Molina Healthcare Reports Second Quarter 2014 Results

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

  • Adjusted net income per diluted share, continuing operations,1 of $0.71.
  • Net income per diluted share, continuing operations, of $0.16.
  • Aggregate membership grew by 22% compared with second quarter of 2013.
  • Total revenue of $2.3 billion, up 12% compared with first quarter of 2014; and up 44% compared with second quarter of 2013.
  • General and administrative expense ratio declined sequentially to 8.4% in the second quarter of 2014, from 9.1% in the first quarter of 2014.
  • Began serving members under fully integrated dual eligible pilot programs in California, Illinois and Ohio during the second quarter of 2014.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2014.

“We are pleased that 2014 is unfolding as we anticipated,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “As we have stated in the past, the three key elements that remain critical to our success during the remainder of 2014 have not changed. These include revenue growth from new programs such as Medicaid expansion and the dual eligible Medicare Medicaid plans; the delivery of cost effective care to our chronically ill members, including the dual eligible; and the realization of administrative cost efficiencies. So far, 2014 has been a success in all three areas. Of course, we have much work left to do in 2014. Many factors outside of our direct control, such as the reimbursement of the Affordable Care Act’s Health Insurer Fee, are still not resolved. But we remain confident in the prospects for our company and take satisfaction from our progress this year.”

Overview of Financial Results, Continuing Operations

The Company previously reported that its first quarter results were adversely affected by delays in securing agreements for the reimbursement (including reimbursement for tax effect) of the Affordable Care Act’s Health Insurer Fee (ACA HIF) and delays in the recognition of quality related revenue. Those circumstances continued through the end of the second quarter of 2014.

Net income reported for the second quarter of 2014 and the six months ended June 30, 2014, would have been higher except for:

  • ACA HIF not reimbursed by the Company’s state partners reduced earnings approximately $16 million, or $0.14 per diluted share, for the second quarter and $32 million, or $0.29 per diluted share, for the six months ended June 30, 2014 (per-share amounts for both periods on a GAAP and adjusted basis). The Company remains guardedly optimistic that it will secure reimbursement agreements with all of its state partners prior to the close of 2014.
  • The Company’s non-recognition of a portion of the Texas health plan’s quality incentive program reduced earnings approximately $7 million, or $0.06 per diluted share, for the second quarter and $13 million, or $0.12 per diluted share, for the six months ended June 30, 2014 (per-share amounts for both periods on a GAAP and adjusted basis). The Company remains guardedly optimistic that it will be able to recognize most of its quality revenue in Texas prior to the close of 2014.

Second Quarter of 2014 Compared with the Second Quarter of 2013

The Company believes that the following items are of significance when comparing financial results from continuing operations for the second quarter of 2014 with the second quarter of 2013:

  • Thus far in 2014, certain of the Company’s state partners have failed to reimburse it for the ACA HIF reduced revenue, representing approximately $16 million in the second quarter of 2014;
  • Approximately $7 million of quality revenue was not recognized by the Company’s Texas health plan in the second quarter of 2014;
  • The non-deductibility of ACA HIF resulted in a much higher effective tax rate in the second quarter of 2014 than in the second quarter of 2013; and
  • A non-cash charge of approximately $4 million was recorded in the second quarter of 2013 in connection with the Company’s convertible senior notes offering in February 2013.

Net Income Per Share Guidance

The Company’s guidance for fiscal year 2014 remains unchanged and is as follows:

     

Low End

     

High End

Net income per diluted share, continuing operations $ 1.65 $ 2.15
 
Adjusted net income per diluted share, continuing operations $ 4.00 $ 4.50
 

As previously stated, the underlying assumptions for fiscal year 2014 guidance include full reimbursement of ACA HIF and receipt of the Texas Health plan’s quality incentive program revenue, and exclude the effect of hepatitis C drugs such as Sovaldi.

