MOLINA HEALTHCARE, INC. [MOH] Filings

10-Q 1 moh-20240930.htm 10-Q moh-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 001-31719

MOLINA HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)


Delaware		13-4204626
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Oceangate, Suite 100
Long Beach,	California	90802
(Address of principal executive offices)		(Zip Code)

(562) 435-3666

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value	MOH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of October 18, 2024, was approximately 57.2 million.

Table of Contents

MOLINA HEALTHCARE, INC. FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS


ITEM NUMBER		Page

PART I

1.	Financial Statements	3

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

3.	Quantitative and Qualitative Disclosures About Market Risk	36

4.	Controls and Procedures	36

PART II

1.	Legal Proceedings	36

1A.	Risk Factors	36

2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

3.	Defaults Upon Senior Securities	Not Applicable.

4.	Mine Safety Disclosures	Not Applicable.

5.	Other Information	37

6.	Exhibits	38

	Signatures	39

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions, except per-share amounts) (Unaudited)
Revenue:
Premium revenue	$	9,694	$	8,240	$	28,644	$	24,167
Premium tax revenue	508		176		1,103		517

Investment income	118		112		341		280
Other revenue	20		20		63		60
Total revenue	10,340		8,548		30,151		25,024
Operating expenses:
Medical care costs	8,643		7,306		25,425		21,215
General and administrative expenses	676		608		2,078		1,817
Premium tax expenses	508		176		1,103		517

Depreciation and amortization	47		42		138		128
Other	(1)		57		80		90
Total operating expenses	9,873		8,189		28,824		23,767
Operating income	467		359		1,327		1,257

Interest expense	29		27		84		82


Income before income tax expense	438		332		1,243		1,175
Income tax expense	112		87		315		300
Net income	$	326	$	245	$	928	$	875

Net income per share - Basic	$	5.67	$	4.24	$	16.05	$	15.18
Net income per share - Diluted	$	5.65	$	4.21	$	15.97	$	15.08

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions) (Unaudited)
Net income	$	326	$	245	$	928	$	875
Other comprehensive gain (loss):
Unrealized investment gain (loss)	100		(24)		96		(7)
Less: effect of income taxes	24		(5)		23		(2)
Other comprehensive gain (loss), net of tax	76		(19)		73		(5)
Comprehensive income	$	402	$	226	$	1,001	$	870

See accompanying notes.

Molina Healthcare, Inc. September 30, 2024 Form 10-Q | 3

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CONSOLIDATED BALANCE SHEETS


	September 30, 2024		December 31, 2023

	(Dollars in millions, except per-share amounts)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,732	$	4,848
Investments	4,482		4,259
Receivables	3,259		3,104
Prepaid expenses and other current assets	408		331
Total current assets	12,881		12,542
Property, equipment, and capitalized software, net	306		270
Goodwill, and intangible assets, net	1,923		1,449
Restricted investments	289		261
Deferred income taxes, net	227		227
Other assets	132		143
Total assets	$	15,758	$	14,892

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	4,732	$	4,204
Amounts due government agencies	2,026		2,294
Accounts payable, accrued liabilities and other	1,215		1,252
Deferred revenue	364		418
Total current liabilities	8,337		8,168
Long-term debt	2,332		2,180
Finance lease liabilities	197		205
Other long-term liabilities	122		124
Total liabilities	10,988		10,677
Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 57 million shares at September 30, 2024 and 58 million at December 31, 2023	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	453		410
Accumulated other comprehensive loss	(9)		(82)
Retained earnings	4,326		3,887
Total stockholders’ equity	4,770		4,215
Total liabilities and stockholders’ equity	$	15,758	$	14,892

See accompanying notes.

Molina Healthcare, Inc. September 30, 2024 Form 10-Q | 4

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Outstanding	Amount

	(In millions)
	(Unaudited)
Balance at December 31, 2023	58	$	—	$	410	$	(82)	$	3,887	$	4,215
Net income	—	—		—		—		301		301









Other comprehensive loss, net	—	—		—		(3)		—		(3)
Share-based compensation	1	—		(20)		—		—		(20)
Balance at March 31, 2024	59	—		390		(85)		4,188		4,493
Net income	—	—		—		—		301		301










Share-based compensation	—	—		49		—		—		49
Balance at June 30, 2024	59	—		439		(85)		4,489		4,843
Net income	—	—		—		—		326		326







Common stock purchases	(2)	—		(11)		—		(489)		(500)
Stock purchase excise tax	—	—		(3)		—		—		(3)
Other comprehensive income, net	—	—		—		76		—		76
Share-based compensation	—	—		28		—		—		28
Balance at September 30, 2024	57	$	—	$	453	$	(9)	$	4,326	$	4,770


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Outstanding	Amount

	(In millions)
	(Unaudited)
Balance at December 31, 2022	58	$	—	$	328	$	(160)	$	2,796	$	2,964
Net income	—	—		—		—		321		321









Other comprehensive income, net	—	—		—		35		—		35
Share-based compensation	—	—		(32)		—		—		(32)
Balance at March 31, 2023	58	—		296		(125)		3,117		3,288
Net income	—	—		—		—		309		309









Other comprehensive loss, net	—	—		—		(21)		—		(21)
Share-based compensation	—	—		45		—		—		45
Balance at June 30, 2023	58	—		341		(146)		3,426		3,621
Net income	—	—		—		—		245		245









Other comprehensive loss, net	—	—		—		(19)		—		(19)
Share-based compensation	—	—		32		—		—		32
Balance at September 30, 2023	58	$	—	$	373	$	(165)	$	3,671	$	3,879

See accompanying notes.

