Molina Healthcare Announces Fourth Quarter and Year-End 2018 Results and Provides Fiscal Year 2019 Guidance

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the fourth quarter and year ended December 31, 2018, and provided its guidance for fiscal year 2019.

We have accomplished much over the last year as we executed the first phase of our margin recovery and sustainability plan, said Joe Zubretsky, president and CEO. Our full year results are a capstone to a very successful beginning of this margin turnaround and growth story.

Our guidance for 2019 reflects continued strength as we sustain our margins while beginning to execute the growth phase of our strategy.

Consolidated Results

Fourth Quarter of 2018 Compared With Third Quarter of 2018

Net income increased to $201 million, from $197 million in the third quarter of 2018. Net income per diluted share increased to $3.01, from $2.90 in the third quarter of 2018.

Premium revenue increased $101 million, or 2%, in the fourth quarter of 2018 compared with the third quarter of 2018. The sequential increase was mainly in Medicaid and was attributed to a lower non-run rate reduction in revenues for retroactive California Medicaid Expansion risk corridor adjustments and favorable rate changes in other programs that include retroactivity back to earlier periods in 2018.

Overall, the medical care ratio (MCR) decreased to 85.1%, from 87.4% in the third quarter of 2018. Excluding the $24 million retroactive California Medicaid Expansion risk corridor adjustment, related mainly to the 2017-18 state fiscal period, the MCR would have been 84.6% in the fourth quarter of 2018. Excluding the $57 million retroactive California Medicaid Expansion risk corridor adjustment related to the 2016-17 state fiscal period and a small benefit from the 2017 Marketplace cost sharing reduction (CSR), the MCR would have been 86.4% in the third quarter of 2018. The sequential improvement in the overall underlying MCR was due to decreases in the Medicaid, Medicare and Marketplace MCRs as follows:

  • The Medicaid MCR decreased slightly to 88.8%, from 90.5% in the third quarter of 2018. Excluding the $24 million retroactive California Medicaid Expansion risk corridor adjustment related mainly to the 2017-18 state fiscal period, the Medicaid MCR would have been 88.2% in the fourth quarter of 2018. Excluding the $57 million retroactive California Medicaid Expansion risk corridor adjustment related to the 2016-17 state fiscal period, the MCR would have been 89.0% in the third quarter of 2018. The sequential decrease was mainly due to improved performance in the Aged, Blind or Disabled (ABD) and Temporary Assistance for Needy Families (TANF) programs.
  • The Medicare MCR decreased to 80.8%, from 87.3% in the third quarter of 2018, mainly due to improved performance in our Medicare-Medicaid Integrated plans (MMPs).
  • The Marketplace MCR decreased to 62.9%, from 64.1% in the third quarter of 2018. Excluding the benefit of the 2017 CSR, the Marketplace MCR would have been 65.3% in the third quarter of 2018. The sequential decrease is mainly attributable to an increase in premium revenue.

The general and administrative (G&A) expense ratio increased to 7.2%, from 6.6% in the third quarter of 2018, due to seasonally higher spending, including sales and marketing initiatives related to the open enrollment period for the Marketplace and Medicare programs.

Fourth Quarter of 2018 Compared With Fourth Quarter of 2017

Net income for the fourth quarter of 2018 was $201 million, compared with a net loss of $262 million for the fourth quarter of 2017. Net income per diluted share was $3.01 for the fourth quarter of 2018 compared with a net loss per diluted share of $4.59 reported for the fourth quarter of 2017. In the fourth quarter of 2017, we recorded impairment losses and restructuring costs of $342 million, or $4.03 net loss per diluted share.

Capital Plan Progress

In the fourth quarter of 2018, we repaid $62 million aggregate principal amount of our 1.125% Notes and entered into privately negotiated termination agreements to terminate the respective portion of the related 1.125% Call Option and 1.125% Warrants. Year to date, we have reduced the principal amount of outstanding debt by $759 million.

Sale of Pathways Behavioral Health Subsidiary

We closed on the sale of the Pathways behavioral health subsidiary in October 2018. As a result of this transaction, we recorded a net loss of $32 million, or $0.48 per diluted share.

2019 Guidance

The following table summarizes 2019 Guidance (1):

 
Premium revenue ~$15.8B
Premium tax revenue ~$375M
Investment income and other revenue   ~$195M
Total revenue ~$16.3B
Medical care costs ~$13.7B
Medical care ratio (2) 86.7% – 87.0%
General and administrative expenses ~$1.2B
G&A ratio (3) 7.5% – 7.7%
Premium tax expenses ~$375M
Depreciation and amortization ~$85M
Interest expense and other expenses, net ~$100M
Income before income taxes $790M – $840M
Net income $600M – $630M
EBITDA (4)

$975M – $1,025M

Effective tax rate 24.5% – 25.0%
After-tax margin (3) 3.7% – 3.9%
Diluted weighted average shares ~64.7M
Net income per share $9.25 – $9.75
End-of-year by membership by government program:
Medicaid and Medicare 3.2M
Marketplace 250K – 275K
 

__________________

(1)

All amounts are estimates and do not include non-recurring significant items. Earnings per diluted share as shown is calculated on a GAAP basis; actual results may differ materially. See the Companys risk factors as discussed in its 2018 Form 10-K and other filings and the statements below in this press release after the heading Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.

