Molina Healthcare Reports Third Quarter 2015 Results

LONG BEACH, Calif.--()--Molina Healthcare, Inc. (NYSE: MOH):

  • Net income per diluted share, continuing operations, of $0.77 for the quarter, compared with $0.33 in 2014.
  • Adjusted net income per diluted share, continuing operations,1 of $0.89 for the quarter, compared with $0.48 for 2014.
  • Total revenue of $3.6 billion, up 45% over third quarter 2014 and 2% over second quarter 2015.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the third quarter of 2015.

“Momentum in our business continues to grow as we execute on our priorities of revenue growth, profit improvement and business diversification,” said J. Mario Molina M.D., chief executive officer of Molina Healthcare, Inc. “I am very proud of our performance so far this year, and I look forward to welcoming the employees and patients of Providence Human Services into the Molina family.” As previously announced, the Company has agreed to acquire Providence Human Services, LLC and Providence Community Services, LLC, both wholly owned subsidiaries of The Providence Service Corporation, in an all-cash transaction.

Overview of Financial Results, Continuing Operations

Financial results for the third quarter of 2015 improved significantly over the same quarter of 2014 due to higher revenue, greater medical cost efficiency, and full state reimbursement of the Affordable Care Act Health Insurer Fee (HIF).

Income from continuing operations, before tax expense, increased to $98 million in the third quarter of 2015, from $24 million in the third quarter of 2014.

Premium revenue increased approximately 46% in the third quarter of 2015, compared with the third quarter of 2014, due to increased Medicaid expansion, integrated Medicare-Medicaid Plan and Marketplace enrollment, growth in the Company’s Illinois health plan, and the start-up of the Company’s Puerto Rico health plan earlier this year.

Medical care costs as a percent of premium revenue (the “medical care ratio”) decreased to 89.3% in the third quarter of 2015, from 90.6% in the third quarter of 2014.

General and administrative expenses as a percentage of total revenue (the “general and administrative expense ratio”) increased to 8.0% in the third quarter of 2015, from 7.2% in the third quarter of 2014, primarily due to broker and exchange fees associated with the Company’s Marketplace program.

Health Insurer Fee Update

The Company has secured full reimbursement for the Medicaid portion of its expense under the HIF. During the third quarter of 2015, the Company recognized as revenue certain amounts of HIF reimbursement due from Michigan and Utah for prior periods. These amounts represented approximately $8 million ($0.08 per diluted share) of HIF revenue related to 2014 and approximately $17 million ($0.18 per diluted share) related to the first two quarters of 2015.

The amount of HIF reimbursement not recognized in the third quarter of 2014 was approximately $6 million ($0.07 per diluted share) and approximately $37 million ($0.49 per diluted share) for the nine months ended September 30, 2014.

Texas Health Plan Quality Revenue Update

As previously disclosed, the Company has deferred recognition of that portion of its quality related revenue in Texas that is based upon measures for which the Company does not have historical information, clear definitions, and clarity around minimum standards. Such revenue is estimated to be approximately $20 million for all of 2014 and $17 million for the nine months ended September 30, 2015. The Company has not recognized any of this revenue through September 30, 2015.

Conference Call

The Company’s management will host a conference call and webcast to discuss its third quarter results at 5:00 p.m. Eastern time on Thursday, October 29, 2015. The number to call for the interactive teleconference is (212) 231-2926. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Thursday, October 29, 2015, through 6:00 p.m. on Friday, October 30, 2015, by dialing (800) 633-8284 and entering confirmation number 21777769. A live audio broadcast of Molina Healthcare’s conference call will be available on the Company’s website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our locally operated health plans in 11 states across the nation and in the Commonwealth of Puerto Rico, Molina currently serves approximately 3.5 million members. Dr. C. David Molina founded our company in 1980 as a provider organization serving low-income families in Southern California. Today, we continue his mission of providing high quality and cost-effective health care to those who need it most. For more information about Molina Healthcare, please visit our website at molinahealthcare.com.