Molina Healthcare, Inc. September 30, 2024 Form 10-Q | 5

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CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,
	2024		2023

	(In millions) (Unaudited)
Operating activities:
Net income	$	928	$	875
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	138		128
Deferred income taxes	14		(33)
Share-based compensation	98		88

Other, net	8		3
Changes in operating assets and liabilities:
Receivables	(31)		(132)
Prepaid expenses and other current assets	(6)		(69)
Medical claims and benefits payable	65		611
Amounts due government agencies	(289)		377
Accounts payable, accrued liabilities and other	(33)		(137)
Deferred revenue	(53)		332
Income taxes	29		309
Net cash provided by operating activities	868		2,352
Investing activities:
Purchases of investments	(989)		(1,295)
Proceeds from sales and maturities of investments	871		670
Net cash paid in business combinations	(344)		(3)
Purchases of property, equipment and capitalized software	(89)		(89)
Other, net	68		(2)
Net cash used in investing activities	(483)		(719)
Financing activities:
Common stock purchases	(500)		—
Proceeds from borrowings under credit facility	300		—
Repayment of credit facility	(150)		—
Common stock withheld to settle employee tax obligations	(57)		(60)








Other, net	(7)		(1)
Net cash used in financing activities	(414)		(61)
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents	(29)		1,572
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	4,908		4,048
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	4,879	$	5,620

Molina Healthcare, Inc. September 30, 2024 Form 10-Q | 6

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2024

1. Organization and Basis of Presentation

Organization and Operations

Molina Healthcare, Inc. provides managed healthcare services under the Medicaid and Medicare programs, and through the state insurance marketplaces (the “Marketplace”). We currently have four reportable segments consisting of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other. Our reportable segments are consistent with how we currently manage the business and view the markets we serve.

As of September 30, 2024, we served approximately 5.6 million members eligible for government-sponsored healthcare programs, located across 21 states.

Our state Medicaid contracts typically have terms of three to five years, contain renewal options exercisable by the state Medicaid agency, and allow either the state or the health plan to terminate the contract with or without cause. Such contracts are subject to risk of loss in states that issue requests for proposal (“RFP”) open to competitive bidding by other health plans. If one of our health plans is not a successful responsive bidder to a state RFP, its contract may not be renewed.

In addition to contract renewal, our state Medicaid contracts may be periodically amended to include or exclude certain health benefits (such as pharmacy services, behavioral health services, or long-term care services); populations such as the aged, blind or disabled (“ABD”); and regions or service areas.

In Medicare, we enter into Medicare Advantage-Part D contracts with the Centers for Medicare and Medicaid Services (“CMS”) annually, and for dual-eligible programs, we enter into contracts with CMS, in partnership with each state’s department of health and human services. Such contracts typically have terms of one to three years.

In Marketplace, we enter into contracts with CMS, which end on December 31 of each year, and must be renewed annually.

Recent Developments

Michigan Procurement—Medicare. In October 2024, we were awarded a contract to provide benefits to the state’s Highly Integrated Dual Eligible (“HIDE”) Special Needs population in six service regions. This award facilitates the transition of our existing Medicaid-Medicare Plan (“MMP”) members to a HIDE product and ensures a new dual-eligibles growth opportunity by expanding our footprint from two regions to six, including Detroit. The new contract, which is expected to commence on January 1, 2026 in select regions, will be implemented statewide in 2027 and is expected to continue for seven years.

Massachusetts Procurement—Medicare. In September 2024, we were selected to proceed to contract negotiations to operate both One Care and Senior Care Options plans for 2026. This selection is expected to allow us to operate the One Care 21-64 program, and to retain our position in the Senior Care Options program. The programs provide physical, behavioral, long-term services and supports, and other community services to dual-eligibles. The new contract is expected to commence on January 1, 2026.

Connecticut Acquisition—Marketplace and Medicare. On July 23, 2024, we announced a definitive agreement to acquire ConnectiCare Holding Company, Inc. (“ConnectiCare”), a wholly owned subsidiary of EmblemHealth, Inc. ConnectiCare is a leading health plan in the state of Connecticut serving members across Marketplace, Medicare, and certain commercial products. The purchase price for the transaction is approximately $350 million, which we intend to fund with cash on hand. The transaction is subject to applicable federal and state regulatory approvals and the satisfaction of other customary closing conditions. We currently expect the transaction to close in the first quarter of 2025.

Florida Procurement—Medicaid. In July 2024, we were notified that the Florida Agency for Healthcare Administration awarded a Medicaid managed care contract to Molina Healthcare of Florida. The contract term is expected to commence on February 1, 2025, and to run through December 31, 2030. We expect to serve approximately 90,000 Medicaid beneficiaries in Miami-Dade and Monroe Counties.

New Mexico Procurement—Medicaid. Our new contract with the New Mexico Health Care Authority commenced on July 1, 2024 and will run through December 31, 2026. The new contract added approximately 33,000 members.

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Wisconsin Procurement—Medicaid. In May 2024, we were notified that the Wisconsin Department of Health Services intends to make an award for the purchase of services under the Family Care and Family Care Partnership program in its Geographic Service Region 5 to Molina Healthcare of Wisconsin. The go-live date is expected to be January 1, 2025, and the contract is expected to have a duration of two years, with an option for three two-year extensions. Additionally, we were re-awarded our sole contract position in the self-directed long-term services and supports personal care program.