(2)

Medical care ratio represents medical care costs as a percentage of premium revenue.

(3)

G&A ratio represents general and administrative expenses as a percentage of total revenue. After-tax margin represents net income as a percentage of total revenue.

(4)

See reconciliation of non-GAAP financial measures at the end of this release.

 

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcares fourth quarter and year-end 2018 results at 8:30 a.m. Eastern time on Tuesday, February 12, 2019. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 2698825. A telephonic replay of the conference call will be available through Tuesday, February 19, 2019, by dialing (877) 344-7529 and entering confirmation number 10127491. A live audio broadcast of this conference call will be available on Molina Healthcares 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 its locally operated health plans, Molina Healthcare served approximately 3.8 million members as of December 31, 2018. For more information about Molina Healthcare, please visit molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This earnings release contains forward-looking statements regarding the Companys 2018 revised guidance, as well as its 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 numerous political, judicial and market-based uncertainties associated with the Affordable Care Act (the ACA) or Obamacare, including the ultimate outcome on appeal of the Texas et al. v. U.S. et al. matter;
  • the market dynamics surrounding the ACA Marketplaces, including but not limited to uncertainties associated with risk adjustment requirements, the potential for disproportionate enrollment of higher acuity members, the discontinuation of premium tax credits, and the adequacy of agreed rates;
  • 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;
  • effective management of the Companys medical costs;
  • the Companys 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;
  • the full reimbursement of the ACA health insurer fee, or HIF;
  • the success of the Companys efforts to retain existing or awarded government contracts, including the success of any requests for proposal protest filings or defenses;
  • the success of the Companys profit improvement and maintenance initiatives, including the timing and amounts of the benefits realized, and administrative and medical cost savings achieved;
  • the Companys ability to manage its operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of its care management initiatives;
  • the Companys 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;
  • the Companys 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 and requirements;
  • the Companys 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 medical cost corridor, 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 the Companys ability to recognize revenue amounts associated therewith;
  • the Companys ability to successfully recognize the intended cost savings and other intended benefits of outsourcing certain services and functions to third parties, and its ability to manage the risk that such third parties may not perform contracted functions and services in a timely, satisfactory and compliant manner;
  • cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
  • the success of the Companys health plan in Puerto Rico, including the resolution of the debt crisis and the effect of the PROMESA law, and the impact of any future significant weather events;
  • the success and renewal of the Companys 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 the Companys health plans;
  • efforts by states to recoup previously paid and recognized premium amounts;
  • complications, member confusion, eligibility redeterminations, or enrollment backlogs related to the annual renewal of Medicaid coverage;
  • government audits, reviews, comment letters, or potential investigations, and any fine, sanction, enrollment freeze, monitoring program, or premium recovery that may result therefrom;
  • changes with respect to the Companys provider contracts and the loss of providers;
  • approval by state regulators of dividends and distributions by the Companys health plan subsidiaries;
  • changes in funding under the Companys 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, including litigation involving the ACA to which we ourselves are not a direct party;
  • the relatively small number of states in which we operate health plans, including the greater scale and revenues of the Companys California, Ohio, Texas, and Washington health plans;
  • the availability of adequate financing on acceptable terms to fund and capitalize the Companys expansion and growth, repay the Companys outstanding indebtedness at maturity and meet its liquidity needs, including the interest expense and other costs associated with such financing;
  • the Companys failure to comply with the financial or other covenants in its credit agreement or the indentures governing its outstanding notes;
  • the sufficiency of the Companys funds on hand to pay the amounts due upon conversion or maturity of its outstanding notes;
  • the failure of a state in which we operate to renew its federal Medicaid waiver;
  • the loss of services of a key executive;
  • changes generally affecting the managed care industry;
  • increases in government surcharges, taxes, and assessments;
  • newly emergent viruses or widespread epidemics, public catastrophes or terrorist attacks, and associated public alarm;
  • the unexpected loss of the leadership of one or more of our senior executives;
  • increasing competition and consolidation in the Medicaid industry;
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and numerous other risk factors, including those discussed in the Companys periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of the Companys website or on the SECs website at sec.gov. Given these risks and uncertainties, the Company can give no assurances that its forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by its forward-looking statements will in fact occur, and the Company cautions investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Companys judgment as of February 11, 2019, and the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations.