Notes:

1. Adjusted net income per diluted share, continuing operations, is a non-GAAP financial measure used by management as a supplemental metric in evaluating its financial performance, its financing and business decisions, and in forecasting and planning for future periods. This measure is not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measure, which is diluted net income per share, continuing operations. See below for reconciliations of the Company’s non-GAAP measures to the most directly comparable GAAP measures.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding the Company’s 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:

  • uncertainties associated with the implementation of the Affordable Care Act, the Medicaid expansion, the insurance marketplaces, the effect of various implementing regulations, and uncertainties regarding the Medicare-Medicaid dual eligible demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
  • management of our medical costs, including seasonal flu patterns and rates of utilization that are consistent with our expectations, and our ability to reduce over time the high medical costs commonly associated with new patient populations;
  • federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and conflicting interpretations thereof;
  • the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures, including 2014 and 2015 at-risk premium rules in the state of Texas;
  • cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
  • the success of our new health plan in Puerto Rico, including the successful resolution of the Puerto Rico debt crisis and the payment of all amounts due under our Medicaid contract;
  • newly FDA-approved specialty drugs such as Sovaldi, Olysio, Harvoni, and other specialty drugs or generic drugs that are exorbitantly priced but not factored into the calculation of our capitated rates;
  • significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria, including the resolution of the Illinois budget impasse and continued payment of our Illinois health plan;
  • the accurate estimation of incurred but not reported or paid medical costs across our health plans;
  • retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including Medicaid pharmaceutical rebates or retroactive premium rate increases;
  • efforts by states to recoup previously paid amounts;
  • the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states;
  • the continuation and renewal of the government contracts of both our health plans and Molina Medicaid Solutions and the terms under which such contracts are renewed;
  • complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
  • government audits and reviews, and any fine, enrollment freeze, or monitoring program that may result therefrom;
  • changes with respect to our provider contracts and the loss of providers;
  • approval by state regulators of dividends and distributions by our health plan subsidiaries;
  • changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
  • high dollar claims related to catastrophic illness;
  • the favorable or unfavorable resolution of litigation, arbitration, or administrative proceedings, including a pending qui tam action in California, and the litigation commenced against us by the state of Louisiana alleging that Molina Medicaid Solutions and its predecessors used an incorrect reimbursement formula for the payment of pharmaceutical claims;
  • the relatively small number of states in which we operate health plans;
  • our management of a portion of College Health Enterprises’ hospital in Long Beach, California;
  • the effect on our Los Angeles County subcontract of Centene’s acquisition of Health Net;
  • the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;
  • the failure of a state in which we operate to renew its federal Medicaid waiver;
  • changes generally affecting the managed care or Medicaid management information systems industries;
  • increases in government surcharges, taxes, and assessments;
  • newly emergent viruses or widespread epidemics, and associated public alarm;
  • changes in general economic conditions, including unemployment rates;
  • the sufficiency of our funds on hand to pay the amounts due upon conversion of our outstanding notes;
  • increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at sec.gov. Given these risks and uncertainties, we can give no assurances that the Company’s forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by the Company’s 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 the Company’s judgment as of October 29, 2015, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

 
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
         
Three Months Ended Nine Months Ended
September 30, September 30,
2015     2014 2015     2014
(Amounts in thousands, except net income per share)
Revenue:
Premium revenue $ 3,377,030 $ 2,316,759 $ 9,652,054 $ 6,424,238
Service revenue 47,551 52,557 146,652 156,419
Premium tax revenue 99,047 81,240 289,003 203,053
Health insurer fee revenue 81,158 29,427 202,996 67,785
Investment income 4,832 2,041 11,675 5,615
Other revenue 1,745   2,327   4,996   8,523  
Total revenue 3,611,363   2,484,351   10,307,376   6,865,633  
Operating expenses:
Medical care costs 3,015,371 2,097,836 8,580,689 5,753,793
Cost of service revenue 34,573 40,067 103,294 117,831
General and administrative expenses 287,691 178,879 830,277 560,205
Premium tax expenses 99,047 81,240 289,003 203,053
Health insurer fee expenses 35,985 22,308 117,415 66,443
Depreciation and amortization 25,843   24,242   75,987   67,835  
Total operating expenses 3,498,510   2,444,572   9,996,665   6,769,160  
Operating income 112,853   39,779   310,711   96,473  
Other expenses, net:
Interest expense 15,269 14,419 45,091 42,234
Other (income) expense, net (40 ) 863   (82 ) 810  
Total other expenses, net 15,229   15,282   45,009   43,044  
Income from continuing operations before income tax expense 97,624 24,497 265,702 53,429
Income tax expense 51,329   8,427   152,335   24,784  
Income from continuing operations 46,295 16,070 113,367 28,645