Michigan Procurement—Medicaid. In April 2024, we announced that the Michigan Department of Health and Human Services intends to award a Comprehensive Health Care Program contract to Molina Healthcare of Michigan. We were awarded the contract in six service regions. The new Medicaid contract commenced on October 1, 2024. The new contract is expected to have a duration of five years, with an option for three one-year extensions.

Mississippi Procurement—Medicaid. In the second quarter of 2024, the Mississippi Division of Medicaid extended the existing contracts for the state fiscal year that began on July 1, 2024. We now expect the new four-year contract, which will cover both TANF & ABD and CHIP, to commence on July 1, 2025.

Texas Procurement—Medicaid. In the first quarter of 2024, we were notified of the Texas Health and Human Services Commission’s intent to award us a contract for Temporary Assistance for Needy Families (“TANF”) and Children’s Health Insurance Program (“CHIP”) (known in Texas as the STAR & CHIP programs, and both existing contracts for Molina), expanding our footprint and expecting to grow our market share. The expected start of operations and other final contract terms are still pending. The new STAR+PLUS contract began on September 1, 2024 and grew our market share.

Virginia Procurement—Medicaid. In the first quarter of 2024, the Virginia Department of Medical Assistance Services (“DMAS”) issued a notice of intent to award which did not include Molina Healthcare of Virginia as an awardee for its Cardinal Care Managed Care (“CCMC”) procurement. We exercised our right to protest that decision. On April 19, 2024, DMAS upheld its notice of intent to award in response to our protest. On April 26, 2024, Molina filed a legal action in Virginia Circuit Court over DMAS’s decision not to award Molina a CCMC contract. In addition, DMAS separately notified us that they were exercising the contractual extension option for the period from July 1, 2024 through June 30, 2025. The noticed CCMC awards are subject to a statutory stay pending the resolution of Molina’s legal action.

California Acquisition—Medicare. Effective January 1, 2024, we closed on our acquisition of 100% of the issued and outstanding capital stock of Brand New Day and Central Health Plan of California (“Bright Health Medicare”), which added approximately 109,000 members.

California Procurement—Medicaid. Our new contract with the California Department of Health Care Services commenced on January 1, 2024, which enables us to continue servicing Medi-Cal members in most of our existing counties and expand our footprint in Los Angeles County.

Nebraska Procurement—Medicaid. Our new contract with the Nebraska Department of Health and Human Services commenced on January 1, 2024, which added approximately 114,000 members.

Consolidation and Interim Financial Information

The consolidated financial statements include the accounts of Molina Healthcare, Inc. and its subsidiaries. In the opinion of management, these financial statements reflect all normal recurring adjustments, which are considered necessary for a fair presentation of the results as of the dates and for the interim periods presented. All significant intercompany balances and transactions have been eliminated. The consolidated results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results for the entire year ending December 31, 2024.

The unaudited consolidated interim financial statements have been prepared under the assumption that users of the interim financial data have either read or have access to our audited consolidated financial statements for the fiscal year ended December 31, 2023. Accordingly, certain disclosures that would substantially duplicate the disclosures contained in our December 31, 2023, audited consolidated financial statements have been omitted.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

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2. Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term, highly liquid investments that are both readily convertible into known amounts of cash and have a maturity of three months or less on the date of purchase. The following table provides a reconciliation of cash and cash equivalents, and restricted cash and cash equivalents reported within the accompanying consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying consolidated statements of cash flows. The restricted cash and cash equivalents presented below are included in “Restricted investments” in the accompanying consolidated balance sheets.


	September 30,
	2024		2023

	(In millions)
Cash and cash equivalents	$	4,732	$	5,565
Restricted cash and cash equivalents	147		55
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	4,879	$	5,620

Receivables

Receivables consist primarily of premium amounts due from government agencies, which are subject to potential retroactive adjustments. We apply the current expected credit loss model to measure expected credit losses on our receivables based on available information about past events and reasonable and supportable forecasts. Because substantially all of our receivable amounts are readily determinable and substantially all of our creditors are governmental authorities, our allowance for credit losses is insignificant. Any amounts determined to be uncollectible are charged to expense when such determination is made.


	September 30, 2024		December 31, 2023

	(In millions)
Government receivables	$	2,210	$	2,354
Pharmacy rebate receivables	335		330

Other	714		420

Total receivables	$	3,259	$	3,104

Premium Revenue Recognition and Amounts Due Government Agencies

Premium revenue is generated from our contracts with state and federal agencies, in connection with our participation in the Medicaid, Medicare, and Marketplace programs. Premium revenue is generally received based on per member per month (“PMPM”) rates established in advance of the periods covered. These premium revenues are recognized in the month that members are entitled to receive healthcare services, and premiums collected in advance are deferred. Many of our contracts contain provisions that may adjust or limit revenue or profit, as described below. Consequently, we recognize premium revenue as it is earned under such provisions. Liabilities accrued for premiums to be returned under such provisions are reported in the aggregate as “Amounts due government agencies” in the accompanying consolidated balance sheets. State Medicaid programs and the federal Medicare program periodically adjust premium rates, including certain components of premium revenue that are subject to accounting estimates and are described below, and in our 2023 Annual Report on Form 10-K, Note 2, “Significant Accounting Policies,” under “Premium Revenue Recognition and Amounts Due Government Agencies,” and “Quality Incentives.”