   
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 

Three Months Ended

December 31,

Year Ended

December 31,

2018   2017 2018   2017

(In millions, except per-share amounts)

Revenue:
Premium revenue $ 4,438 $ 4,689 $ 17,612 $ 18,854
Service revenue 16 131 407 521
Premium tax revenue 97 107 417 438
Health insurer fees reimbursed 81 329
Investment income and other revenue 32   22   125   70  
Total revenue 4,664   4,949   18,890   19,883  
Operating expenses:
Medical care costs 3,775 4,251 15,137 17,073
Cost of service revenue 15 123 364 492
General and administrative expenses 335 367 1,333 1,594
Premium tax expenses 97 107 417 438
Health insurer fees 87 348
Depreciation and amortization 23 28 99 137
Restructuring and separation costs 8 73 46 234
Impairment losses   269     470  

Total operating expenses

4,340   5,218   17,744   20,438  
Loss on sales of subsidiaries, net of gain (52 )   (15 )  
Operating income (loss) 272   (269 ) 1,131   (555 )
Other expenses, net:
Interest expense 24 33 115 118

Other (income) expenses, net

(8 ) 14   17   (61 )
Total other expenses, net 16   47   132   57  
Income (loss) before income tax expense (benefit) 256 (316 ) 999 (612 )
Income tax expense (benefit) 55   (54 ) 292   (100 )
Net income (loss) $ 201   $ (262 ) $ 707   $ (512 )
 
Net income (loss) per diluted share $ 3.01   $ (4.59 ) $ 10.61   $ (9.07 )
 
Diluted weighted average shares outstanding 66.6   57.1   66.6   56.4  
 
Operating Statistics:
Medical care ratio 85.1 % 90.7 % 85.9 % 90.6 %
G&A ratio 7.2 % 7.4 % 7.1 % 8.0 %
Premium tax ratio 2.2 % 2.2 % 2.3 % 2.3 %
Effective income tax expense (benefit) rate 21.4 % (17.2 )% 29.2 % (16.4 )%
After-tax margin 4.3 % (5.3 )% 3.7 % (2.6 )%
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
December 31,
2018   2017
(In millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents $ 2,826 $ 3,186
Investments 1,681 2,524
Restricted investments 169
Receivables 1,330 871
Prepaid expenses and other current assets 149 239
Derivative asset 476   522  
Total current assets 6,462 7,511
Property, equipment, and capitalized software, net 241 342
Goodwill and intangible assets, net 190 255
Restricted investments 120 119
Deferred income taxes 117 103
Other assets 24   141  
$ 7,154   $ 8,471  
 
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Medical claims and benefits payable $ 1,961 $ 2,192
Amounts due government agencies 967 1,542
Accounts payable and accrued liabilities 390 366
Deferred revenue 211 282
Current portion of long-term debt 241 653
Derivative liability 476   522  
Total current liabilities 4,246 5,557
Long-term debt 1,020 1,318
Lease financing obligations 197 198
Other long-term liabilities 44   61  
Total liabilities 5,507   7,134  
Stockholders equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 62 million shares at December 31, 2018 and 60 million shares at December 31, 2017
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding
Additional paid-in capital 643 1,044
Accumulated other comprehensive loss (8 ) (5 )
Retained earnings 1,012   298  
Total stockholders equity 1,647   1,337  
$ 7,154   $ 8,471  
 