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 Wednesday, July 30, 2014. The number to call for the interactive teleconference is (212) 231-2936. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Wednesday, July 30, 2014, through 6:00 p.m. on Thursday, July 31, 2014, by dialing (800) 633-8284 and entering confirmation number 21721183. A live broadcast of Molina Healthcare’s conference call will be available on the Company’s website, www.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, Molina currently serves approximately 2.3 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 www.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, including the full grossed up reimbursement by states of the non-deductible health insurer fee, the expansion of Medicaid eligibility in the states that participate to previously uninsured populations unfamiliar with managed care, the implementation of state insurance marketplaces, the effect of various implementing regulations, and uncertainties regarding the impact of other federal or state health care and insurance reform measures, including the dual eligibles demonstration programs in California, Illinois, Michigan, Ohio, and South Carolina;
  • newly FDA-approved drugs such as Sovaldi, Olysio, and other drugs for hepatitis C or other medical conditions that are exorbitantly priced but not factored into the calculation of our capitated rates for 2014;
  • 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;
  • 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;
  • the accurate estimation of incurred but not 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, including claims by the Washington Health Care Authority (HCA) that it overpaid our Washington health plan for certain claims related to psychotropic drugs and the Washington Community Options Program Entry System (COPES);
  • 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, including the success of the proposal of Molina Medicaid Solutions in New Jersey;
  • 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, including the extension of the Louisiana contract of Molina Medicaid Solutions through 2015;
  • 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;
  • federal or state medical cost expenditure floors, administrative cost and profit ceilings, and profit sharing arrangements;
  • the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures, including 2014 at-risk premium rules in the state of Texas;
  • 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 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 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;
  • an inadvertent unauthorized disclosure of protected health information;
  • changes generally affecting the managed care or Medicaid management information systems industries;
  • increases in government surcharges, taxes, and assessments;
  • changes in general economic conditions, including unemployment rates;
  • increasing 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 www.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 July 30, 2014, 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

June 30,

  Six Months Ended

June 30,

2014   2013 2014   2013
(Amounts in thousands, except net income per share)
Revenue:
Premium revenue $ 2,167,142 $ 1,501,729 $ 4,107,479 $ 2,999,162
Service revenue 50,232 49,672 103,862 99,428
Premium tax revenue 70,120 46,883 121,813 83,883
Health insurer fee revenue (1) 19,662 38,358
Investment income 1,945 1,628 3,574 3,144
Other revenue   2,938     5,922     6,196     10,616  
Total revenue   2,312,039     1,605,834     4,381,282     3,196,233  
Operating expenses:
Medical care costs 1,934,299 1,294,706 3,655,957 2,582,621
Cost of service revenue 37,107 39,305 77,764 79,075
General and administrative expenses 193,239 161,479 381,326 302,757
Premium tax expenses 70,120 46,883 121,813 83,883
Health insurer fee expenses (1) 21,945 44,135
Depreciation and amortization   22,902     17,015     43,593     33,578  
Total operating expenses   2,279,612     1,559,388     4,324,588     3,081,914  
Operating income   32,427     46,446     56,694     114,319  
Other expenses, net:
Interest expense 13,993 11,667 27,815 24,704
Other (income) expense, net   (9 )   3,502     (53 )   3,371  
Total other expenses, net   13,984     15,169     27,762     28,075  
Income from continuing operations before income tax expense 18,443 31,277 28,932 86,244
Income tax expense   10,702     15,481     16,357     39,926  
Income from continuing operations 7,741 15,796 12,575 46,318

Income (loss) from discontinued operations, net of tax

  70     8,775     (266 )   8,168  
Net income $ 7,811   $ 24,571   $ 12,309   $ 54,486  
 
Diluted net income per share:
Continuing operations $ 0.16 $ 0.34 $ 0.26 $ 1.00
Discontinued operations       0.19         0.17  
Diluted net income per share $ 0.16   $ 0.53   $ 0.26   $ 1.17  
 
Diluted weighted average shares outstanding   48,003     46,507     47,824     46,506  
 
Operating Statistics, Continuing Operations:
Medical care ratio (2) 89.3 % 86.2 % 89.0 % 86.1 %
Service revenue ratio (3) 73.9 % 79.1 % 74.9 % 79.5 %
General and administrative expense ratio (4) 8.4 % 10.1 % 8.7 % 9.5 %
Premium tax ratio (2) 3.1 % 3.0 % 2.9 % 2.7 %
Effective tax rate 58.0 % 49.5 % 56.5 % 46.3 %
 

____________

(1) Health insurer fee expenses represent insurer fees levied by the federal government under the Affordable Care Act, which are not tax deductible. Associated revenues represent state and federal reimbursement of such fees (including the related income tax effect) for Medicaid and Medicare insurers.