Minimum MLR, Medical Cost Corridors and Profit Sharing. A portion of our Medicaid premium revenue may be returned if certain minimum amounts are not spent on defined medical care costs as a percentage of premium revenue, or minimum medical loss ratio (“Minimum MLR”). Under certain medical cost corridor provisions, the health plans may receive additional premiums if amounts spent on medical care costs exceed a defined maximum threshold. This includes remaining risk corridors that were enacted by various states in 2020 in response to the reduced demand for medical services stemming from COVID-19. Our contracts with certain states contain profit sharing provisions under which we refund amounts to the states if our health plans generate profit above a certain specified percentage. In some cases, we are limited in the amount of administrative costs that we may deduct in calculating the refund, if any. We recorded aggregate liabilities under the terms of such contract provisions of $1,176 million and $1,344 million at September 30, 2024 and December 31, 2023, respectively, to “Amounts due government agencies” in the accompanying consolidated balance sheets.

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The Affordable Care Act (“ACA”) established a Minimum MLR of 85% for Medicare. Federal regulations define what constitutes medical costs and premium revenue. If the Minimum MLR is not met, we may be required to pay rebates to the federal government. Our dual-eligible plans may also be subject to state-specific Minimum MLRs, medical cost corridors, and profit-sharing provisions. We recognize estimated rebates as an adjustment to premium revenue in our consolidated statements of income. We recorded a liability under the terms of such contract provisions of $40 million and $64 million at September 30, 2024 and December 31, 2023, respectively, to “Amounts due government agencies” in the accompanying consolidated balance sheets.

The ACA established a Minimum MLR of 80% for the Marketplace. If the Minimum MLR is not met, we may be required to pay rebates to our Marketplace policyholders. The Marketplace risk adjustment program discussed below is taken into consideration when computing the Minimum MLR. We recognize estimated rebates under the Minimum MLR as an adjustment to premium revenue in our consolidated statements of income. The amounts were insignificant at September 30, 2024 and December 31, 2023.

Risk Adjustment. Our Medicare premiums are subject to retroactive increase or decrease based on the health status of our Medicare members (as measured by member risk score). We estimate our members’ risk scores and the related amount of Medicare revenue that will ultimately be realized for the periods presented based on our knowledge of our members’ health status, risk scores and CMS practices. We also estimate amounts owed to CMS for Part D settlements. We recorded a liability under the terms of such contract provisions of $82 million and $66 million at September 30, 2024 and December 31, 2023, respectively, to “Amounts due government agencies” in the accompanying consolidated balance sheets.

Under this program for our Marketplace business, our health plans’ composite risk scores are compared with the overall average risk score for the relevant state and market pool. Generally, our health plans will make a risk adjustment payment into the pool if their composite risk scores are below the average risk score (risk adjustment payable) and will receive a risk adjustment payment from the pool if their composite risk scores are above the average risk score (risk adjustment receivable). We estimate our ultimate premium based on insurance policy year-to-date experience and recognize estimated premiums relating to the risk adjustment program as an adjustment to premium revenue in our consolidated statements of income. As of September 30, 2024, Marketplace risk adjustment payables amounted to $207 million and related receivables amounted to $282 million, for a net receivable of $75 million. As of December 31, 2023, Marketplace risk adjustment payables amounted to $201 million and related receivables amounted to $241 million, for a net receivable of $40 million. Marketplace risk adjustment receivables at December 31, 2023 are net of a $41 million credit loss allowance resulting from a credit loss recognized in the third quarter of 2023 on 2022 Marketplace risk adjustment receivables due to the insolvency of an issuer in the Texas risk pool.

Premium Deficiency Reserve on Loss Contracts

We assess the profitability of our contracts to determine if it is probable that a loss will be incurred in the future by reviewing current results and forecasts. For purposes of this assessment, contracts are grouped in a manner consistent with our method of acquiring, servicing and measuring the profitability of such contracts. A premium deficiency reserve (“PDR”) is recognized if anticipated future medical care and administrative costs exceed anticipated future premium revenue, investment income and reinsurance recoveries. Once established, a PDR is reduced over the contract period as an offset to actual losses.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, receivables, and restricted investments. Our investments and a portion of our cash equivalents are managed by professional portfolio managers operating under documented investment guidelines. Our portfolio managers must obtain our prior approval before selling investments where the loss position of those investments exceeds certain levels. Our investments consist primarily of investment-grade debt securities with final maturities of less than 15 years, or less than 15 years average life for structured securities. Restricted investments are invested principally in cash, cash equivalents, U.S. Treasury securities, and corporate debt securities. Concentration of credit risk with respect to accounts receivable is limited because our payors consist principally of the federal government, and governments of each state in which our health plan subsidiaries operate.

Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which generally differs from the U.S. federal statutory rate primarily because of state taxes and nondeductible expenses such as certain compensation and other general and administrative expenses.

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The effective tax rate may be subject to fluctuations during the year as new information is obtained. Such information may affect the assumptions used to estimate the annual effective tax rate, including projected pretax earnings, the mix of pretax earnings in the various tax jurisdictions in which we operate, valuation allowances against deferred tax assets, the recognition or the reversal of the recognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities, along with net operating loss and tax credit carryovers.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the Financial Accounting Standards Board (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (“SEC”) did not have, nor does management expect such pronouncements to have, a significant impact on our present or future consolidated financial statements.