   
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended Year Ended
December 31, December 31,
2018   2017 2018   2017
(In millions)
Operating activities:
Net income (loss) $ 201 $ (262 ) $ 707 $ (512 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization 23 39 127 178
Deferred income taxes 26 (26 ) (6 ) (94 )
Share-based compensation 7 8 27 46
Non-cash restructuring costs 11 17 60
Amortization of convertible senior notes and lease financing obligations 4 8 22 32
Loss on sales of subsidiaries, net of gain 52 15
Loss on debt extinguishment (3 ) 14 22 14
Impairment losses 269 470
Other, net (2 ) 8 4 21
Changes in operating assets and liabilities:
Receivables (23 ) 131 (530 ) 103
Prepaid expenses and other current assets 123 (3 ) 6 (56 )
Medical claims and benefits payable (82 ) (286 ) (226 ) 263
Amounts due government agencies (63 ) 219 (574 ) 341
Accounts payable and accrued liabilities (353 ) (102 ) 45 (12 )
Deferred revenue 34 (187 ) (21 ) (34 )
Income taxes (67 ) 6   51   (16 )
Net cash (used in) provided by operating activities (123 ) (153 ) (314 ) 804  
Investing activities:
Purchases of investments (242 ) (803 ) (1,444 ) (2,697 )
Proceeds from sales and maturities of investments 375 223 2,445 1,759
Net cash received from sales of subsidiaries 190 190
Purchases of property, equipment, and capitalized software (6 ) (1 ) (30 ) (86 )
Other, net 5   (5 ) (18 ) (38 )
Net cash provided by (used in) investing activities 322   (586 ) 1,143   (1,062 )
Financing activities:
Repayment of credit facility (300 )
Repayment of principal amount of 1.125% Convertible Notes (62 ) (298 )
Cash paid for partial settlement of 1.125% Conversion Option (146 ) (623 )
Cash received for partial termination of 1.125% Call Option 146 623
Cash paid for partial termination of 1.125% Warrants (130 ) (549 )
Repayment of principal amount of 1.625% Convertible Notes (64 )
Proceeds from senior notes offerings, net of issuance costs 325
Proceeds from borrowings under credit facility 300
Other, net 11   4   18   11  
Net cash (used in) provided by financing activities (181 ) 4   (1,193 ) 636  
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents 18 (735 ) (364 ) 378
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period 2,908   4,025   3,290   2,912  
Cash, cash equivalents, and restricted cash and cash equivalents at end of period $ 2,926   $ 3,290   $ 2,926   $ 3,290  
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP
 
As of December 31,
2018   2017   2016
Ending Membership by Government Program:
Temporary Assistance for Needy Families (TANF) and Childrens Health Insurance Program (CHIP) 2,295,000 2,457,000 2,536,000
Medicaid Expansion 660,000 668,000 673,000
Aged, Blind or Disabled (ABD) 406,000   412,000   396,000
Total Medicaid 3,361,000   3,537,000   3,605,000
Medicare-Medicaid Plan (MMP) – Integrated 54,000 57,000 51,000
Medicare Special Needs Plans 44,000   44,000   45,000
Total Medicare 98,000   101,000   96,000
Total Medicaid and Medicare 3,459,000   3,638,000   3,701,000
Marketplace 362,000   815,000   526,000
3,821,000   4,453,000   4,227,000
 
Ending Membership by Health Plan:
California 608,000 746,000 683,000
Florida 313,000 625,000 553,000
Illinois 224,000 165,000 195,000
Michigan 383,000 398,000 391,000
New Mexico 222,000 253,000 254,000
Ohio 302,000 327,000 332,000
Puerto Rico 252,000 314,000 330,000
South Carolina 120,000 116,000 109,000
Texas 423,000 430,000 337,000
Washington 781,000 777,000 736,000
Other (1) 193,000   302,000   307,000
3,821,000   4,453,000   4,227,000
 

__________________

(1)

Other includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

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

BY GOVERNMENT PROGRAM

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

 
Three Months Ended December 31, 2018
Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM
TANF and CHIP 7.1 $ 1,363 $ 189.86 $ 1,203 $ 167.61 88.3 % $ 160
Medicaid Expansion 2.0 700 349.05 630 314.34 90.1 70
ABD 1.3   1,367   1,094.14 1,213   970.49 88.7 154  
Total Medicaid 10.4   3,430   328.79 3,046   292.00 88.8 384  
MMP 0.2 366 2,263.41 300 1,855.34 82.0 66
Medicare 0.1   161   1,206.96 126   944.65 78.3 35  
Total Medicare 0.3   527   1,784.58 426   1,442.57 80.8 101  
Total Medicaid and Medicare 10.7   3,957   368.93 3,472   323.72 87.7 485  
Marketplace 1.1   481   437.79 303   275.56 62.9 178  
11.8   $ 4,438   $ 375.33 $ 3,775   $ 319.24 85.1 % $ 663  
 
Three Months Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
TANF and CHIP 7.4 $ 1,369 $ 183.95 $ 1,250 $ 168.00 91.3 % $ 119
Medicaid Expansion 2.0 774 386.22 629 313.89 81.3 145
ABD 1.3   1,366   1,100.22 1,229   989.56 89.9 137  
Total Medicaid 10.7   3,509   328.28 3,108   290.76 88.6 401  
MMP 0.2 363 2,142.07 341 2,006.07 93.7 22
Medicare 0.1   152   1,155.15 124   948.16 82.1 28  
Total Medicare 0.3   515   1,710.94 465   1,543.93 90.2 50  
Total Medicaid and Medicare 11.0   4,024   366.18 3,573   325.12 88.8 451  
Marketplace 2.4   665   268.39 678   273.92 102.1 (13 )
13.4   $ 4,689   $ 348.20 $ 4,251   $ 315.70 90.7 % $ 438  
 

__________________

(1)

A member month is defined as the aggregate of each months ending membership for the period presented.

