FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q comprises forward-looking statements relating to our enterprise, monetary situation, and outcomes of operations throughout the which means of Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Securities Exchange Act. Many of the forward-looking statements are positioned below the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements present present expectations of future occasions based mostly on sure assumptions and embrace any assertion that doesn't instantly relate to any historic or present reality. Forward-looking statements may also be recognized by phrases equivalent to "guidance," "future," "anticipates," "believes," "estimates," "expects," "growth," "intends," "plans," "predicts," "projects," "will," "would," "could," "can," "may," and comparable phrases. Readers are cautioned to not place undue reliance on any forward-looking statements, as forward-looking statements are usually not ensures of future efficiency and the Company's precise outcomes could differ considerably because of quite a few identified and unknown dangers and uncertainties. Those identified dangers and uncertainties embrace, however are usually not restricted to, the danger components recognized within the part titled "Risk Factors" in our 2021 Annual Report on Form 10-Ok, together with with out limitation the next: •the influence of the COVID-19 pandemic and its related or oblique results on our enterprise, operations, and monetary outcomes, together with with out limitation the length of the Public Health Emergency Declaration ("PHE") and related suspension in redeterminations, and the potential influence on our workforce or contractors of federal or state vaccine mandates; •important funds pressures on state governments from diminished tax revenues incidental to the COVID-19 pandemic and their efforts to scale back charges or restrict price will increase, to impose revenue caps or threat corridors, or to recoup beforehand paid premium quantities on a retroactive foundation; •the quite a few political, judicial, and market-based uncertainties related with the Affordable Care Act (the "ACA"); •the market dynamics surrounding the ACA Marketplaces, together with points impacting enrollment, threat adjustment estimates and outcomes, the potential for disproportionate enrollment of upper acuity members, and the discontinuation of premium tax credit; •the end result of the authorized proceedings inKentucky with regard to the Medicaid contract award to ourKentucky well being plan and our acquisition of sure property of Passport; •the success of our efforts to retain present or awarded authorities contracts, and the success of any bid submissions in response to requests for proposal, together with our contracts inCalifornia andTexas ; •subsequent changes to reported premium income based mostly upon subsequent developments or new data, together with adjustments to estimated quantities payable or receivable associated to Marketplace threat adjustment; •our capability to consummate, combine, and understand advantages from acquisitions, together with the finished acquisitions of Magellan Complete Care, Passport, Affinity, and the Medicaid property of Cigna inTexas , and the introduced acquisitions of AgeWell New York and My Choice Wisconsin; •efficient administration of our medical prices; •our capability to foretell with an inexpensive diploma of accuracy utilization charges, together with utilization charges related to COVID-19; •cyber-attacks, ransomware assaults, or different privateness or knowledge safety incidents leading to an inadvertent unauthorized disclosure of protected data; •the power to handle our operations, together with sustaining and creating sufficient inner methods and controls referring to authorizations, approvals, supplier funds, and the general success of our care administration initiatives; •our receipt of sufficient premium charges to help rising pharmacy prices, together with prices related to specialty medicine and prices ensuing from formulary adjustments that enable the choice of higher-priced non-generic medicine; •our capability to function profitably in an surroundings the place the pattern in premium price will increase lags behind the pattern in rising medical prices; •the interpretation and implementation of federal or state medical price expenditure flooring, administrative price and revenue ceilings, premium stabilization packages, profit-sharing preparations, and threat adjustment provisions and necessities; •our estimates of quantities owed for such price expenditure flooring, administrative price and revenue ceilings, premium stabilization packages, profit-sharing preparations, and threat adjustment provisions and necessities;Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 20 -------------------------------------------------------------------------------- Table of Contents •the Medicaid growth medical price hall, and another retroactive adjustment to income the place methodologies and procedures are topic to interpretation or dependent upon details about the well being standing of members aside from Molina members; •the interpretation and implementation of at-risk premium guidelines and state contract efficiency necessities relating to the achievement of sure high quality measures, and our capability to acknowledge income quantities related therewith; •the success and renewal of our duals demonstration packages inCalifornia ,Illinois ,Michigan ,Ohio ,South Carolina , andTexas ; •the correct estimation of incurred however not reported or paid medical prices throughout our well being plans; •efforts by states to recoup beforehand paid and acknowledged premium quantities; •adjustments in our annual efficient tax price, because of federal and/or state laws, or adjustments in our mixture of earnings and different components; •problems, member confusion, eligibility redeterminations, or enrollment backlogs associated to the renewal of Medicaid protection; •fraud, waste and abuse issues, authorities audits or opinions, remark letters, or potential investigations, and any positive, sanction, enrollment freeze, corrective motion plan, monitoring program, or premium restoration which will outcome therefrom; •our exit fromPuerto Rico , together with the cost in filled with our excellent accounts receivable, the efficient run-out of claims, the return of our capital, and the end result of the claims filed in opposition to ourPuerto Rico well being plan and us by thePuerto Rico Health Insurance Administration , or ASES; •adjustments with respect to our supplier contracts and the lack of suppliers; •approval by state regulators of dividends and distributions by our well being plan subsidiaries; •adjustments in funding below our contracts on account of regulatory adjustments, programmatic changes, or different reforms; •excessive greenback claims associated to catastrophic sickness; •the decision, favorable or unfavorable, of litigation, arbitration, or administrative