Income (loss) from discontinued operations, net of tax

4   52   28   (214 )
Net income $ 46,299   $ 16,122   $ 113,395   $ 28,431  
 
Diluted net income per share:
Income from continuing operations $ 0.77 $ 0.33 $ 2.07 $ 0.60
Loss from discontinued operations       (0.01 )
Diluted net income per share $ 0.77   $ 0.33   $ 2.07   $ 0.59  
 
Diluted weighted average shares outstanding 59,978   48,644   54,699   48,088  
 
Operating Statistics, Continuing Operations:
Medical care ratio(1) 89.3 % 90.6 % 88.9 % 89.6 %
Service revenue ratio(2) 72.7 % 76.2 % 70.4 % 75.3 %
General and administrative expense ratio(3) 8.0 % 7.2 % 8.1 % 8.2 %
Premium tax ratio(1) 2.8 % 3.4 % 2.9 % 3.1 %
Effective tax rate 52.6 % 34.4 % 57.3 % 46.4 %
Net profit margin, continuing operations(3) 1.3 % 0.6 % 1.1 % 0.4 %
 

_____________

(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. Medical care costs include costs incurred for providing long term services and supports (LTSS).

(2) Service revenue ratio represents cost of service revenue as a percentage of service revenue.

(3) Computed as a percentage of total revenue.

 

 

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS
         

September 30,
2015

December 31,
2014

(Amounts in thousands,
except per-share data)

ASSETS
Current assets:
Cash and cash equivalents $ 2,164,210 $ 1,539,063
Investments 1,461,467 1,019,462
Receivables 619,891 596,456
Deferred income taxes 54,231 39,532
Prepaid expenses and other current assets 120,438 50,884
Derivative asset 490,087    
Total current assets 4,910,324 3,245,397
Property, equipment, and capitalized software, net 374,862 340,778
Deferred contract costs 73,619 53,675
Intangible assets, net 96,424 89,273
Goodwill 321,220 271,964
Restricted investments 101,970 102,479
Derivative asset 329,323
Other assets 36,612   44,326  
$ 5,915,031   $ 4,477,215  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable $ 1,559,570 $ 1,200,522
Amounts due government agencies 980,317 527,193
Accounts payable and accrued liabilities 274,131 241,654
Deferred revenue 67,227 196,076
Income taxes payable 39,205 8,987
Current portion of long-term debt 450,780 341
Derivative liability 489,940    
Total current liabilities 3,861,170 2,174,773
Convertible senior notes 275,050 704,097
Lease financing obligations 161,553 160,710
Lease financing obligations - related party 39,868 40,241
Deferred income taxes 27,111 24,271
Derivative liability 329,194
Other long-term liabilities 32,270   33,487  
Total liabilities 4,397,022   3,466,773  
Stockholders’ equity:

Common stock, $0.001 par value; 150,000 shares authorized; outstanding: 56,075 shares at September 30, 2015 and 49,727 shares at December 31, 2014

56 50

Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding

Additional paid-in capital 789,907 396,059
Accumulated other comprehensive loss (701 ) (1,019 )
Retained earnings 728,747   615,352  
Total stockholders’ equity 1,518,009   1,010,442  
$ 5,915,031   $ 4,477,215  
 

 
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS,
CONTINUING AND DISCONTINUED OPERATIONS
         

Three Months Ended
September 30,

Nine Months Ended
September 30,

2015     2014 2015     2014

(Amounts in thousands)