(2) 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.

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

(4) Computed as a percentage of total revenue.

 
 
 

MOLINA HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS

 
  (Unaudited)  

June 30,

2014

Dec. 31,

2013

(Amounts in thousands,

except per-share data)

ASSETS
Current assets:
Cash and cash equivalents $ 1,027,351 $ 935,895
Investments 740,874 703,052
Receivables 473,514 298,935
Income taxes refundable 16,726 32,742
Deferred income taxes 19,518 26,556
Prepaid expenses and other current assets   93,862   42,484  
Total current assets 2,371,845 2,039,664
Property, equipment, and capitalized software, net 317,630 292,083
Deferred contract costs 47,969 45,675
Intangible assets, net 88,493 98,871
Goodwill 230,738 230,738
Restricted investments 84,440 63,093
Auction rate securities 11,025 10,898
Deferred income taxes 4,075
Derivative asset 250,160 186,351
Other assets   45,654   35,564  
$ 3,452,029 $ 3,002,937  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable $ 924,182 $ 669,787
Accounts payable and accrued liabilities 475,358 319,965
Deferred revenue 45,945 122,216
Current maturities of long-term debt   185,451   182,008  
Total current liabilities 1,630,936 1,293,976
Convertible senior notes 425,709 416,368
Lease financing obligations 160,121 159,394
Lease financing obligations – related party 39,436 27,092
Deferred income taxes 580
Derivative liability 250,038 186,239
Other long-term liabilities   28,719   26,351  
Total liabilities   2,534,959   2,110,000  
 
Stockholders’ equity:
Common stock, $0.001 par value; 150,000 shares authorized; outstanding: 46,494 shares at June 30, 2014 and 45,871 shares at December 31, 2013 46 46
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding
Additional paid-in capital 351,546 340,848
Accumulated other comprehensive income (loss) 40 (1,086 )
Retained earnings   565,438   553,129  
Total stockholders’ equity   917,070   892,937  
$ 3,452,029 $ 3,002,937  

 
 
 

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

 
  Three Months Ended

June 30,

  Six Months Ended

June 30,

2014   2013 2014   2013
(Amounts in thousands)
Operating activities:
Net income $ 7,811 $ 24,571 $ 12,309 $ 54,486

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

Depreciation and amortization 32,660 22,108 65,654 43,907
Deferred income taxes 2,362 (22,139 ) 1,692 (22,155 )
Stock-based compensation 4,860 7,729 10,456 12,150
Amortization of convertible senior notes and lease financing obligations 6,781 5,965 13,455 9,688
Other, net 3,271 7,421 1,723 10,010
Changes in operating assets and liabilities:
Receivables (135,282 ) (63,525 ) (174,579 ) (64,094 )
Prepaid expenses and other assets 11,136 (11,292 ) (66,887 ) (22,856 )
Medical claims and benefits payable 104,641 (25,658 ) 254,395 (29,043 )
Accounts payable and accrued liabilities 75,280 14,879 177,497 (16,968 )
Deferred revenue (100,331 ) (89,855 ) (76,271 ) (95,849 )
Income taxes   11,374     552     16,016     8,976  
Net cash provided by (used in) operating activities   24,563     (129,244 )   235,460     (111,748 )
 
Investing activities:
Purchases of investments (226,159 ) (456,139 ) (368,304 ) (532,151 )
Sales and maturities of investments 179,278 73,773 326,648 149,420
Purchases of equipment (19,882 ) (24,062 ) (37,670 ) (35,229 )
Increase in restricted investments (1,241 ) (1,818 ) (15,622 ) (12,834 )
Other, net   (6,841 )   (4,974 )   (7,388 )   (1,018 )
Net cash used in investing activities   (74,845 )   (413,220 )   (102,336 )   (431,812 )
 
Financing activities:
Proceeds from issuance of 1.125% Notes, net of deferred financing costs 537,973
Proceeds from sale-leaseback transactions 158,694 158,694
Purchase of 1.125% Notes call option (149,331 )
Proceeds from issuance of warrants 75,074
Treasury stock purchases (50,000 )
Principal payments on term loan (47,180 ) (47,471 )