3. Net Income Per Share

The following table sets forth the calculation of basic and diluted net income per share:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions, except net income per share)
Numerator:
Net income	$	326	$	245	$	928	$	875
Denominator:
Shares outstanding at the beginning of the period	58.1		57.8		57.8		57.4
Weighted-average number of shares issued:
Stock-based compensation	—		—		0.2		0.3
Stock purchases	(0.5)		—		(0.2)		—
Denominator for basic net income per share	57.6		57.8		57.8		57.7
Effect of dilutive securities: (1)
Stock-based compensation	0.1		0.3		0.3		0.4

Denominator for diluted net income per share	57.7		58.1		58.1		58.1

Net income per share - Basic (2)	$	5.67	$	4.24	$	16.05	$	15.18
Net income per share - Diluted (2)	$	5.65	$	4.21	$	15.97	$	15.08

______________________________

(1) The dilutive effect of all potentially dilutive common shares is calculated using the treasury stock method. Certain potentially dilutive common shares issuable are not included in the computation of diluted net income per share because to do so would be anti-dilutive. For the three and nine months ended September 30, 2024, 196,000 shares and 102,000 shares, respectively, were excluded from diluted shares outstanding.

(2) Source data for calculations in thousands.

4. Business Combinations

Bright Health Medicare. On January 1, 2024, we closed on our acquisition of Bright Health Medicare for $441 million in cash, consistent with our strategy to grow in our existing markets. For this transaction, we applied the acquisition method of accounting, where the total purchase price was preliminarily allocated to the tangible and intangible assets acquired and liabilities assumed, based on their fair values as of the acquisition date. We expect to complete the final determination of the purchase price allocation as soon as practicable, but no later than one year following the acquisition’s closing date in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. The pro forma effects of this acquisition for prior periods were not material to our consolidated results of operations. Acquisition costs amounted to $3 million in the aggregate for the

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nine months ended September 30, 2024, and were recorded as “General and administrative expenses” in the accompanying consolidated statements of income.

The acquisition-date fair value of the consideration transferred consisted of the following, in millions:


Fair value of consideration transferred:
Cash	$	341
Contingent consideration	86
Total	$	427

The contingent consideration arrangement allows the seller to earn up to $100 million for the satisfaction of certain conditions within the stock purchase agreement by the fourth quarter of 2024. The fair value of the contingent consideration arrangement at the acquisition date was $86 million. This fair value measurement is based on inputs not observable in the market and thus represents a Level 3 measurement. We estimated the fair value using a probability-weighted scenario approach focused on existing and expected membership. On the acquisition date, we placed the $100 million into a third-party escrow and recorded a receivable of $14 million in relation to the fair value measurement. As of September 30, 2024, the fair value of the contingent consideration arrangement increased to $100 million due to the conditions being met. The net change in fair value is reported in “Other” operating expenses in our consolidated statements of income.

The valuation of the assets acquired and liabilities assumed has not yet been finalized. Further, the finalization of purchase price adjustments as provided in the stock purchase agreement is expected to occur in the fourth quarter of 2024. As a result, provisional estimates have been recorded and are subject to change, primarily for accounts that include the use of estimates, such as medical claims and benefits payable, receivables, amounts due government agencies, certain acquired intangible assets, and certain tax assets and liabilities.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Such assets include synergies we expect to achieve as a result of the transaction, such as the use of our existing infrastructure to support the added membership, and future economic benefits arising from the assembled workforce. All of the goodwill was assigned to the Medicare segment and is deductible for income tax purposes. The following table summarizes the provisional fair values assigned to assets acquired and liabilities assumed, in millions.


Assets acquired:
Current assets	$	341
Goodwill	395
Intangible assets	141
Other long-term assets	57
Liabilities assumed:
Medical claims and benefits payable	(463)
Amounts due government agencies	(21)
Accounts payable, accrued and other long-term liabilities	(23)
Fair value of net assets acquired	$	427

The table below presents intangible assets acquired, by major class, for the Bright Health Medicare acquisition. The weighted-average amortization period, in the aggregate, is 11.1 years.


	Fair Value		Life

	(In millions)		(Years)
Contract rights - member list	$	104	10
Trade name	32		15
Provider network	5		10
	$	141

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My Choice. On September 1, 2023, we closed on our acquisition of My Choice Wisconsin for preliminary purchase consideration of approximately $74 million. In August 2024, we paid purchase consideration of $49 million as a result of final purchase price adjustments as provided in the asset purchase agreement. In the nine months ended September 30, 2024, we recorded various measurement period adjustments that were insignificant. These measurement period adjustments and purchase price adjustments have been finalized as of September 30, 2024.

5. Fair Value Measurements

We consider the carrying amounts of current assets and current liabilities to approximate their fair values because of the relatively short period of time between the origination of these instruments and their expected realization or payment. For our financial instruments measured at fair value on a recurring basis, we prioritize the inputs used in measuring fair value according to the three-tier fair value hierarchy. For a description of the methods and assumptions used to: a) estimate the fair value; and b) determine the classification according to the fair value hierarchy for each financial instrument, refer to our 2023 Annual Report on Form 10-K, Note 5, “Fair Value Measurements.”