proceedings; •the comparatively small variety of states by which we function well being plans, together with the larger scale and revenues of ourCalifornia ,Ohio ,Texas , andWashington well being plans; •the failure to adjust to the monetary or different covenants in our credit score settlement or the indentures governing our excellent notes; •the provision of sufficient financing on acceptable phrases to fund and capitalize our growth and development, repay our excellent indebtedness at maturity, and meet our common liquidity wants; •the sufficiency of funds readily available to pay the quantities due upon maturity of our excellent notes; •the failure of a state by which we function to resume its federal Medicaid waiver; •adjustments usually affecting the managed care business; •will increase in authorities surcharges, taxes, and assessments; •the sudden lack of the management of a number of of our senior executives; and •rising competitors and consolidation within the Medicaid business. Each of the phrases "Molina Healthcare, Inc. " "Molina Healthcare ," "Company," "we," "our," and "us," as used herein, refers collectively toMolina Healthcare, Inc. and its wholly owned subsidiaries, except in any other case acknowledged. The Company assumes no obligation to revise or replace any forward-looking statements for any cause, besides as required by legislation. Readers ought to check with the part entitled "Risk Factors" in our 2021 Annual Report on Form 10-Ok, for a dialogue of sure threat components that would materially have an effect on our enterprise, monetary situation, money flows, or outcomes of operations. Given these dangers and uncertainties, we can provide no assurance that any outcomes or occasions projected or contemplated by our forward-looking statements will in truth happen. This Quarterly Report on Form 10-Q and the next dialogue of our monetary situation and outcomes of operations must be learn along side the accompanying consolidated monetary statements and the notes to these statements showing elsewhere on this report, and the audited monetary statements and Management's Discussion and Analysis showing in our 2021 Annual Report on Form 10-Ok.Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 21
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OVERVIEW
managed healthcare companies below the Medicaid and Medicare packages, and
by the state insurance coverage marketplaces (the “Marketplace”). We served
roughly 5.1 million members as of
SECOND QUARTER 2022 HIGHLIGHTS
We reported internet earnings of
second quarter of 2022, which mirrored the next:
•Membership enhance of 422,000, or 9%, in contrast withJune 30, 2021 , and a 33,000 sequential enhance in comparison withMarch 31, 2022 ; •Premium income of$7.8 billion elevated 18% in contrast with the second quarter of 2021, reflecting the influence of acquisitions, elevated natural membership in Medicaid and Medicare, and state directed funds in our Texas Medicaid plan, partially offset by the anticipated attrition in Marketplace membership; •Consolidated medical care ratio ("MCR") was 88.1%, in contrast with 88.4% for the second quarter of 2021; •General and administrative expense ("G&A") ratio of 6.8%, which in contrast with 7.1% within the second quarter of 2021, reflecting the advantages of scale produced by our enhance in income and disciplined price administration; and •After-tax margin of three.1%, which was consistent with our expectations.
We observe the next components impacting the 2022 second quarter monetary
outcomes:
•The internet impact of COVID decreased internet earnings by roughly$0.68 per diluted share and elevated the MCR by 60 foundation factors within the second quarter of 2022. The internet impact of COVID decreased internet earnings by roughly$1.00 per diluted share and elevated the MCR by 110 foundation factors within the second quarter of 2021; •An enhance within the 2021 Marketplace threat adjustment payable decreased internet earnings by roughly$0.44 per diluted share; and •Higher internet funding earnings that was primarily pushed by latestFederal Reserve rate of interest will increase.Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 22
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CONSOLIDATED FINANCIAL SUMMARY
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands and thousands, besides per-share quantities) Premium income$ 7,799 $ 6,583 $ 15,330 $ 12,889 Less: medical care prices 6,872 5,819 13,435 11,293 Medical margin 927 764 1,895 1,596 MCR (1) 88.1 % 88.4 % 87.6 % 87.6 % Other revenues: Premium tax income 215 185 423 372 Investment earnings 22 10 33 19 Other income 18 22 38 42 General and administrative bills 551 484 1,122 957 G&A ratio (2) 6.8 % 7.1 % 7.1 % 7.2 % Premium tax bills 215 185 423 372 Depreciation and amortization 44 31 84 64 Other 11 8 27 28 Operating earnings 361 273 733 608 Interest expense 27 30 55 60 Income earlier than earnings tax expense 334 243 678 548 Income tax expense 86 58 172 135 Net earnings $ 248$ 185 $ 506 $ 413 Net earnings per share - Diluted$ 4.25 $ 3.16 $ 8.63 $ 7.05 Diluted weighted common shares excellent 58.4 58.4 58.6 58.5 Other Key Statistics Ending membership 5.1 4.7 5.1 4.7 Effective earnings tax price 25.8 % 24.2 % 25.4 % 24.7 % After-tax margin (3) 3.1 % 2.7 % 3.2 % 3.1 %
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(1) MCR represents medical care prices as a share of premium income. (2) G&A ratio represents common and administrative bills as a share of complete income. (3) After-tax margin represents internet earnings as a share of complete income. CONSOLIDATED RESULTS
NET INCOME AND OPERATING INCOME
Net earnings within the second quarter of 2022 amounted to$248 million , or$4.25 per diluted share, in contrast with$185 million , or$3.16 per diluted share, within the second quarter of 2021. The 34% enhance in internet earnings is per the enchancment in working earnings, which elevated to$361 million within the second quarter of 2022, in contrast with$273 million within the second quarter of 2021. Net earnings within the six months endedJune 30, 2022 amounted to$506 million , or$8.63 per diluted share, in contrast with$413 million , or$7.05 per diluted share, within the six months endedJune 30, 2021 . The 23% enhance in internet earnings is per the advance in working earnings of$733 million within the six months endedJune 30, 2022 , in contrast with$608 million within the six months endedJune 30, 2021 .
The enchancment in working earnings for each durations was primarily because of
membership development and better premium revenues, and a lower in MCR for the
second quarter of 2022 in comparison with the prior 12 months interval.
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Net earnings per share within the second quarter and 6 months endedJune 30, 2022 was favorably impacted by the discount in frequent shares excellent consequently of our share repurchases in the course of the second quarter of 2022. See additional dialogue in "Liquidity and Financial Condition," under.