Repayment of amounts borrowed under credit facility

(40,000 )
Contingent consideration liabilities settled (12,230 ) (50,349 )
Other, net   6,494     4,109     8,681     5,521  

Net cash (used in) provided by financing activities

  (5,736 )   115,623     (41,668 )   490,460  

Net (decrease) increase in cash and cash equivalents

(56,018 ) (426,841 ) 91,456 (53,100 )

Cash and cash equivalents at beginning of period

  1,083,369     1,169,511     935,895     795,770  
Cash and cash equivalents at end of period $ 1,027,351   $ 742,670   $ 1,027,351   $ 742,670  

 
 
 

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

June 30,

  Six Months Ended

June 30,

2014   2013 2014   2013
(Amounts in thousands)
Net income $ 7,811 $ 24,571 $ 12,309 $ 54,486
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software 28,292 22,108 54,206 43,907
Interest expense 13,993 11,667 27,815 24,704
Income tax expense   10,760     5,513   15,997   29,783
EBITDA $ 60,856   $ 63,859 $ 110,327 $ 152,880
 

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 June 30,
2014 2013
(In thousands, except per diluted share amounts)
Net income, continuing operations $ 7,741 $ 0.16 $ 15,796 $ 0.34
Adjustments, net of tax:

Depreciation, and amortization of capitalized software

14,614 0.30 10,875 0.23
Stock-based compensation 4,322 0.09 5,890 0.13

Amortization of convertible senior notes and lease financing obligations

4,272 0.09 3,758 0.08
Amortization of intangible assets 3,209 0.07 3,053 0.07
Change in fair value of derivatives, net   (5 )     3,658   0.08
Adjusted net income, continuing operations $ 34,153   $ 0.71 $ 43,030 $ 0.93
 
Six Months Ended June 30,
2014 2013
(In thousands, except per diluted share amounts)
Net income, continuing operations $ 12,575 $ 0.26 $ 46,318 $ 1.00
Adjustments, net of tax:

Depreciation, and amortization of capitalized software

27,612 0.58 21,554 0.46
Stock-based compensation 9,221 0.19 9,490 0.20

Amortization of convertible senior notes and lease financing obligations

8,477 0.18 6,103 0.13
Amortization of intangible assets 6,538 0.14 6,107 0.13
Change in fair value of derivatives, net   (6 )     3,583   0.08
Adjusted net income, continuing operations $ 64,417   $ 1.35 $ 93,155 $ 2.00

 
 
 

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

 
 

June 30,

2014

 

March 31,

2014

 

Dec. 31,

2013

 

June 30,

2013

Ending Membership by Health Plan:
California

455,000

418,000 368,000 355,000
Florida (1) 58,000 91,000 89,000 81,000
Illinois

6,000

5,000 4,000
Michigan 244,000 218,000 213,000 215,000
New Mexico 195,000 183,000 168,000 92,000
Ohio 302,000 260,000 255,000 240,000
South Carolina (2) 119,000 126,000
Texas 247,000 246,000 252,000 266,000
Utah 83,000 80,000 86,000 87,000
Washington 461,000 434,000 403,000 413,000
Wisconsin 85,000 90,000 93,000 98,000

2,255,000

2,151,000 1,931,000 1,847,000
 
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) 1,564,500 1,575,300 1,503,800 1,435,400
Aged, Blind or Disabled (ABD) 305,300 309,900 288,600 270,300
Medicaid Expansion (3) 232,300 133,000
Children’s Health Insurance Program (CHIP)

77,000

83,700 99,200 105,000
Medicare Special Needs Plans 44,000 41,400 39,400 36,300
Health Insurance Marketplaces (3)

18,300

7,700
Medicare-Medicaid Plan (MMP) - Integrated (4)

5,200

MMP - Medicare Opt Out (5)

8,400

2,255,000

2,151,000 1,931,000 1,847,000
 

____________

(1) Enrollment at the Florida health plan declined between the first and second quarters of 2014 due to a reassignment of membership as part of the implementation of Florida’s Managed Medical Assistance program. The Company believes that enrollment at its Florida health plan will grow later in the year.

(2) The South Carolina health plan began serving members under the state of South Carolina’s new full-risk Medicaid managed care program effective January 1, 2014.