Operating activities:
Net income $ 46,299 $ 16,122 $ 113,395 $ 28,431

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 30,507 33,810 92,583 99,464
Deferred income taxes (19,477 ) (12,397 ) (12,072 ) (10,705 )
Share-based compensation 6,985 5,659 16,226 16,115

Amortization of convertible senior notes and lease financing obligations

7,416 6,740 22,101 20,195
Other, net 4,571 2,152 13,212 3,875
Changes in operating assets and liabilities:
Receivables 11,239 47,831 (23,429 ) (126,748 )
Prepaid expenses and other current assets 33,715 15,305 (63,312 ) (51,582 )
Medical claims and benefits payable 67,318 199,664 359,048 454,059
Amounts due government agencies 155,383 220,903 453,124 340,775
Accounts payable and accrued liabilities (124,193 ) (84,009 ) 33,541 (26,384 )
Deferred revenue 9,504 144,911 (128,849 ) 68,640
Income taxes 28,809   9,047   30,218   25,063  
Net cash provided by operating activities 258,076   605,738   905,786   841,198  
 
Investing activities:
Purchases of investments (318,253 ) (248,020 ) (1,311,231 ) (616,324 )
Proceeds from sales and maturities of investments 321,522 147,188 862,572 473,836

Purchases of property, equipment, and capitalized software

(34,501 ) (34,101 ) (100,361 ) (71,771 )
Increase in restricted investments 8,986 (8,679 ) (5,216 ) (24,301 )
Net cash paid in business combinations (69,310 ) (7,500 ) (77,316 ) (7,500 )
Other, net (16,670 ) (7,832 ) (33,523 ) (15,220 )
Net cash used in investing activities (108,226 ) (158,944 ) (665,075 ) (261,280 )
 
Financing activities:

Proceeds from common stock offering, net of issuance costs

373,151

Proceeds from issuance of convertible senior notes, net of issuance costs

123,387 123,387
Contingent consideration liabilities settled (50,349 )
Proceeds from employee stock plans 249 11 8,636 7,628
Other, net 229   1,053   2,649   2,117  
Net cash provided by financing activities 478   124,451   384,436   82,783  
Net increase in cash and cash equivalents 150,328 571,245 625,147 662,701
Cash and cash equivalents at beginning of period 2,013,882   1,027,351   1,539,063   935,895  
Cash and cash equivalents at end of period $ 2,164,210   $ 1,598,596   $ 2,164,210   $ 1,598,596  
 

MOLINA HEALTHCARE, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES

The Company uses two non-GAAP financial measures as supplemental metrics in evaluating its 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 the Company’s performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures.

The first of these non-GAAP measures is earnings before interest, taxes, depreciation and amortization (EBITDA). The following table reconciles net income, which the Company believes to be the most comparable GAAP measure, to EBITDA.

         
Three Months Ended Nine Months Ended
September 30, September 30,
2015     2014 2015     2014
(Amounts in thousands)
Net income $ 46,299 $ 16,122 $ 113,395 $ 28,431
Adjustments:

Depreciation, and amortization of intangible assets and capitalized software

29,463 29,307 87,261 83,513
Interest expense 15,269 14,419 45,091 42,234
Income tax expense 51,332   8,439   152,371   24,436
EBITDA $ 142,363   $ 68,287   $ 398,118   $ 178,614
 

The second of these non-GAAP measures is adjusted net income, continuing operations (including adjusted net income per diluted share). The following table reconciles net income from continuing operations, which the Company believes to be the most comparable GAAP measure, to adjusted net income, continuing operations.