PREMIUM REVENUE
Premium income elevated$1.2 billion , or 18%, within the second quarter of 2022, when put next with the second quarter of 2021, and elevated$2.4 billion , or 19%, within the six months endedJune 30, 2022 , when put next with the six months endedJune 30, 2021 . The increased premium income displays the influence of acquisitions, elevated natural membership within the Medicaid and Medicare segments, and state directed funds in our Texas Medicaid well being plan, partially offset by a decline within the Marketplace phase.
MEDICAL CARE RATIO
The consolidated MCR within the second quarter of 2022 was 88.1%, in contrast with 88.4% within the second quarter of 2021. The internet impact of COVID impacted all of our segments and elevated the consolidated MCR by roughly 60 foundation factors in the second quarter of 2022, and roughly 110 foundation factors within the second quarter of 2021. The year-over-year comparative influence primarily displays increased COVID-related utilization curtailment, partially offset by increased COVID inpatient prices. The mixed influence of state directed funds in ourTexas Medicaid well being plan and a rise within the 2021 Marketplace threat adjustment payable elevated the consolidated MCR by 90 foundation factors. The consolidated MCR within the six months endedJune 30, 2022 was 87.6%, and is per the 87.6% MCR for the six months endedJune 30, 2021 . Similar to the quarter-to-date consolidated MCR, internet impact of COVID impacted every interval; nonetheless, the outcomes had been different by phase. See additional rationalization in "Segment Financial Performance," under. The prior 12 months reserve growth within the second quarter and 6 months endedJune 30, 2022 was favorable, and its influence on earnings was partially absorbed by the COVID-related threat corridors.
PREMIUM TAX REVENUE AND EXPENSES
The premium tax ratio (premium tax expense as a share of premium income plus premium tax income) was 2.7% for each the second quarter of 2022 and 2021, and a couple of.7% and a couple of.8% for the six months endedJune 30, 2022 and 2021, respectively. The present 12 months ratio lower was primarily because of adjustments in enterprise combine.
INVESTMENT INCOME
Investment earnings elevated to$22 million within the second quarter of 2022, in contrast with$10 million within the second quarter of 2021, and elevated to$33 million within the six months endedJune 30, 2022 , in contrast with$19 million within the six months endedJune 30 , 2021.The enchancment in each durations was pushed by latestFederal Reserve rate of interest will increase and better invested property. Additionally, funding yields had been decrease within the first half of 2021 because of a non permanent allocation in shorter-term invested property as a result of COVID-19 pandemic, which was rescinded within the second quarter of 2021.
OTHER REVENUE
Other income decreased to$18 million within the second quarter of 2022, in contrast with$22 million within the second quarter of 2021, and decreased to$38 million in the six months endedJune 30, 2022 , in contrast with$42 million within the six months endedJune 30, 2021 . Other income primarily contains service income related with long-term companies and helps consultative companies we offer inWisconsin .
G&A EXPENSES
The G&A expense ratio decreased to six.8% within the second quarter of 2022, in contrast with 7.1% within the second quarter of 2021. The G&A expense ratio was 7.1% within the six months endedJune 30, 2022 , in contrast with 7.2% with the six months endedJune 30, 2021 , primarily reflecting the advantages of scale produced by our enhance in income and disciplined price administration. We count on our full 12 months 2022 G&A ratio to be per our long run targets.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization elevated to$44 million within the second quarter of 2022, in contrast with$31 million within the second quarter of 2021, and elevated to$84 million within the six months endedJune 30, 2022 , in contrast with$64 million in the six months endedJune 30, 2021 . The will increase in each durations had been due primarily to amortization related to acquisitions accomplished within the fourth quarter of 2021 and the primary quarter of 2022.Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 24 --------------------------------------------------------------------------------
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OTHER OPERATING EXPENSES
Other working bills elevated to$11 million within the second quarter of 2022, in contrast with$8 million within the second quarter of 2021, and decreased to$27 million within the six months endedJune 30, 2022 , in contrast with$28 million within the six months endedJune 30, 2021 . Other working bills primarily contains service prices related to long-term companies and helps consultative companies we present inWisconsin , as famous above.
INTEREST EXPENSE
Interest expense decreased to$27 million within the second quarter of 2022, in contrast with$30 million within the second quarter of 2021, and to$55 million in the six months endedJune 30, 2022 , in contrast with$60 million within the six months endedJune 30, 2021 . The lower resulted from our early redemption of$700 million mixture principal quantity of our 5.375% senior notes due 2022 within the fourth quarter of 2021, partially offset by curiosity associated to the non-public providing of the three.875% Notes due 2032 in the identical interval.
INCOME TAXES
Income tax expense amounted to$86 million within the second quarter of 2022, or 25.8% of pretax earnings, in contrast with earnings tax expense of$58 million , or 24.2% of pretax earnings within the second quarter of 2021. Income tax expense amounted to$172 million within the six months endedJune 30, 2022 , or 25.4% of pretax earnings, in contrast with earnings tax expense of$135 million , or 24.7% of pretax earnings within the six months endedJune 30, 2021 . The distinction within the efficient tax price is primarily as a result of influence of sure discrete tax advantages acknowledged within the second quarter and the six months endedJune 30, 2021 . TRENDS AND UNCERTAINTIES COVID-19 PANDEMIC
As the COVID-19 pandemic continues to evolve, its ongoing influence to our
enterprise, outcomes of operations, monetary situation, and money flows is
unsure and tough to foretell. Specific tendencies and uncertainties associated to
our Medicaid, Medicare, and Marketplace segments comply with.
Federal Economic Stabilization and Other Programs
EffectiveApril 17, 2022 , theBiden Administration prolonged the COVID-19 associated PHE, which, amongst different issues, continued the suspension in state Medicaid eligibility redeterminations for 90 days tillJuly 15, 2022 . EffectiveJuly 15, 2022 , theBiden Administration prolonged the PHE for an additional 90 days and it'll stay in impact tillOctober 13, 2022 , except prolonged. Due to the uncertainty as to the length and breadth of the pandemic, we're unable to fairly estimate the final word influence of the financial stabilization and different packages to our enterprise, monetary situation, and working outcomes.