(2)

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

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

BY GOVERNMENT PROGRAM

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

 
Year Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
TANF and CHIP 29.4 $ 5,508 $ 187.04 $ 4,908 $ 166.66 89.1 % $ 600
Medicaid Expansion 8.1 2,884 356.81 2,587 320.11 89.7 297
ABD 5.0   5,231   1,049.26 4,763   955.22 91.0 468
Total Medicaid 42.5   13,623   320.43 12,258   288.31 90.0 1,365
MMP 0.7 1,443 2,192.58 1,241 1,885.59 86.0 202
Medicare 0.5   631   1,180.46 511   955.81 81.0 120
Total Medicare 1.2   2,074   1,738.85 1,752   1,468.77 84.5 322
Total Medicaid and Medicare 43.7   15,697   359.14 14,010   320.53 89.2 1,687
Marketplace 4.9   1,915   392.97 1,127   231.33 58.9 788
48.6   $ 17,612   $ 362.54 $ 15,137   $ 311.59 85.9 % $ 2,475
 
Year Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
TANF and CHIP 30.2 $ 5,554 $ 183.75 $ 5,111 $ 169.09 92.0 % $ 443
Medicaid Expansion 8.1 3,150 388.42 2,674 329.73 84.9 476
ABD 4.9   5,135   1,050.41 4,863   994.80 94.7 272
Total Medicaid 43.2   13,839   320.16 12,648   292.61 91.4 1,191
MMP 0.7 1,446 2,177.72 1,317 1,982.36 91.0 129
Medicare 0.5   601   1,143.63 493   939.67 82.2 108
Total Medicare 1.2   2,047   1,722.47 1,810   1,523.15 88.4 237
Total Medicaid and Medicare 44.4   15,886   357.68 14,458   325.53 91.0 1,428
Marketplace 10.8   2,968   274.47 2,615   241.84 88.1 353
55.2   $ 18,854   $ 341.39 $ 17,073   $ 309.14 90.6 % $ 1,781
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
MEDICAID AND MEDICARE BY HEALTH PLAN

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

 
Three Months Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 1.8 $ 485 $ 282.83 $ 425 $ 247.56 87.5 % $ 60
Florida 1.0 370 376.80 345 351.20 93.2 25
Illinois 0.7 242 361.29 196 291.63 80.7 46
Michigan 1.1 389 348.47 320 287.33 82.5 69
New Mexico 0.6 305 489.86 265 425.85 86.9 40
Ohio 0.9 607 662.51 527 575.69 86.9 80
Puerto Rico 0.8 147 173.81 135 158.97 91.5 12
South Carolina 0.3 126 352.67 106 299.17 84.8 20
Texas 0.6 581 865.75 538 801.34 92.6 43
Washington 2.3 512 225.52 455 200.72 89.0 57
Other (1) 0.6   193   344.31 160   283.96 82.5 33
10.7   $ 3,957   $ 368.93 $ 3,472   $ 323.72 87.7 % $ 485
 
Three Months Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
California 1.8 $ 621 $ 335.46 $ 531 $ 286.70 85.5 % $ 90
Florida 1.1 390 358.34 349 320.47 89.4 41
Illinois 0.5 146 294.68 146 295.25 100.2
Michigan 1.1 383 339.23 325 287.60 84.8 58
New Mexico 0.7 325 465.52 279 400.84 86.1 46
Ohio 1.0 532 555.50 460 480.48 86.5 72
Puerto Rico 0.9 179 187.49 178 187.68 100.1 1
South Carolina 0.4 116 337.14 111 320.47 95.1 5
Texas 0.7 558 796.86 510 728.72 91.4 48
Washington 2.2 610 275.76 540 243.70 88.4 70
Other 0.6   164   292.88 144   256.26 87.5 20
11.0   $ 4,024   $ 366.18 $ 3,573   $ 325.12 88.8 % $ 451
 

__________________

(1)

Other includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
MEDICAID AND MEDICARE BY HEALTH PLAN

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

 
Year Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 7.1 $ 1,931 $ 273.59 $ 1,724 $ 244.21 89.3 % $ 207
Florida 4.2 1,517 360.98 1,414 336.43 93.2 103
Illinois 2.5 793 322.87 670 272.61 84.4 123
Michigan 4.5 1,550 344.42 1,303 289.53 84.1 247
New Mexico 2.6 1,241 474.10 1,140 435.65 91.9 101
Ohio 3.7 2,277 608.29 2,001 534.59 87.9 276
Puerto Rico 3.7 696 186.59 636 170.45 91.4 60
South Carolina 1.4 495 351.38 429 304.85 86.8 66
Texas 2.7 2,296 839.70 2,092 765.12 91.1 204
Washington 9.1 2,178 240.42 1,999 220.72 91.8 179
Other 2.2   723   329.06 602   273.55 83.1 121  
43.7   $ 15,697   $ 359.14 $ 14,010   $ 320.53 89.2 % $ 1,687  
 