         

Three Months Ended
September 30,

Nine Months Ended
September 30,

2015     2014 2015     2014
(In thousands, except per diluted share amounts)
Net income, continuing operations $ 46,295     $ 0.77 $ 16,070     $ 0.33 $ 113,367     $ 2.07 $ 28,645     $ 0.60
Adjustments, net of tax:

Amortization of convertible senior notes and lease financing obligations

4,672 0.08 4,246 0.09 13,924 0.25 12,723 0.26
Amortization of intangible assets 2,371   0.04   3,189   0.06   7,919   0.15   9,727   0.20

Adjusted net income, continuing operations(1)

$ 53,338   $ 0.89   $ 23,505   $ 0.48   $ 135,210   $ 2.47   $ 51,095   $ 1.06
 

_____________

(1) Beginning in the first quarter of 2015, the Company revised its calculation of adjusted net income, continuing operations. The Company no longer subtracts “depreciation, and amortization of capitalized software” and “share-based compensation” from net income, continuing operations to arrive at adjusted net income, continuing operations. The Company has made this change to better reflect the way in which it evaluates its financial performance, makes financing and business decisions, and forecasts and plans for future periods. All periods presented conform to this presentation.

 

 
MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP, CONTINUING OPERATIONS
                 

September 30,
2015

June 30,
2015

December 31,
2014

September 30,
2014

Ending Membership by Health Plan:
California 611,000 593,000 531,000 496,000
Florida 349,000 348,000 164,000 98,000
Illinois 101,000 101,000 100,000 21,000
Michigan 340,000 260,000 242,000 238,000
New Mexico 231,000 225,000 212,000 207,000
Ohio 344,000 332,000 347,000 337,000
Puerto Rico(1) 356,000 361,000
South Carolina 102,000 114,000 118,000 118,000
Texas 263,000 266,000 245,000 249,000
Utah 102,000 92,000 83,000 83,000
Washington 568,000 553,000 497,000 473,000
Wisconsin 103,000   107,000   84,000   84,000
3,470,000   3,352,000   2,623,000   2,404,000
Ending Membership by Program:

Temporary Assistance for Needy Families (TANF), CHIP(2)

2,249,000 2,180,000 1,809,000 1,678,000
Medicaid Expansion(3) 540,000 475,000 385,000 315,000
Aged, Blind or Disabled (ABD) 359,000 353,000 347,000 335,000
Marketplace(3) 226,000 261,000 15,000 16,000

Medicare-Medicaid Plan (MMP) - Integrated(4)

56,000 39,000 18,000 14,000
Medicare Special Needs Plans 40,000   44,000   49,000   46,000
3,470,000   3,352,000   2,623,000   2,404,000
 

_____________

(1) The Puerto Rico health plan began serving members effective April 1, 2015.

(2) CHIP stands for Children’s Health Insurance Program.

(3) Medicaid Expansion membership phased in, and Marketplace became available for consumers to access coverage, beginning January 1, 2014.

(4) MMP members who receive both Medicaid and Medicare coverage from the Company. The Company began serving members under this program in the second quarter of 2014.

 

 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,
CONTINUING OPERATIONS

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

                             
Three Months Ended September 30, 2015

Member
Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
California 1,816 $ 523,798 $ 288.45 $ 437,785 $ 241.09 83.6 % $ 86,013
Florida 1,003 299,971 299.33 264,956 264.39 88.3 35,015
Illinois 306 106,089 347.34 100,063 327.61 94.3 6,026
Michigan 853 281,359 330.00 235,837 276.61 83.8 45,522
New Mexico 706 297,744 421.76 275,503 390.26 92.5 22,241
Ohio 1,024 510,135 498.36 436,045 425.98 85.5 74,090
Puerto Rico 1,057 180,783 170.91 161,511 152.69 89.3 19,272
South Carolina 322 85,115 264.37 68,178 211.76 80.1 16,937
Texas 791 523,342 661.69 492,617 622.84 94.1 30,725
Utah 307 84,921 276.72 76,876 250.50 90.5 8,045
Washington 1,679 399,791 238.03 371,439 221.14 92.9 28,352
Wisconsin 307 71,460 232.32 56,886 184.94 79.6 14,574
Other(3)   12,522   37,675   (25,153 )
10,171   $ 3,377,030   $ 332.05 $ 3,015,371   $ 296.49 89.3 % $ 361,659  
 