Operations
Enrollment and Premium Revenue
Excluding acquisitions and our exit fromPuerto Rico , we added over 750,000 new Medicaid members sinceMarch 31, 2020 , after we first started to report on the impacts of the pandemic. We imagine this membership enhance was primarily because of the suspension of redeterminations for Medicaid eligibility. We count on Medicaid enrollment to proceed to profit from the extension of the PHE interval, and the related pause on membership redeterminations, a minimum of bymid-October 2022 . Beginning in 2020, varied states enacted non permanent threat corridors in response to the lowered demand for medical companies stemming from COVID-19, which have resulted in a discount of our medical margin. The present price surroundings is steady and rational. We proceed to imagine that the risk-sharing corridors beforehand launched are associated to the declared PHE and can possible be eradicated because the COVID pandemic subsides. However, the danger corridors proceed to contribute an added stage of variability to our outcomes of operations. In the three and 6 months endedJune 30, 2022 , we acknowledged roughly$94 million and$122 million , respectively, for the influence of those threat corridors, in comparison with$56 million and$166 million , respectively, acknowledged in the three and 6 months endedJune 30, 2021 . The lower in 2022 is as a result of elimination of a number of of the COVID-19 threat corridors. It is feasible that sure states may change the construction of present threat corridors, implement new threat corridors sooner or later or discontinue present threat corridors. Due to those uncertainties, the final word outcomes may differMolina Healthcare, Inc. June 30, 2022 Form 10-Q | 25 --------------------------------------------------------------------------------
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materially from our estimates on account of adjustments in information or additional
developments, which may have an opposed impact on our consolidated monetary
place, outcomes of operations, or money flows.
Medical Care Costs
We count on continued uncertainty relating to utilization tendencies because the pandemic continues. The pace and extent to which utilization rebounds will likely be tremendously impacted by the financial system and shopper habits, supplier capability, and the potential resurgence of COVID-19 an infection charges. We imagine that some portion of the utilization curtailment skilled within the six months endedJune 30, 2022 is probably going the results of service deferrals, and so these companies will possible be offered to members over the rest of the 12 months.
Capital and Financial Resources
We proceed to observe and assess the estimated working and monetary influence of the COVID-19 pandemic on our enterprise and, because it evolves, we proceed to course of, assemble, and assess member utilization data. We imagine that our money sources, borrowing capability out there below the Credit Agreement, and money circulate generated from operations will likely be ample to face up to the monetary influence of the pandemic, and can allow us to proceed to help our operations, regulatory necessities, debt compensation obligations, and capital expenditures for the foreseeable future. Refer to "Liquidity and Financial Condition" under for additional dialogue of our capital and monetary sources.
OTHER RECENT DEVELOPMENTS
Wisconsin Acquisition - Medicaid and Medicare. OnJuly 13, 2022 , we introduced a definitive settlement to amass considerably all of the property of My ChoiceWisconsin ("MCW"). As ofMay 2022 , MCW served over 44,000 managed long-term companies and helps and core Medicaid members all throughWisconsin , delivering roughly$1 billion in premium income for the 12 months endedMarch 31, 2022 . The buy worth for the transaction is roughly$150 million , internet of anticipated tax advantages and required regulatory capital, which we intend to fund with money readily available. The transaction is topic to receipt of relevant federal and state regulatory approvals, and the satisfaction of different customary closing situations. We at the moment count on the transaction to shut in 2022. Texas Acquisition-Medicaid and Medicare. OnJanuary 1, 2022 , we closed on our acquisition of Cigna Corporation's Texas Medicaid and Medicare-Medicaid Plan ("MMP") contracts, together with sure working property. New York Acquisition-Medicaid. OnOctober 7, 2021 , we introduced a definitive settlement to amass the Medicaid Managed Long Term Care enterprise of AgeWell New York. The buy worth for the transaction is roughly$106 million , internet of sure tax advantages and goal allocation of required regulatory capital, which we intend to fund with money readily available. The transaction is topic to relevant federal and state regulatory approvals and the satisfaction of different customary closing situations. We at the moment count on the transaction to shut in the fourth quarter of 2022. California Procurement-Medicaid. InApril 2022 , we submitted our RFP response. We count on the award to be introduced in earlyAugust 2022 , with an efficient date ofJanuary 2024 . Texas Procurement-Medicaid. InMarch 2022 , theTexas Health and Human Services Commission posted the ABD program (identified inTexas as STAR+PLUS) RFP, with awards estimated to be introduced within the first quarter of 2023, and begin of operations inFebruary 2024 .
Nevada Procurement-Medicaid. Our new contract in
commenced on
Medicaid Expansion beneficiaries. The 4 12 months contract with a potential
two-year extension was ratified in
Marketplace Enrollment. We now count on to finish 2022 with roughly 315,000 members, reflecting regular attrition over the rest of the 12 months and restricted particular enrollment interval development based mostly on revised eligibility guidelines and our product design and distribution technique. This represents a rise in contrast to our earlier estimate of 270,000 members by the tip of 2022, ensuing from stronger last enrollment and beauty interval membership. Pharmacy. We have entered into an early renewal of our long-standing pharmacy profit administration ("PBM") settlement with CVS Caremark ("Caremark"). Under the renewal, Caremark will proceed to be the unique PBM supplier to us and our well being plan subsidiaries byDecember 31, 2026 . The renewal contains enhancements to community charges and administrative prices in addition to improved phrases round efficiency requirements. Caremark's companies to Molina embrace, amongst different issues, pharmacy community administration, mail order, specialty pharmacy, pharmacy claims processing, and pharmaceutical rebate administration.Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 26 --------------------------------------------------------------------------------
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Real Estate. We intend to maneuver completely to a distant work surroundings, a mannequin now we have been working below efficiently for practically two years. As a outcome, we count on to formalize a discount of our actual property footprint by the tip of the 12 months, which can yield substantial and sustainable G&A expense financial savings.