Year Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
California 7.4 $ 2,392 $ 321.46 $ 2,117 $ 284.53 88.5 % $ 275
Florida 4.3 1,522 350.15 1,461 335.97 96.0 61
Illinois 2.1 593 286.69 638 308.41 107.6 (45 )
Michigan 4.6 1,545 334.22 1,360 294.15 88.0 185
New Mexico 2.9 1,258 439.95 1,166 407.94 92.7 92
Ohio 3.9 2,130 544.98 1,894 484.66 88.9 236
Puerto Rico 3.8 732 190.13 691 179.65 94.5 41
South Carolina 1.4 445 328.41 412 304.04 92.6 33
Texas 2.8 2,150 769.82 1,978 708.20 92.0 172
Washington 8.9 2,445 275.64 2,143 241.55 87.6 302
Other 2.3   674   292.92 598   259.85 88.7 76  
44.4   $ 15,886   $ 357.68 $ 14,458   $ 325.53 91.0 % $ 1,428  
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
MARKETPLACE BY HEALTH PLAN

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

 
Three Months Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR

 

 

Medical

Margin

Total   PMPM Total   PMPM  
California $ 48 $ 322.39 $ 36 $ 248.84 77.2 % $ 12
Florida 0.1 62 526.44 32 278.60 52.9 30
Michigan 0.1 11 259.20 8 166.54 64.3 3
New Mexico 0.1 22 328.32 19 302.79 92.2 3
Ohio 0.1 27 512.33 20 366.62 71.6 7
Texas 0.7 269 440.81 153 250.66 56.9 116
Washington 44 697.31 35 536.80 77.0 9
Other (1)   (2 ) NM   NM NM (2 )
1.1   $ 481   $ 437.79 $ 303   $ 275.56 62.9 % $ 178  
 
Three Months Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM  
California 0.5 $ 68 $ 163.41 $ 75 $ 181.70 111.2 % $ (7 )
Florida 0.8 225 283.63 251 316.67 111.6 (26 )
Michigan 0.1 10 153.52 11 166.49 108.5 (1 )
New Mexico 0.1 28 387.65 22 291.42 75.2 6
Ohio 18 355.81 17 317.65 89.3 1
Texas 0.5 146 242.38 166 276.16 113.9 (20 )
Washington 0.1 40 321.91 28 233.26 72.5 12
Other 0.3   130   364.63 108   305.05 83.7 22  
2.4   $ 665   $ 268.39 $ 678   $ 273.92 102.1 % $ (13 )
 

__________________

(1)

Other includes the Utah and Wisconsin health plans, where we did not participate in the Marketplace in 2018. Therefore, the ratios for 2018 periods are not meaningful (NM).

 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
MARKETPLACE BY HEALTH PLAN

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

 
Year Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM  
California 0.6 $ 219 $ 325.84 $ 125 $ 187.37 57.5 % $ 94
Florida 0.6 273 498.66 99 181.52 36.4 174
Michigan 0.2 51 250.69 31 150.11 59.9 20
New Mexico 0.3 115 403.55 74 260.29 64.5 41
Ohio 0.3 111 477.03 78 334.32 70.1 33
Texas 2.7 948 356.06 593 222.89 62.6 355
Washington 0.2 183 664.48 140 506.07 76.2 43
Other   15   NM (13 ) NM NM 28
4.9   $ 1,915   $ 392.97 $ 1,127   $ 231.33 58.9 % $ 788
 
Year Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM  
California 1.7 $ 309 $ 185.88 $ 231 $ 138.61 74.6 % $ 78
Florida 3.6 1,046 293.35 1,009 283.17 96.5 37
Michigan 0.3 51 180.26 38 135.64 75.2 13
New Mexico 0.3 110 349.50 84 264.14 75.6 26
Ohio 0.2 86 363.24 81 340.44 93.7 5
Texas 2.6 663 250.08 517 195.20 78.1 146
Washington 0.5 163 317.39 156 304.74 96.0 7
Other 1.6   540   340.13 499   314.21 92.4 41
10.8   $ 2,968   $ 274.47 $ 2,615   $ 241.84 88.1 % $ 353
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
TOTAL BY HEALTH PLAN

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

 
Three Months Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 1.8 $ 533 $ 285.98 $ 461 $ 247.66 86.6 % $ 72
Florida 1.1 432 392.68 377 343.49 87.5 55
Illinois 0.7 242 361.29 196 291.63 80.7 46
Michigan 1.2 400 344.96 328 282.58 81.9 72
New Mexico 0.7 327 474.44 284 414.10 87.3 43
Ohio 1.0 634 654.39 547 564.37 86.2 87
Puerto Rico 0.8 147 173.81 135 158.97 91.5 12
South Carolina 0.3 126 352.67 106 299.17 84.8 20
Texas 1.3 850 663.84 691 539.68 81.3 159
Washington 2.3 556 238.21 490 209.76 88.1 66
Other (1) 0.6   191   344.44 160   285.37 82.9 31
11.8   $ 4,438   $ 375.33 $ 3,775   $ 319.24 85.1 % $ 663
 