Three Months Ended September 30, 2014

Member
Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
California 1,451 $ 384,147 $ 264.79 $ 327,389 $ 225.66 85.2 % $ 56,758
Florida 243 106,275 437.47 103,898 427.69 97.8 2,377
Illinois 38 34,514 906.78 28,333 744.41 82.1 6,181
Michigan 727 208,873 287.15 177,680 244.27 85.1 31,193
New Mexico 652 284,058 435.67 265,697 407.51 93.5 18,361
Ohio 994 454,410 457.17 395,098 397.49 86.9 59,312
Puerto Rico
South Carolina 355 95,455 268.97 74,489 209.89 78.0 20,966
Texas 748 337,430 451.24 306,577 409.98 90.9 30,853
Utah 250 78,703 315.04 75,270 301.30 95.6 3,433
Washington 1,410 280,883 199.18 274,213 194.45 97.6 6,670
Wisconsin 252 42,933 170.40 38,107 151.25 88.8 4,826
Other(3)   9,078   31,085   (22,007 )
7,120   $ 2,316,759   $ 325.40 $ 2,097,836   $ 294.65 90.6 % $ 218,923  
 

_____________

(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,
CONTINUING OPERATIONS

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

     
Nine Months Ended September 30, 2015

Member
Months(1)

    Premium Revenue     Medical Care Costs     MCR(2)    

Medical
Margin

Total     PMPM Total     PMPM
California 5,256 $ 1,538,081 $ 292.64 $ 1,349,265 $ 256.71 87.7 % $ 188,816
Florida 2,953 868,259 294.05 763,251 258.49 87.9 105,008
Illinois 912 312,003 342.27 287,760 315.68 92.2 24,243
Michigan 2,382 738,390 310.01 620,540 260.53 84.0 117,850
New Mexico 2,080 933,208 448.75 843,473 405.60 90.4 89,735
Ohio 3,075 1,533,690 498.76 1,281,305 416.69 83.5 252,385
Puerto Rico 2,139 374,767 175.17 345,751 161.60 92.3 29,016
South Carolina 1,002 269,530 269.11 208,779 208.45 77.5 60,751
Texas 2,372 1,417,535 597.53 1,312,724 553.35 92.6 104,811
Utah 850 242,027 284.83 222,747 262.14 92.0 19,280
Washington 4,885 1,185,899 242.75 1,094,250 223.99 92.3 91,649
Wisconsin 929 206,334 221.97 161,735 173.99 78.4 44,599
Other(3)   32,331   89,109   (56,778 )
28,835   $ 9,652,054   $ 334.74 $ 8,580,689   $ 297.58 88.9 % $ 1,071,365  
 
Nine Months Ended September 30, 2014

Member
Months(1)

Premium Revenue Medical Care Costs MCR(2)

Medical
Margin

Total PMPM Total PMPM
California 4,040 $ 1,059,860 $ 262.34 $ 889,656 $ 220.21 83.9 % $ 170,204
Florida 742 312,864 421.80 290,224 391.28 92.8 22,640
Illinois 69 68,948 998.03 63,299 916.26 91.8 5,649
Michigan 2,077 567,706 273.28 476,392 229.33 83.9 91,314
New Mexico 1,818 777,120 427.55 702,257 386.36 90.4 74,863
Ohio 2,615 1,061,335 405.81 909,142 347.62 85.7 152,193
Puerto Rico
South Carolina 1,109 287,928 259.69 249,437 224.97 86.6 38,491
Texas 2,239 978,492 437.00 897,434 400.80 91.7 81,058
Utah 745 233,931 314.13 215,564 289.47 92.1 18,367
Washington 4,050 941,303 232.40 877,418 216.63 93.2 63,885
Wisconsin 782 118,386 151.48 100,059 128.03 84.5 18,327
Other(3)   16,365   82,911   (66,546 )
20,286   $ 6,424,238   $ 316.69 $ 5,753,793   $ 283.64 89.6 % $ 670,445  
 

_____________

(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,
CONTINUING OPERATIONS

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

     
Three Months Ended September 30, 2015(1)

Member
Months(2)

    Premium Revenue     Medical Care Costs     MCR(3)    