For a dialogue of further phase tendencies, uncertainties and different
developments, check with our 2021 Annual Report on Form 10-Ok, “Item 1.
Business-Our Business,” and “-Legislative and Political Environment.”
REPORTABLE SEGMENTS
As ofJune 30, 2022 , we served roughly 5.1 million members eligible for Medicaid, Medicare, and different government-sponsored healthcare packages for low-income households and people, together with Marketplace members, most of whom obtain authorities premium subsidies.
We at the moment have 4 reportable segments consisting of: 1) Medicaid;
2) Medicare; 3) Marketplace; and 4) Other.
The Medicaid, Medicare, and Marketplace segments characterize the government-funded or sponsored packages below which we provide managed healthcare companies. The Other phase, which is insignificant to our consolidated outcomes of operations, contains sure company quantities not related to or allotted to the Medicaid, Medicare, or Marketplace segments. Additionally, the Other phase contains service revenues and repair prices related to the long-term companies and helps consultative companies we offer inWisconsin .
HOW WE ASSESS PERFORMANCE
We derive our revenues primarily from medical insurance premiums. Our main
prospects are state Medicaid businesses and the federal authorities.
The key metrics used to evaluate the efficiency of our Medicaid, Medicare, and Marketplace segments are premium income, medical margin and medical care ratio ("MCR"). MCR represents the quantity of medical care prices as a share of premium income. Therefore, the underlying medical margin, or the quantity earned by the Medicaid, Medicare, and Marketplace segments after medical prices are deducted from premium income, represents a very powerful measure of earnings reviewed by administration, and is utilized by our chief government officer to assessment outcomes, assess efficiency, and allocate sources. The key metric used to assess the efficiency of our Other phase is service margin. The service margin is the same as service income minus price of service income.
Management’s dialogue and evaluation of the change in medical margin is
mentioned under below “Segment Financial Performance.” For extra data, see
Notes to Consolidated Financial Statements, Note 10, “Segments.”
SEGMENT MEMBERSHIP
The following desk units forth our membership by phase as of the dates indicated: June 30, December 31, June 30, 2022 2021 2021 Medicaid 4,610,000 4,329,000 3,928,000 Medicare 151,000 142,000 130,000 Marketplace 357,000 728,000 638,000 Total 5,118,000 5,199,000 4,696,000 Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 27
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SEGMENT FINANCIAL PERFORMANCE
The following tables summarize premium income, medical margin, and MCR by
phase for the durations indicated ({dollars} in thousands and thousands):
Three Months Ended June 30, 2022 2021 Premium Medical Premium Medical Revenue Margin MCR Revenue Margin MCR Medicaid$ 6,301 $ 755 88.0 %$ 5,034 $ 551 89.0 % Medicare 957 124 86.9 814 101 87.6 Marketplace 541 48 91.2 735 112 84.8 Total$ 7,799 $ 927 88.1 %$ 6,583 $ 764 88.4 % Six Months Ended June 30, 2022 2021 Premium Medical Premium Medical Revenue Margin MCR Revenue Margin MCR Medicaid$ 12,281 $ 1,465 88.1 %$ 9,874 $ 1,155 88.3 % Medicare 1,900 252 86.7 1,613 178 89.0 Marketplace 1,149 178 84.5 1,402 263 81.2 Total$ 15,330 $ 1,895 87.6 %$ 12,889 $ 1,596 87.6 % Medicaid Medicaid premium income elevated$1.3 billion , or 25% within the second quarter of 2022, when put next with the second quarter of 2021. Medicaid premium income elevated$2.4 billion , or 24% within the six months endedJune 30, 2022 , when in contrast with the six months endedJune 30, 2021 . The will increase in each durations had been primarily because of natural membership development, together withNevada , the influence from the Affinity and Cigna acquisitions that closed within the fourth quarter of 2021 and inJanuary 2022 , respectively, and state directed funds in ourTexas well being plan. Excluding the acquisitions, the membership development was throughout a number of states and was primarily pushed by the extension of the PHE interval and the related suspension of membership redeterminations because of COVID-19. As described above in "Trends and Uncertainties," we acknowledged roughly$94 million and$122 million within the second quarter and 6 months endedJune 30, 2022 , respectively, for the influence of threat corridors enacted in a number of states because the second quarter of 2020, in response to the decrease utilization of medical companies ensuing from COVID-19. We acknowledged roughly$56 million and$166 million , respectively, for the influence of such threat corridors in the second quarter and 6 months endedJune 30, 2021 . The lower was because of the elimination of many of the COVID-19 threat corridors. The medical margin in our Medicaid program elevated$204 million , or 37%, in the second quarter of 2022 when put next with the second quarter of 2021, and elevated$310 million , or 27%, within the six months endedJune 30, 2022 when in contrast with the six months endedJune 30, 2021 . The enhance in margin in each durations was pushed by the elevated membership development and premium revenues mentioned above and the MCR lower mentioned under. The Medicaid MCR decreased to 88.0% within the second quarter of 2022, from 89.0% in the second quarter of 2021, and decreased to 88.1% within the six months endedJune 30, 2022 , from 88.3% within the six months endedJune 30, 2021 . The lower for each durations is principally attributable to improved operations, together with medical price administration, decrease utilization and the year-over-year change within the internet impact of COVID, partially offset by the influence of state directed funds in ourTexas well being plan. The year-over-year change within the internet impact of COVID for the second quarter of 2022 displays a rise in COVID-related utilization curtailment, partially offset by a rise in COVID-related inpatient prices. The 2022 Medicaid MCR is per our long-term goal regardless of the web impact of COVID and different impacts.