Three Months Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs

MCR

Medical

Margin

Total PMPM Total PMPM
California 2.3 $ 689 $ 303.98 $ 606 $ 267.49 88.0 % $ 83
Florida 1.9 615 326.80 600 318.86 97.6 15
Illinois 0.5 146 294.68 146 295.25 100.2
Michigan 1.2 393 329.50 336 281.26 85.4 57
New Mexico 0.8 353 458.22 301 390.58 85.2 52
Ohio 1.0 550 545.09 477 471.99 86.6 73
Puerto Rico 0.9 179 187.49 178 187.68 100.1 1
South Carolina 0.4 116 337.14 111 320.47 95.1 5
Texas 1.2 704 541.55 676 520.34 96.1 28
Washington 2.3 650 278.21 568 243.15 87.4 82
Other 0.9   294   320.77 252   275.23 85.8 42
13.4   $ 4,689   $ 348.20 $ 4,251   $ 315.70 90.7 % $ 438
 

__________________

(1)

Other includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

 
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MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
TOTAL BY HEALTH PLAN

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

 
Year Ended December 31, 2018
Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 7.7 $ 2,150 $ 278.13 $ 1,849 $ 239.28 86.0 % $ 301
Florida 4.8 1,790 376.84 1,513 318.58 84.5 277
Illinois 2.5 793 322.87 670 272.61 84.4 123
Michigan 4.7 1,601 340.35 1,334 283.47 83.3 267
New Mexico 2.9 1,356 467.17 1,214 418.44 89.6 142
Ohio 4.0 2,388 600.62 2,079 522.89 87.1 309
Puerto Rico 3.7 696 186.59 636 170.45 91.4 60
South Carolina 1.4 495 351.38 429 304.85 86.8 66
Texas 5.4 3,244 601.23 2,685 497.75 82.8 559
Washington 9.3 2,361 252.92 2,139 229.13 90.6 222
Other 2.2   738   336.86 589   268.17 79.6 149  
48.6   $ 17,612   $ 362.54 $ 15,137   $ 311.59 85.9 % $ 2,475  
 
Year Ended December 31, 2017
Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
California 9.1 $ 2,701 $ 296.68 $ 2,348 $ 257.86 86.9 % $ 353
Florida 7.9 2,568 324.56 2,470 312.18 96.2 98
Illinois 2.1 593 286.69 638 308.41 107.6 (45 )
Michigan 4.9 1,596 325.43 1,398 285.11 87.6 198
New Mexico 3.2 1,368 430.97 1,250 393.67 91.3 118
Ohio 4.1 2,216 534.56 1,975 476.39 89.1 241
Puerto Rico 3.8 732 190.13 691 179.65 94.5 41
South Carolina 1.4 445 328.41 412 304.04 92.6 33
Texas 5.4 2,813 516.84 2,495 458.50 88.7 318
Washington 9.4 2,608 277.93 2,299 245.01 88.2 309
Other 3.9   1,214   312.20 1,097   282.06 90.3 117  
55.2   $ 18,854   $ 341.39 $ 17,073   $ 309.14 90.6 % $ 1,781  
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED 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 December 31,
2018   2017
Amount   PMPM   % of

Total

Amount   PMPM   % of

Total

Fee for service $ 2,807 $ 237.39 74.4 % $ 3,052 $ 226.66 71.8 %
Pharmacy 493 41.68 13.1 659 48.88 15.4
Capitation 293 24.83 7.7 338 25.13 8.0
Other   182   15.34 4.8     202   15.03 4.8  
$ 3,775 $ 319.24 100.0 % $ 4,251 $ 315.70 100.0 %
 
Year Ended December 31,
2018 2017
Amount PMPM % of

Total

Amount PMPM % of

Total

Fee for service $ 11,278 $ 232.15 74.5 % $ 12,682 $ 229.63 74.3 %
Pharmacy 2,138 44.01 14.1 2,563 46.40 15.0
Capitation 1,184 24.38 7.8 1,360 24.63 8.0
Other   537   11.05 3.6     468   8.48 2.7  
$ 15,137 $ 311.59 100.0 % $ 17,073 $ 309.14 100.0 %
 
 

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

 
December 31,
2018   2017
Fee-for-service claims incurred but not paid (IBNP) $ 1,562 $ 1,717
Pharmacy payable 115 112
Capitation payable 52 67
Other (1) 232   296
$ 1,961   $ 2,192

______________________

(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 December 31, 2018 and 2017, we had recorded non-risk provider payables of approximately $107 million and $122 million, respectively.