Medical
Margin

Total     PMPM Total     PMPM
TANF and CHIP 6,652 $ 1,138,673 $ 171.16 $ 1,070,109 $ 160.85 94.0 % $ 68,564
Medicaid Expansion 1,541 564,982 366.80 457,716 297.16 81.0 107,266
ABD 1,052 1,069,999 1,017.68 978,973 931.11 91.5 91,026
Marketplace 646 169,670 262.74 124,121 192.21 73.2 45,549
MMP 157 310,451 1,975.10 270,058 1,718.13 87.0 40,393
Medicare 123   123,255   1,002.50 114,394   930.43 92.8 8,861
10,171   $ 3,377,030   $ 332.05 $ 3,015,371   $ 296.49 89.3 % $ 361,659
 
 
Nine Months Ended September 30, 2015(1)

Member
Months(2)

Premium Revenue Medical Care Costs MCR(3)

Medical
Margin

Total PMPM Total PMPM
TANF and CHIP 18,687 $ 3,279,989 $ 175.52 $ 3,030,424 $ 162.16 92.4 % $ 249,565
Medicaid Expansion 4,202 1,654,321 393.71 1,324,945 315.33 80.1 329,376
ABD 3,172 3,063,365 965.91 2,788,586 379.27 91.0 274,779
Marketplace 2,017 524,395 259.97 369,803 183.33 70.5 154,592
MMP 370 733,257 1,981.40 683,532 1,847.03 93.2 49,725
Medicare 387   396,727   1,026.00 383,399   991.53 96.6 13,328
28,835   $ 9,652,054   $ 334.74 $ 8,580,689   $ 297.58 88.9 % $ 1,071,365
 

_____________

 

(1)  Three and nine months ended September 30, 2014, data not presented due to lack of comparability.

(2)  A member month is defined as the aggregate of each month’s ending membership for the period presented.

(3)  The MCR represents medical costs as a percentage of premium revenue.

 

 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,
CONTINUING OPERATIONS

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

 

The following tables provide the details of the Company’s medical care costs from continuing operations for the periods indicated:

     
Three Months Ended September 30,
2015     2014
Amount     PMPM    

% of
Total

Amount     PMPM    

% of
Total

Fee for service $ 2,224,141 $ 218.69 73.8 % $ 1,469,765 $ 206.43 70.1 %
Pharmacy 417,721 41.07 13.9 337,150 47.35 16.1
Capitation 260,033 25.57 8.6 190,277 26.73 9.1
Direct delivery 30,226 2.97 1.0 24,863 3.49 1.1
Other 83,250   8.19   2.7   75,781   10.65   3.6  
$ 3,015,371   $ 296.49   100.0 % $ 2,097,836   $ 294.65   100.0 %
 
 
Nine Months Ended September 30,
2015 2014
Amount PMPM

% of
Total

Amount PMPM

% of
Total

Fee for service $ 6,275,222 $ 217.63 73.1 % $ 4,028,863 $ 198.61 70.0 %
Pharmacy 1,160,818 40.26 13.5 919,374 45.32 16.0
Capitation 724,715 25.13 8.5 536,533 26.45 9.3
Direct delivery 84,882 2.94 1.0 69,947 3.45 1.2
Other 335,052   11.62   3.9   199,076   9.81   3.5  
$ 8,580,689   $ 297.58   100.0 % $ 5,753,793   $ 283.64   100.0 %
 

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

 
     

September 30,
2015

   

December 31,
2014

Fee-for-service claims incurred but not paid (IBNP) $ 1,184,147 $ 870,429
Pharmacy payable 93,953 71,412
Capitation payable 30,061 28,150
Other(1) 251,409   230,531
$ 1,559,570   $ 1,200,522
 

_____________

(1) “Other” medical claims and benefits payable include amounts payable to certain providers for which the Company acts as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact the Company’s unaudited consolidated statements of income. As of September 30, 2015 and December 31, 2014, the Company had recorded non-risk provider payables of approximately $161.4 million and $119.3 million, respectively.