Our financial instruments measured at fair value on a recurring basis at September 30, 2024, were as follows:


			Observable Inputs		Directly or Indirectly Observable Inputs		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)

	(In millions)
Corporate debt securities	$	2,848	$	—	$	2,848	$	—
Mortgage-backed securities	945		—		945		—
Asset-backed securities	438		—		438		—
Municipal securities	195		—		195		—
U.S. Treasury notes	5		—		5		—



Other	51		—		51		—
Total assets	$	4,482	$	—	$	4,482	$	—

Our financial instruments measured at fair value on a recurring basis at December 31, 2023, were as follows:


			Observable Inputs		Directly or Indirectly Observable Inputs		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)

	(In millions)
Corporate debt securities	$	2,732	$	—	$	2,732	$	—
Mortgage-backed securities	911		—		911		—
Asset-backed securities	365		—		365		—
Municipal securities	166		—		166		—
U.S. Treasury notes	40		—		40		—


Other	45		—		45		—
Total assets	$	4,259	$	—	$	4,259	$	—

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Fair Value Measurements – Disclosure Only

The carrying amounts and estimated fair values of our notes payable are classified as Level 2 financial instruments. Fair value for these securities is determined using a market approach based on quoted market prices for similar securities in active markets or quoted prices for identical securities in inactive markets.


	September 30, 2024				December 31, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(In millions)
4.375% Notes due 2028	$	795	$	778	$	794	$	757
3.875% Notes due 2030	644		604		644		583
3.875% Notes due 2032	743		685		742		654
Credit Facility	150		150		—		—
Total	$	2,332	$	2,217	$	2,180	$	1,994

6. Investments

Available-for-Sale

We consider all of our investments classified as current assets to be available-for-sale. The following tables summarize our current investments as of the dates indicated:


	September 30, 2024
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses

	(In millions)
Corporate debt securities	$	2,837	$	37	$	26	$	2,848
Mortgage-backed securities	963		11		29		945
Asset-backed securities	441		3		6		438
Municipal securities	197		2		4		195
U.S. Treasury notes	5		—		—		5



Other	51		1		1		51
Total	$	4,494	$	54	$	66	$	4,482


	December 31, 2023
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses

	(In millions)
Corporate debt securities	$	2,781	$	16	$	65	$	2,732
Mortgage-backed securities	951		4		44		911
Asset-backed securities	376		1		12		365
Municipal securities	172		—		6		166
U.S. Treasury notes	40		—		—		40


Other	47		—		2		45
Total	$	4,367	$	21	$	129	$	4,259

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The contractual maturities of our current investments as of September 30, 2024 are summarized below:


	Amortized Cost		Estimated Fair Value

	(In millions)
Due in one year or less	$	581	$	577
Due after one year through five years	2,295		2,297
Due after five years through ten years	509		519
Due after ten years	1,109		1,089
Total	$	4,494	$	4,482

In the nine months ended September 30, 2024, and 2023, maturities and redemptions of available-for-sale securities amounted to $786 million and $410 million, respectively, and sales amounted to $85 million and $260 million, respectively. Gross realized gains and losses from sales of available-for-sale securities are calculated under the specific identification method and are included in investment income. Gross realized investment gains amounted to $2 million for the nine months ended September 30, 2024 and were insignificant for the nine months ended September 30, 2023. Gross realized investment losses amounted to $3 million and $10 million in the nine months ended September 30, 2024 and 2023, respectively, and were reclassified into earnings from other comprehensive income on a net-of-tax basis.

We have determined that unrealized losses at September 30, 2024, and December 31, 2023, primarily resulted from fluctuating interest rates, rather than a deterioration of the creditworthiness of the issuers. Therefore, we determined that an allowance for credit losses was not necessary. So long as we maintain the intent and ability to hold these securities to maturity, we are unlikely to experience realized losses. In the event that we dispose of these securities before maturity, we expect that realized losses, if any, will be insignificant.

The following table segregates those available-for-sale investments that have been in a continuous loss position for less than 12 months, and those that have been in a continuous loss position for 12 months or more as of September 30, 2024:


	In a Continuous Loss Position for Less than 12 Months					In a Continuous Loss Position for 12 Months or More
	Estimated Fair Value		Unrealized Losses		Total Number of Positions	Estimated Fair Value		Unrealized Losses		Total Number of Positions

	(Dollars in millions)
Corporate debt securities	$	—	$	—	—	$	1,057	$	26	506
Mortgage-backed securities	—		—		—	444		29		256
Asset-backed securities	—		—		—	157		6		77
Municipal securities	—		—		—	102		4		97



Other	—		—		—	16		1		16

Total	$	—	$	—	—	$	1,776	$	66	952

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	In a Continuous Loss Position for Less than 12 Months					In a Continuous Loss Position for 12 Months or More
	Estimated Fair Value		Unrealized Losses		Total Number of Positions	Estimated Fair Value		Unrealized Losses		Total Number of Positions

	(Dollars in millions)
Corporate debt securities	$	263	$	1	160	$	1,553	$	64	754
Mortgage-backed securities	123		2		98	549		42		283
Asset-backed securities	—		—		—	195		12		91
Municipal securities	—		—		—	117		6		116


Other	—		—		—	17		2		17

Total	$	386	$	3	258	$	2,431	$	126	1,261

Restricted Investments Held-to-Maturity

Pursuant to the regulations governing our state health plan subsidiaries, we maintain statutory deposits and deposits required by government authorities primarily in cash, cash equivalents, U.S. Treasury securities, and corporate debt securities. We also maintain restricted investments as protection against the insolvency of certain capitated providers. The use of these funds is limited as required by regulations in the various states in which we operate, or as needed in the event of insolvency of capitated providers. Therefore, such investments are reported as “Restricted investments” in the accompanying consolidated balance sheets.