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

(Dollars in millions)

 

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 was (more) less than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

 
Year Ended December 31,
2018   2017
Medical claims and benefits payable, beginning balance $ 2,192 $ 1,929
Components of medical care costs related to:
Current period 15,478 17,037
Prior period (1) (341 ) 36  
Total medical care costs 15,137   17,073  
 
Change in non-risk provider payables 13   (106 )
Payments for medical care costs related to:
Current period 13,671 15,130
Prior period 1,710   1,574  
Total paid 15,381   16,704  
Medical claims and benefits payable, ending balance $ 1,961   $ 2,192  
 
Days in claims payable, fee for service (2) 53 54
 

______________________

(1)

Includes the 2018 benefit of the 2017 Marketplace CSR reimbursement of $81 million.

(2)

Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in Other medical claims and benefits payable amounting to $43 million and $99 million, as of December 31, 2018 and 2017, respectively.

 
   
MOLINA HEALTHCARE, INC.
UNAUDITED SUMMARY OF SIGNIFICANT ITEMS AFFECTING CURRENT QUARTER AND
YEAR-TO-DATE FINANCIAL RESULTS

(In millions, except per diluted share amounts)

 

The table below summarizes the impact of certain items significant to our financial performance in the periods presented. The individual items presented below increase (decrease) income before income tax expense.

 

Three Months Ended December 31, 2018

Year Ended December 31, 2018

Amount  

Per Diluted Share (1)

Amount  

Per Diluted Share (1)

 
Retroactive California Medicaid Expansion risk corridor $ (24 ) $ (0.28 ) $ (81 ) $ (0.95 )
Marketplace risk adjustment, for 2017 dates of service 56 0.66
Marketplace CSR subsidies, for 2017 dates of service 81 0.95
Loss on sales of subsidiaries, net of gain (52 ) (0.48 ) (15 ) (0.05 )
Restructuring costs (8 ) (0.09 ) (46 ) (0.54 )
Gain (loss) on debt extinguishment 3   0.04   (22 ) (0.29 )
$ (81 ) $ (0.81 ) $ (27 ) $ (0.22 )
 

(1)

Except for permanent differences between GAAP and tax (such as certain expenses that are not deductible for tax purposes), per diluted share amounts are generally calculated at the statutory income tax rate of 22%.

 
   
MOLINA HEALTHCARE, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES

(In millions, except per diluted share amounts)

 

We use non-generally accepted accounting principles, or 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.

 

Three Months Ended December 31,

Year Ended December 31,
2018   2017 2018   2017
 
Net income (loss) $ 201 $ (262 ) $ 707 $ (512 )
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software 23 36 118 165
Interest expense 24 33 115 118
Income tax expense (benefit) 55   (54 ) 292   (100 )
EBITDA $ 303   $ (247 ) $ 1,232   $ (329 )
 
   
Three Months Ended December 31, Year Ended December 31,
2018   2017 2018   2017
 
Amount  

Per

Diluted

Share

Amount  

Per

Diluted

Share

Amount  

Per

Diluted

Share

Amount  

Per

Diluted

Share

Net income (loss) $ 201 $ 3.01 $ (262 ) $ (4.59 ) $ 707 $ 10.61 $ (512 ) $ (9.07 )
Adjustment:
Amortization of intangible assets 6 0.08 6 0.11 22 0.32 30 0.55
Income tax effect (1) (1 ) (0.02 ) (2 ) (0.04 ) (5 ) (0.07 ) (11 ) (0.20 )
Amortization of intangible assets, net of tax effect 5   0.06   4   0.07   17   0.25   19   0.35  
Adjusted net income (loss) $ 206   $ 3.07   $ (258 ) $ (4.52 ) $ 724   $ 10.86   $ (493 ) $ (8.72 )
 

________________________

(1)

Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22% and 37% for 2018 and 2017, respectively.

 

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 income (loss) on a GAAP basis less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.

Adjusted net income: Net income (loss) on a GAAP basis less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. We believe that adjusted net income (loss) is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

Adjusted net income per diluted share: Adjusted net income (loss) divided by weighted average common shares outstanding on a fully diluted basis.

   
MOLINA HEALTHCARE, INC.
2019 GUIDANCE
 

Reconciliation of Non-GAAP Financial Measures

 
Low End High End
(In millions)
Net income $ 600 $ 630
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software 85 85
Interest expense 100 100
Income tax expense 190   210
EBITDA $ 975   $ 1,025

Ryan Kubota
Investor Relations
562-435-3666, ext. 119057