounts displayed for “Components of medical care costs related to: Prior period” represent the amount by which our original estimate of claims and benefits payable at the beginning of the period 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:

	Six Months Ended June 30,						Year Ended December 31, 2016
	2017			2016			Year Ended December 31, 2016
Medical claims and benefits payable, beginning balance	$	1,929		$	1,685		$	1,685
Components of medical care costs related to:
Current period	8,633			7,371			14,966
Prior period	(31		)	(189		)	(192		)
Total medical care costs	8,602			7,182			14,774

Change in non-risk provider payables	(114		)	24			58
Payments for medical care costs related to:
Current period	6,883			5,885			13,304
Prior period	1,457			1,240			1,284
Total paid	8,340			7,125			14,588
Medical claims and benefits payable, ending balance	$	2,077		$	1,766		$	1,929

Benefit from prior period as a percentage of:
Balance at beginning of period	1.6		%	11.3		%	11.4		%
Premium revenue, trailing twelve months	0.2		%	1.3		%	1.2		%
Medical care costs, trailing twelve months	0.2		%	1.4		%	1.3		%

Days in claims payable, fee for service ⁽¹⁾	46			48			47

____________________
(1)	Claims payable includes primarily IBNP. Additionally, it includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $157 million, $74 million and $94 million, as of June 30, 2017, June 30, 2016, and December 31, 2016, respectively.


MOLINA HEALTHCARE, INC. UNAUDITED NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures. See further information regarding non-GAAP measures below the tables (in millions, except per diluted share amounts).

	Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016		2017			2016

Net (loss) income	$	(230	)	$	33	$	(153	)	$	57
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	44			39		90			76
Interest expense	27			25		53			50
Income tax (benefit) expense	(84		)	47		(30		)	87
EBITDA	$	(243	)	$	144	$	(40	)	$	270


	Three Months Ended June 30,												Six Months Ended June 30,
	2017						2016						2017						2016

	Amount			Per Diluted share			Amount			Per Diluted share			Amount			Per Diluted share			Amount			Per Diluted share
Net (loss) income	$	(230	)	$	(4.10	)	$	33		$	0.58		$	(153	)	$	(2.74	)	$	57		$	1.01
Adjustment:
Amortization of intangible assets	8			0.14			8			0.14			17			0.30			15			0.27
Income tax effect ⁽¹⁾	(3		)	(0.05		)	(3		)	(0.05		)	(6		)	(0.11		)	(5		)	(0.10		)
Amortization of intangible assets, net of tax effect	5			0.09			5			0.09			11			0.19			10			0.17
Adjusted net (loss) income	$	(225	)	$	(4.01	)	$	38		$	0.67		$	(142	)	$	(2.55	)	$	67		$	1.18
____________________
(1) Income tax effect of adjustment calculated at the blended federal and state statutory tax rate of 37%.

The following are descriptions of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release: Earnings before interest, taxes, depreciation and amortization (EBITDA): Net (loss) income (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax (benefit) expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units. Adjusted net (loss) income: Net (loss) income (GAAP) less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate of 37%. We believe that adjusted net (loss) income is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles. Adjusted net (loss) income per diluted share: Adjusted net (loss) income divided by weighted average common shares outstanding on a fully diluted basis.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170802006305/en/

Source: Molina Healthcare, Inc.

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

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