We have the ability to hold these restricted investments until maturity and, as a result, we would not expect the value of these investments to decline significantly due to a sudden change in market interest rates. Our held-to-maturity restricted investments are carried at amortized cost, which approximates fair value. Such investments amounted to $289 million at September 30, 2024, of which $207 million will mature in one year or less, $77 million will mature in one through five years, and $5 million will mature after five years.

7. Medical Claims and Benefits Payable

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


	September 30, 2024		December 31, 2023

	(In millions)
Claims incurred but not paid (“IBNP”)	$	3,065	$	2,901
Pharmacy payable	249		202
Capitation payable	173		100
Other	1,245		1,001
Total	$	4,732	$	4,204

“Other” medical claims and benefits payable mainly includes amounts payable to certain providers for which we act as an intermediary on behalf of various government agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. Non-risk provider payables amounted to $493 million and $481 million as of September 30, 2024, and December 31, 2023, respectively.

The following tables present the components of the change in our medical claims and benefits payable for the periods indicated. The amounts presented for “Components of medical care costs related to: Prior years” represent the amount by which our original estimate of medical claims and benefits payable at the beginning of the year varied from the actual liabilities, based on information (principally the payment of claims) developed since those liabilities were first reported.

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	Nine Months Ended September 30, 2024
	Medicaid		Medicare		Marketplace		Consolidated

	(In millions)
Medical claims and benefits payable, beginning balance	$	3,444	$	532	$	228	$	4,204
Components of medical care costs related to:
Current year	20,903		3,798		1,349		26,050
Prior years	(553)		(70)		(2)		(625)
Total medical care costs	20,350		3,728		1,347		25,425
Payments for medical care costs related to:
Current year	17,813		3,237		1,122		22,172
Prior years	2,256		742		217		3,215
Total paid	20,069		3,979		1,339		25,387
Acquired balances, net of post-acquisition adjustments	—		463		—		463
Change in non-risk and other payables	27		—		—		27
Medical claims and benefits payable, ending balance	$	3,752	$	744	$	236	$	4,732


	Nine Months Ended September 30, 2023
	Medicaid		Medicare		Marketplace		Consolidated

	(In millions)
Medical claims and benefits payable, beginning balance	$	2,815	$	452	$	261	$	3,528
Components of medical care costs related to:
Current year	17,630		2,811		1,132		21,573
Prior years	(327)		(6)		(25)		(358)
Total medical care costs	17,303		2,805		1,107		21,215
Payments for medical care costs related to:
Current year	14,961		2,340		927		18,228
Prior years	2,074		424		209		2,707
Total paid	17,035		2,764		1,136		20,935
Acquired balances, net of post-acquisition adjustments	83		13		—		96
Change in non-risk and other provider payables	335		(4)		—		331
Medical claims and benefits payable, ending balance	$	3,501	$	502	$	232	$	4,235

Our estimates of medical claims and benefits payable recorded at December 31, 2023, and 2022 developed favorably by approximately $625 million and $358 million as of September 30, 2024, and 2023, respectively.

The favorable prior year development recognized in the nine months ended September 30, 2024 was primarily attributable to reserving under moderately adverse conditions, lower than expected utilization of medical services by our members and improved operating performance, mainly in the Medicaid segment. Consequently, the ultimate costs recognized in 2024, as claims payments were processed, were lower than our estimates in 2023.

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8. Debt

The following table summarizes our outstanding debt obligations, all of which are non-current as of the dates reported below:


	September 30, 2024		December 31, 2023

	(In millions)




Non-current long-term debt:
4.375% Notes due 2028	$	800	$	800
3.875% Notes due 2030	650		650
3.875% Notes due 2032	750		750
Credit Facility	150		—
Deferred debt issuance costs	(18)		(20)
Total	$	2,332	$	2,180

Credit Agreement

On September 20, 2024, we entered into a Second Amendment to our credit agreement (the “Amended Credit Agreement”) which includes an increase in available commitments under the revolving credit facility (“Credit Facility”) to $1.25 billion, among other provisions. The Amended Credit Agreement has a term of five years, and all amounts outstanding will be due and payable on September 20, 2029. Borrowings under the Amended Credit Agreement bear interest based, at our election, on a base rate or other defined rate, plus in each case, the applicable margin. In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Amended Credit Agreement, we are required to pay a quarterly commitment fee. We have other relationships, including financial advisory and banking, with some parties to the Amended Credit Agreement.

The Amended Credit Agreement contains customary non-financial and financial covenants. As of September 30, 2024, we were in compliance with all financial and non-financial covenants under the Amended Credit Agreement. As of September 30, 2024, $150 million was outstanding under the Credit Facility.

Senior Notes

Our senior notes are described below. Each of these notes are senior unsecured obligations of the parent corporation, Molina Healthcare, Inc., and rank equally in right of payment with all existing and future senior debt, and senior to all existing and future subordinated debt of Molina Healthcare, Inc. In addition, each of the indentures governing the senior notes contain customary non-financial covenants and change of control provisions. As of September 30, 2024, we were in compliance with all non-financial covenants in the indentures governing the senior notes.

The indentures governing the senior notes contain cross-default provisions that are triggered upon default by us or any of our subsidiaries on any indebtedness in excess of the amount specified in the applicable indenture.

4.375% Notes due 2028. We have $800 million aggregate principal amount of senior notes (the “4.375% Notes”) outstanding as of September 30, 2024, which are due June 15, 2028, unless earlier redeemed. Interest, at a rate of 4.375% per annum, is payable semiannually in arrears on June 15 and December 15.