Medicare
Medicare premium income elevated$143 million , or 18%, within the second quarter of 2022 in comparison with the second quarter of 2021, and elevated$287 million , or 18%, within the six months endedJune 30, 2022 in comparison with the six months endedJune 30, 2021 . The enhance was primarily as a result of influence of product growth and naturalMolina Healthcare, Inc. June 30, 2022 Form 10-Q | 28
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membership development in present states, partially offset by decrease premium income
PMPM from the change in enterprise combine.
The medical margin for Medicare elevated$23 million within the second quarter of 2022, and elevated$74 million within the six months endedJune 30, 2022 , when in comparison with the identical durations in 2021. The year-over-year adjustments in margin are primarily as a result of enhance in premium revenues and the advance within the MCR mentioned under. The Medicare MCR decreased to 86.9% within the second quarter of 2022, from 87.6% in the second quarter of 2021, or 70 foundation factors. The Medicare MCR decreased to 86.7% within the six months endedJune 30, 2022 , in comparison with 89.0% within the six months endedJune 30, 2021 , or 230 foundation factors. The enchancment in each durations was primarily pushed by improved working efficiency, together with increased threat scores that extra carefully mirror the acuity of our membership, and robust medical price administration, partially offset by the change in enterprise combine. The 2022 Medicare MCR is decrease than our long-term goal.
Marketplace
Marketplace premium income decreased$194 million within the second quarter of 2022 in comparison with the second quarter of 2021, and decreased$253 million within the six months endedJune 30, 2022 in comparison with the six months endedJune 30, 2021 . The lower was primarily because of anticipated attrition of membership, partially offset by a rise in premium income PMPM. Our Marketplace membership as ofJune 30, 2022 , amounted to 357,000 members, representing a lower of 281,000 members in comparison withJune 30, 2021 . The enhance in premium income PMPM is constant with the product and pricing technique, reflecting a rise of members within the silver metallic tier and a lower of members within the bronze metallic tier, partially offset by a rise within the 2021 threat adjustment payable that was finalized inJune 2022 . The Marketplace medical margin decreased$64 million within the second quarter of 2022 when put next with the second quarter of 2021, and decreased$85 million in the six months endedJune 30, 2022 when put next with the six months endedJune 30, 2021 . The lower in each durations is primarily as a result of internet lower in membership and premiums, and the rise within the MCR described under. The Marketplace MCR elevated to 91.2% within the second quarter of 2022, in contrast to 84.8% within the second quarter of 2021, or 640 foundation factors, and elevated to 84.5% within the six months endedJune 30, 2022 , in comparison with 81.2% within the six months endedJune 30, 2021 , or 330 foundation factors. The enhance for each durations resulted primarily from the rise within the 2021 threat adjustment payable mentioned above. Results in 2022 additionally mirror adjustments in membership combine that features increased acuity members, partially offset by the year-over-year change within the internet impact of COVID. We are incurring much less MCR seasonality relative to the prior 12 months, due to the decrease deductibles within the silver metallic tier product.
Other
The Other phase contains service revenues and prices related to long-term companies and helps consultative companies we offer inWisconsin , and likewise contains sure company quantities not allotted to the Medicaid, Medicare, or Marketplace segments. Such quantities had been immaterial to our consolidated outcomes of operations for the second quarters of and 6 months endedJune 30, 2022 and 2021, respectively.
LIQUIDITY AND FINANCIAL CONDITION
LIQUIDITY
We handle our money, investments, and capital construction to satisfy the short- and long-term obligations of our enterprise whereas sustaining liquidity and monetary flexibility. We forecast, analyze, and monitor our money flows to allow prudent funding administration and financing throughout the confines of our monetary technique. We keep liquidity at two ranges: 1) the regulated well being plan subsidiaries; and a couple of) the dad or mum firm. Our regulated subsidiaries generate important money flows from premium income, which is usually obtained a short while earlier than associated healthcare companies are paid. Premium income is our main supply of liquidity. Thus, any decline within the receipt of premium income, and our profitability, may have a unfavorable influence on our liquidity. In the primary half of 2022, we didn't expertise noticeable delays to, or adjustments in, the timing or stage of premium receipts on account of the COVID-19 pandemic, however there can be no assurances that we'll not expertise such delays sooner or later. See additional dialogue under in "Future Sources and Uses of Liquidity-Future Uses-Potential Impact of COVID-19 Pandemic."
A majority of the property held by our regulated well being plan subsidiaries is in
the type of money, money equivalents, and investments. When out there and as
permitted by relevant rules, money in extra of the capital wants of our
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regulated well being plan subsidiaries is usually paid within the type of dividends to our dad or mum firm for use for common company functions. In the second quarter and 6 months endedJune 30, 2022 , the dad or mum firm obtained$165 million and$280 million , respectively, in dividends and return of capital from the regulated well being plan subsidiaries. See additional dialogue of dividends under in "Future Sources and Uses of Liquidity-Future Sources." The dad or mum firm may additionally contribute capital to the regulated well being plan subsidiaries to fulfill minimal statutory internet price necessities, together with funding for newer well being plans. In the second quarter and 6 months endedJune 30, 2022 , the dad or mum firm contributed capital of$10 million and$29 million , respectively, to the regulated well being plan subsidiaries.
Cash, money equivalents and investments on the dad or mum firm amounted to
respectively. The lower as of
repurchase program and the timing of company funds and capital
contributions to regulated well being plan subsidiaries, partially offset by
dividends obtained from regulated well being plan subsidiaries.