 

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

The Company’s 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. The Company’s 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 the Company’s 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 from continuing and discontinued operations combined for the periods indicated:

         
Nine Months Ended

Year Ended
December 31,
2014

September 30,
2015     2014
 
Medical claims and benefits payable, beginning balance $ 1,200,522 $ 669,787 $ 669,787
Components of medical care costs related to:
Current period 8,723,573 5,795,404 8,122,885
Prior period(1) (142,948 ) (41,033 ) (45,979 )
Total medical care costs 8,580,625   5,754,371   8,076,906  
 
Change in non-risk provider payables 42,067   (15,344 ) (31,973 )
Payments for medical care costs related to:
Current period 7,371,504 4,841,429 7,064,427
Prior period 892,140   443,539   449,771  
Total paid 8,263,644   5,284,968   7,514,198  
Medical claims and benefits payable, ending balance $ 1,559,570   $ 1,123,846   $ 1,200,522  
 
Benefit from prior period as a percentage of:
Balance at beginning of period 11.9 % 6.1 % 6.9 %
Premium revenue, trailing twelve months 1.2 % 0.5 % 0.5 %
Medical care costs, trailing twelve months 1.3 % 0.6 % 0.6 %
 
Fee-For-Service Claims Data:
Days in claims payable, fee for service 49 50 49
Number of members at end of year 3,470,000 2,404,000 2,623,000
Number of claims in inventory at end of year 408,100 315,900 307,700
Billed charges of claims in inventory at end of year $ 908,200 $ 749,300 $ 718,500
Claims in inventory per member at end of year 0.12 0.13 0.12

Billed charges of claims in inventory per member at end of year

$ 261.73 $ 311.69 $ 273.92
Number of claims received during the year 29,084,100 19,703,300 27,597,000
Billed charges of claims received during the year $ 33,517,100 $ 21,506,500 $ 30,315,600
 

_____________

(1) The benefit from prior period development of medical claims and benefits payable for the nine months ended September 30, 2015 included approximately $23 million relating to programs that contain medical cost floor or corridor provisions. Accordingly, premium revenue for the nine months ended September 30, 2015 was reduced by the same amount.

 

 
MOLINA HEALTHCARE, INC.
HEALTH INSURER FEE DETAILS BY HEALTH PLAN

(In thousands)

     
HIF Reimbursement Revenue, Gross(1)
Nine Months Ended September 30, 2015    

Year Ending
Dec. 31, 2015

Recognized    

Necessary for
Full
Reimbursement

Necessary for
Full
Reimbursement

Q1 2015     Q2 2015     Q3 2015     Total
2015 HIF:
California $ $ 17,258 $ 5,925 $ 23,183 $ 23,183 $ 30,910
Florida 2,027 2,042 2,056 6,125 6,125 8,167
Illinois 965 973 922 2,860 2,860 3,814
Michigan 20,735 20,735 20,735 27,646
New Mexico 7,539 7,597 7,647 22,783 22,783 30,377
Ohio 11,936 12,027 12,105 36,068 36,068 48,091
South Carolina 3,053 3,077 3,097 9,227 9,227 12,303
Texas 5,839 5,884 5,922 17,645 17,645 23,527
Utah 4,467 4,467 4,467 5,956
Washington 10,951 10,963 5,721 27,635 27,635 36,847
Wisconsin 1,126   1,135   1,142   3,403   3,403     4,537
Subtotal, Medicaid 43,436 60,956 69,739 174,131 174,131 232,175
Marketplace 398 400 402 1,200 1,200 1,601
Medicare 5,702   3,652   4,711   14,065   14,065   18,754
49,536 65,008 74,852 189,396 $ 189,396   $ 252,530
2014 HIF:
California 11,616 11,616
Michigan 6,797 6,797
Utah     1,286   1,286  
$ 49,536   $ 76,624   $ 82,935   $ 209,095  
 
Recognized in:
Health insurer fee revenue $ 47,948 $ 73,890 $ 81,158 $ 202,996
Premium tax revenue 1,588   2,734   1,777   6,099  
$ 49,536   $ 76,624   $ 82,935   $ 209,095  
 

_____________

(1) Amounts in the table include the Company’s estimate of the full economic impact of the excise tax including premium tax and the income tax effect.

 

Contacts

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

$Cashtags

Contacts

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