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

(4) Medicare-Medicaid Plans (MMP) serve members who are dually eligible for Medicare and Medicaid. The Company’s MMP implementations in California and Illinois offered coverage beginning in April 2014 and Ohio beginning in June 2014.

(5) Medicare-Medicaid members who have elected to “opt out” of Medicare coverage and receive Medicaid only.

 
 
 

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 June 30, 2014
Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM
California 1,335 $ 398,071 $ 298.11 $ 324,923 $ 243.33 81.6 % $ 73,148
Florida 229 101,423 443.05 92,865 405.67 91.6 8,558
Illinois (3) 17 19,263 1,136.20 20,472 1,207.48 106.3 (1,209 )
Michigan 702 185,337 264.18 163,392 232.89 88.2 21,945
New Mexico 617 267,994 434.57 240,151 389.42 89.6 27,843
Ohio 849 328,630 386.79 276,716 325.69 84.2 51,914
South Carolina 360 96,453 268.38 84,686 235.64 87.8 11,767
Texas 742 320,966 432.46 297,899 401.38 92.8 23,067
Utah 249 76,574 307.47 73,094 293.49 95.5 3,480
Washington 1,364 336,959 247.03 305,098 223.67 90.5 31,861
Wisconsin 256 36,925 144.42 33,143 129.63 89.8 3,782
Other (4)   (1,453 )   21,860   (23,313 )
6,720 $ 2,167,142   $ 322.52 $ 1,934,299 $ 287.87 89.3 % $ 232,843  
 
 
Three Months Ended June 30, 2013
Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical

Margin

Total PMPM Total PMPM
California 1,055 $ 180,927 $ 171.58 $ 170,777 $ 161.96 94.4 % $ 10,150
Florida 238 61,837 260.61 51,915 218.80 84.0 9,922
Illinois
Michigan 648 167,485 258.40 141,859 218.86 84.7 25,626
New Mexico 275 84,449 307.20 68,253 248.28 80.8 16,196
Ohio 722 270,107 373.78 215,664 298.44 79.8 54,443
South Carolina
Texas 805 318,955 396.05 275,959 342.66 86.5 42,996
Utah 261 77,511 296.69 61,677 236.08 79.6 15,834
Washington 1,238 299,533 241.89 263,512 212.80 88.0 36,021
Wisconsin 293 37,740 128.79 31,185 106.43 82.6 6,555
Other (3)(4)   3,185     13,905   (10,720 )
5,535 $ 1,501,729   $ 271.30 $ 1,294,706 $ 233.91 86.2 % $ 207,023  
 

____________

(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 Illinois health plan’s results prior to October 1, 2013, were insignificant and reported in “Other.”

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

 
  Six Months Ended June 30, 2014
Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM
California 2,589 $ 675,713 $ 260.97 $ 562,267 $ 217.16 83.2 % $ 113,446
Florida 499 206,589 414.17 186,326 373.55 90.2 20,263
Illinois (3) 31 34,434 1,109.99 34,966 1,127.12 101.5 (532 )
Michigan 1,350 358,833 265.81 298,712 221.27 83.2 60,121
New Mexico 1,166 493,062 423.00 436,560 374.53 88.5 56,502
Ohio 1,621 606,925 374.33 514,044 317.04 84.7 92,881
South Carolina 754 192,473 255.31 174,948 232.07 90.9 17,525
Texas 1,491 641,062 429.85 590,857 396.19 92.2 50,205
Utah 495 155,228 313.67 140,294 283.49 90.4 14,934
Washington 2,640 660,420 250.15 603,205 228.48 91.3 57,215
Wisconsin 530 75,453 142.48 61,952 116.99 82.1 13,501
Other (4)   7,287   51,826   (44,539 )
13,166 $ 4,107,479 $ 311.98 $ 3,655,957 $ 277.69 89.0 % $ 451,522  
 
 
Six Months Ended June 30, 2013
Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical

Margin

Total PMPM Total PMPM
California 2,056 $ 368,715 $ 179.36 $ 330,540 $ 160.79 89.6 % $ 38,175
Florida 461 120,001 260.38 101,319 219.84 84.4 18,682
Illinois
Michigan 1,300 334,042 256.96 288,607 222.01 86.4 45,435
New Mexico 549 168,449 307.08 140,402 255.95 83.3 28,047
Ohio 1,448 538,915 372.10 443,118 305.96 82.2 95,797
South Carolina
Texas 1,637 648,406 396.01 542,408 331.27 83.7 105,998
Utah 520 152,467 293.16 126,706 243.63 83.1 25,761
Washington 2,488 597,819 240.29 524,909 210.98 87.8 72,910
Wisconsin 493 64,864 131.53 54,849 111.22 84.6 10,015
Other (3)(4)   5,484   29,763   (24,279 )
10,952 $ 2,999,162 $ 273.85 $ 2,582,621 $ 235.81 86.1 % $ 416,541  
 

____________

(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 Illinois health plan’s results prior to October 1, 2013, were insignificant and reported in “Other.”

(4) “Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

 
 
 

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 from continuing operations for the periods indicated:

 
  Three Months Ended June 30,
2014   2013
Amount   PMPM  

% of

Total

Amount   PMPM  

% of

Total

Fee for service $ 1,378,037 $ 205.08 71.2 % $ 879,865 $ 158.96 68.0 %
Pharmacy 295,596 43.99 15.3 222,992 40.29 17.2
Capitation 176,817 26.31 9.1 138,409 25.00 10.7
Direct delivery 23,063 3.43 1.2 9,443 1.71 0.7
Other   60,786   9.06 3.2     43,997   7.95   3.4  
$ 1,934,299 $ 287.87 100.0 % $ 1,294,706 $ 233.91   100.0 %
 
 
Six Months Ended June 30,
2014 2013
Amount PMPM % of

Total

Amount PMPM % of

Total

Fee for service $ 2,559,098 $ 194.38 70.0 % $ 1,746,620 $ 159.48 67.6 %
Pharmacy 582,224 44.22 15.9 454,830 41.53 17.6
Capitation 346,256 26.30 9.5 278,733 25.45 10.8
Direct delivery 45,084 3.42 1.2 18,127 1.66 0.7
Other   123,295   9.37 3.4     84,311   7.69   3.3  
$ 3,655,957 $ 277.69 100.0 % $ 2,582,621 $ 235.81   100.0 %
 
 

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

 

June 30,

2014

Dec. 31,

2013

Fee-for-service claims incurred but not paid (IBNP) $ 697,038 $ 424,173
Pharmacy payable 54,935 45,037
Capitation payable 29,560 20,267
Other   142,649   180,310  
$ 924,182 $ 669,787  

 
 
 

MOLINA HEALTHCARE, INC.
UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

 

The Company’s claims liability includes an allowance for adverse claims development 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 shows the components of the change in medical claims and benefits payable from continuing and discontinued operations as of the periods indicated:

 
  Six Months Ended

June 30,

 

Year Ended

Dec. 31,

2013

2014   2013
(Dollars in thousands, except per-member amounts)
Balances at beginning of period $ 669,787 $ 494,530 $ 494,530
Components of medical care costs related to:
Current period 3,693,730 2,647,083 5,434,443
Prior period   (37,131 )   (62,757 )   (52,779 )
Total medical care costs   3,656,599     2,584,326     5,381,664  
 
Change in non-risk provider payables   (83,044 )   (10,888 )   111,267  
Payments for medical care costs related to:
Current period 2,891,174 2,235,617 4,932,195
Prior period   427,986     366,864     385,479  
Total paid   3,319,160     2,602,481     5,317,674  
Balances at end of period $ 924,182   $ 465,487   $ 669,787  
 
Benefit from prior period as a percentage of:
Balance at beginning of period 5.5 % 12.7 % 10.7 %
Premium revenue, trailing twelve months 0.5 % 1.1 % 0.9 %
Medical care costs, trailing twelve months 0.6 % 1.2 % 1.0 %
 
Claims Data:
Days in claims payable, fee for service 46 38 43
Number of members at end of period

2,255,000

1,847,000 1,931,000
Number of claims in inventory at end of period 180,600 109,900 145,800
Billed charges of claims in inventory at end of period $ 400,000 $ 200,400 $ 276,500
Claims in inventory per member at end of period 0.08 0.06 0.08

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

$

177.38

$ 108.50 $ 143.19
Number of claims received during the period 12,641,300 10,524,500 21,317,500
Billed charges of claims received during the period $ 13,609,000 $ 10,477,900 $ 21,414,600
 
 

Contacts

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

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Contacts

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