Investments
After contemplating anticipated money flows from working actions, we usually make investments money of regulated subsidiaries that exceeds our anticipated short-term obligations in long term, investment-grade, and marketable debt securities to enhance our total funding return. These investments are made pursuant to board-approved funding insurance policies which conform to relevant state legal guidelines and rules. Our funding insurance policies are designed to supply liquidity, protect capital, and maximize complete return on invested property, all in a way per state necessities that prescribe the forms of devices by which our subsidiaries could make investments. These funding insurance policies require that our investments have last maturities of lower than 15 years, or lower than 15 years common life for structured securities. Professional portfolio managers working below documented pointers handle our investments and a portion of our money equivalents. Our portfolio managers should receive our prior approval earlier than promoting investments the place the loss place of these investments exceeds sure ranges. We imagine that the dangers of the COVID-19 pandemic, as they relate to our investments, are minimal. The total ranking of our portfolio stays sturdy and is rated A+. Our funding coverage has directives along side state pointers to attenuate dangers and exposures in unstable markets. Additionally, our portfolio managers help us in navigating volatility within the capital markets. Our restricted investments are invested principally in money, money equivalents, andU.S. Treasury securities; now we have the power to carry such restricted investments till maturity. All of our unrestricted investments are labeled as present property. Cash Flow Activities
Our money flows are summarized as follows:
Six Months Ended June 30, 2022 2021 Change (In thousands and thousands) Net money offered by working actions$ 731 $ 1,061 $ (330) Net money utilized in investing actions (591) (408) (183) Net money utilized in financing actions (268) (200) (68)
Net (lower) enhance in money, money equivalents,
and restricted money and money equivalents
$ (128) $ 453 $ (581) Operating Activities We sometimes obtain capitation funds month-to-month, upfront of funds for medical claims; nonetheless, authorities payors could modify their cost schedules, positively or negatively impacting our reported money flows from working actions in any given interval. For instance, authorities payors could delay our premium funds, or they could prepay the next month's premium cost. Net money offered by operations for the six months endedJune 30, 2022 was$731 million , in contrast with$1,061 million within the six months endedJune 30, 2021 . The$330 million lower in money circulate was as a result of internet influence of timing variations in authorities receivables and payables and partially offset by an enhance in internet earnings. Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 30
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Investing Activities
Net money utilized in investing actions was$591 million within the six months endedJune 30, 2022 , in contrast with$408 million utilized in investing actions within the six months endedJune 30, 2021 , a lower in money circulate of$183 million . This lower in money circulate was primarily as a result of internet exercise of proceeds and purchases of investments within the six months endedJune 30, 2022 .
Financing Activities
Net money utilized in financing actions was$268 million within the six months endedJune 30, 2022 , in contrast with$200 million used within the six months endedJune 30, 2021 , a lower in money circulate of$68 million . In the six months endedJune 30, 2022 , financing money outflows included frequent inventory purchases of$200 million and$53 million for frequent inventory withheld to settle worker tax obligations. In the six months endedJune 30, 2021 , financing money outflows included frequent inventory purchases of$128 million and$52 million for frequent inventory withheld to settle worker tax obligations. Additionally, we paid$20 million in every of the six months endedJune 30, 2022 and 2021 to settle contingent consideration liabilities referring to our Kentucky Passport acquisition that closed in 2020.
FINANCIAL CONDITION
We imagine that our money sources, borrowing capability out there below the Credit Agreement as mentioned additional under in "Future Sources and Uses of Liquidity-Future Sources," and internally generated funds will likely be ample to help our operations, regulatory necessities, debt compensation obligations and capital expenditures for a minimum of the following 12 months. On a consolidated foundation, atJune 30, 2022 , our working capital was$3.1 billion , in contrast with$3.0 billion atDecember 31, 2021 . AtJune 30, 2022 , our money and investments amounted to$8.1 billion , in contrast with$7.9 billion atDecember 31, 2021 .
Each of our regulated, wholly owned subsidiaries should keep a minimal quantity of statutory capital decided by statute or rules. Such statutes, rules and capital necessities additionally limit the timing, cost and quantity of dividends and different distributions, loans or advances that could be paid to us as the only stockholder. To the extent our subsidiaries should adjust to these rules, they could not have the monetary flexibility to switch funds to us. Based upon present statutes and rules, the minimal capital and surplus requirement for these subsidiaries was estimated to be roughly$2.2 billion atJune 30, 2022 , in contrast with$2.1 billion atDecember 31, 2021 . The mixture capital and surplus of our regulated, wholly owned subsidiaries was in extra of those minimal capital necessities as of each dates. Under relevant regulatory necessities, the quantity of dividends that could be paid by our regulated, wholly owned subsidiaries with out prior approval by regulatory authorities as ofJune 30, 2022 , was roughly$170 million in the mixture. These subsidiaries could pay dividends over this quantity, however solely after approval is granted by the regulatory authorities. Based on our money and investments balances as ofJune 30, 2022 , administration believes that our regulated, wholly owned subsidiaries stay effectively capitalized and exceed their regulatory minimal necessities. We have the power, and have dedicated to supply, further capital to every of our well being plans as mandatory to make sure compliance with statutory capital and surplus necessities.
Debt Ratings
Each of our senior notes is rated “BB-” by
Moody’s Investor Service, Inc. A downgrade in our rankings may adversely have an effect on
our borrowing capability and enhance our future borrowing prices.
Financial Covenants
The Credit Agreement comprises customary non-financial and monetary covenants, together with a internet leverage ratio and an curiosity protection ratio. Such ratios are computed as outlined by the phrases of the Credit Agreement. In addition, the indentures governing every of our excellent senior notes comprise cross-default provisions which might be triggered upon default by us or any of our subsidiaries on any indebtedness in extra of the quantity specified within the relevant indenture. As ofJune 30, 2022 , we had been in compliance with all monetary and non-financial covenants below the Credit Agreement and senior notes.Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 31 --------------------------------------------------------------------------------
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FUTURE SOURCES AND USES OF LIQUIDITY
Future Sources
Our regulated subsidiaries generate important money flows from premium income, which is usually obtained a short while earlier than associated healthcare companies are paid. Premium income is our main supply of liquidity. Thus, any decline in the receipt of premium income, and our profitability, may have a unfavorable influence on our liquidity. Potential Impact of COVID-19 Pandemic. Excluding acquisitions and our exit fromPuerto Rico , we added over 750,000 new Medicaid members sinceMarch 31, 2020 , after we first started to report on the impacts of the pandemic. We imagine this membership enhance was primarily as a result of suspension of redeterminations for Medicaid eligibility. We count on Medicaid enrollment to proceed to profit from the extension of the PHE interval, and the related pause on membership redeterminations, a minimum of bymid-October 2022 . Dividends from Subsidiaries. When out there and as permitted by relevant rules, money in extra of the capital wants of our regulated well being plans is usually paid within the type of dividends to our unregulated dad or mum firm to be used for common company functions. As a results of the COVID-19 pandemic, state regulators may additional limit the power of our regulated well being plan subsidiaries to pay dividends to the dad or mum firm, which would scale back the liquidity of the dad or mum firm. Credit Agreement Borrowing Capacity. As ofJune 30, 2022 , we had out there borrowing capability of$1 billion below the revolving credit score facility of our Credit Agreement. In addition, the Credit Agreement offers for a$15 million swingline sub-facility and a$100 million letter of credit score sub-facility, as effectively as incremental time period loans out there to finance sure acquisitions as much as$500 million , plus a limiteless quantity of such time period loans so long as our consolidated internet leverage ratio will not be larger than an outlined most. See additional dialogue within the Notes to Consolidated Financial Statements, Note 8, "Debt." Future Uses Common Stock Purchases. InSeptember 2021 , our board of administrators licensed the buy of as much as$500 million , within the mixture, of our frequent inventory. This new program, which outmoded the inventory buy program permitted by our board of administrators inSeptember 2020 , is funded with money readily available and extends byDecember 31, 2022 . The actual timing and quantity of any repurchase is decided by administration based mostly on market situations and share worth, along with different components, and topic to the restrictions referring to quantity, worth, and timing below relevant legislation. As ofJuly 27, 2022 ,$300 million remained out there to buy our frequent inventory below this program byDecember 31, 2022 . Acquisitions. OnJuly 13, 2022 , we introduced a definitive settlement to amass considerably all of the property of My Choice Wisconsin ("MCW"). As ofMay 2022 , MCW served over 44,000 managed long-term companies and helps and core Medicaid members all throughWisconsin , delivering roughly$1 billion in premium income for the 12 months endedMarch 31, 2022 . The buy worth for the transaction is roughly$150 million , internet of anticipated tax advantages and required regulatory capital, which we intend to fund with money readily available. The transaction is topic to receipt of relevant federal and state regulatory approvals, and the satisfaction of different customary closing situations. We at the moment count on the transaction to shut in 2022. OnOctober 7, 2021 , we introduced a definitive settlement to amass the Medicaid Managed Long Term Care enterprise of AgeWell New York. The buy worth for the transaction is roughly$106 million , internet of sure tax advantages and goal allocation of required regulatory capital, which we intend to fund with money readily available. The transaction is topic to relevant federal and state regulatory approvals and the satisfaction of different customary closing situations. We at the moment count on the transaction to shut within the fourth quarter of 2022. Potential Impact of COVID-19 Pandemic. As described above in "Trends and Uncertainties," now we have been topic to Medicaid threat corridors on account of the pandemic. Beginning in 2020, varied states enacted non permanent threat corridors in response to the lowered demand for medical companies stemming from COVID-19, which have resulted in a discount of our medical margin. In some instances, these threat corridors had been retroactive to earlier durations in 2020, or as early because the starting of the states' fiscal years in 2019. Since the second quarter of 2020, now we have acknowledged threat corridors that we imagine to be possible, and the place the final premium quantity within reason estimable. For the three and 6 months endedJune 30, 2022 , we acknowledged roughly$94 million and$122 million , respectively, associated to such threat corridors, primarily within the Medicaid phase. It is feasible that sure states may change the construction of present threat corridors, implement new threat corridors sooner or later or discontinue present threat corridors. Due to those uncertainties, the final word outcomes may differ materially from our estimates on account of adjustments in information or additional developments, which may have an opposed impact on our consolidated monetary place, outcomes of operations, or money flows.Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 32 --------------------------------------------------------------------------------
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Regulatory Capital Requirements. We have the power, and have dedicated to
present, further capital to every of our well being plans as mandatory to make sure
compliance with statutory capital and surplus necessities.
CONTRACTUAL OBLIGATIONS
A abstract of future obligations below our varied contractual obligations and commitments as ofDecember 31, 2021 , was disclosed in our 2021 Annual Report on Form 10-Ok. There had been no important adjustments to our contractual obligations and commitments exterior the abnormal course of enterprise in the course of the six months endedJune 30, 2022 .
CRITICAL ACCOUNTING ESTIMATES
When we put together our consolidated monetary statements, we use estimates based mostly on assumptions which will have an effect on reported quantities and disclosures; precise outcomes may differ from these estimates. Our important accounting estimates relate to: •Medical claims and advantages payable. Refer to Notes to Consolidated Financial Statements, Note 7, "Medical Claims and Benefits Payable," for a desk that presents the elements of the change in medical claims and advantages payable, and for added data relating to the components used to find out our adjustments in estimates for all durations introduced within the accompanying consolidated monetary statements. Other than the dialogue as famous above, within the six months endedJune 30, 2022 there have been no important adjustments to our disclosure reported in "Critical Accounting Estimates" in our 2021 Annual Report on Form 10-Ok.
•Contractual provisions which will modify or restrict income or revenue. For a
dialogue of this subject, together with quantities recorded in our consolidated
monetary statements, check with Notes to Consolidated Financial Statements, Note
2, “Significant Accounting Policies.”
•Quality incentives. In the six months ended
important adjustments to our disclosure reported in “Critical Accounting
Estimates” in our 2021 Annual Report on Form 10-Ok.
•Business mixtures, goodwill, and intangible property, internet. In the six months endedJune 30, 2022 , there have been no important adjustments to our disclosure reported in "Critical Accounting Estimates" in our 2021 Annual Report on Form 10-Ok.