3.875% Notes due 2030. We have $650 million aggregate principal amount of senior notes (the “3.875% Notes due 2030”) outstanding as of September 30, 2024, which are due November 15, 2030, unless earlier redeemed. Interest, at a rate of 3.875% per annum, is payable semiannually in arrears on May 15 and November 15.

3.875% Notes due 2032. We have $750 million aggregate principal amount of senior notes (the “3.875% Notes due 2032”) outstanding as of September 30, 2024, which are due May 15, 2032, unless earlier redeemed. Interest, at a rate of 3.875% per annum, is payable semiannually in arrears on May 15 and November 15.

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9. Stockholders' Equity

In September 2023, our board of directors authorized the purchase of up to $750 million, in the aggregate, of our common stock. Under this program, pursuant to a Rule 10b5-1 trading plan, we purchased approximately 1,465,000 shares for $500 million in the third quarter of 2024 (average cost of $341.25 per share). We have accrued a stock repurchase excise tax of $3 million related to the share repurchase program as of September 30, 2024 located in “Accounts payable, accrued liabilities and other” and “Additional paid-in capital” in the accompanying consolidated balance sheets.

In October 2024, our board of directors authorized the purchase of up to $1 billion of our common stock. This new program extends through December 31, 2025 and supersedes the stock purchase program previously approved by our board of directors in September 2023. The exact timing and amount of any repurchase is determined by management based on market conditions and share price, in addition to other factors, and repurchases generally will be made in accordance with the volume, price, and timing parameters under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. No shares have been repurchased under this program.

10. Segments

We currently have four reportable segments consisting of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other. Our reportable segments are consistent with how we currently manage the business and view the markets we serve.

The Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which we offer managed healthcare services. The Other segment, which is insignificant to our consolidated results of operations, includes long-term services and supports consultative services in Wisconsin.

The key metrics used to assess the performance of our Medicaid, Medicare, and Marketplace segments are premium revenue, medical margin and medical care ratio (“MCR”). MCR represents the amount of medical care costs as a percentage of premium revenue. Therefore, the underlying medical margin, or the amount earned by the Medicaid, Medicare, and Marketplace segments after medical costs are deducted from premium revenue, represents the most important measure of earnings reviewed by management, and is used by our chief executive officer to review results, assess performance, and allocate resources. The key metric used to assess the performance of our Other segment is service margin. The service margin is equal to service revenue minus cost of service revenue. We do not report total assets by segment since this is not a metric used to assess segment performance or allocate resources.

The following table presents total revenue by segment. Inter-segment revenue was insignificant for all periods presented.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions)
Total revenue:
Medicaid	$	8,263	$	6,976	$	23,896	$	20,282
Medicare	1,385		1,046		4,301		3,157
Marketplace	672		507		1,894		1,528
Other	20		19		60		57
Consolidated	$	10,340	$	8,548	$	30,151	$	25,024

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The following table reconciles margin by segment to consolidated income before income tax expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions)
Margin:
Medicaid	$	730	$	752	$	2,188	$	2,242
Medicare	142		78		522		317
Marketplace	179		104		509		393
Other	1		2		5		7
Total margin	1,052		936		3,224		2,959
Add: other operating revenues (1)	626		289		1,447		800
Less: other operating expenses (2)	(1,211)		(866)		(3,344)		(2,502)
Operating income	467		359		1,327		1,257
Less: interest expense	29		27		84		82
Income before income tax expense	$	438	$	332	$	1,243	$	1,175

______________________

(1)Other operating revenues include premium tax revenue, investment income, and certain other revenue.

(2)Other operating expenses include general and administrative expenses, premium tax expenses, depreciation and amortization, and certain other operating expenses.

11. Commitments and Contingencies

Legal Proceedings

The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments, as well as various contractual provisions, governing our operations. Compliance with these laws, regulations, and contractual provisions can be subject to government audit, review, and interpretation, as well as regulatory actions. Penalties associated with violations of these laws, regulations, and contractual provisions can include significant fines and penalties, temporary or permanent exclusion from participating in publicly funded programs, a limitation on our ability to market or sell products, the repayment of previously billed and collected revenues, and reputational damage.

We are involved in legal actions in the ordinary course of business including, but not limited to, various employment claims, vendor disputes and provider claims. Some of these legal actions seek monetary damages, including claims for punitive damages, which may not be covered by insurance. We review legal matters and update our estimates, or range of estimates, of reasonably possible losses and related disclosures, as necessary. We have accrued liabilities for legal matters for which we deem the loss to be both probable and reasonably estimable. These liability estimates could change as a result of further developments. The outcome of these legal actions are inherently uncertain. An adverse determination in one or more of these pending matters could have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Kentucky RFP. On September 4, 2020, Anthem Kentucky Managed Care Plan, Inc. (“Anthem”) brought an action in Franklin County Circuit Court against the Kentucky Finance and Administration Cabinet, the Kentucky Cabinet for Health and Family Services, and all of the five winning bidder health plans, including our Kentucky health plan. On September 9, 2022, the Kentucky Court of Appeals ruled that, with regard to the earlier Circuit Court ruling granting Anthem relief, the Circuit Court should not have invalidated the 2020 procurement and thus should not have awarded a contract to Anthem. Anthem sought discretionary review by the Kentucky Supreme Court (“KSC”) of the ruling by the Court of Appeals. On March 14, 2024, the KSC entered an Order affirming the Kentucky Court of Appeals. On April 3, 2024, Anthem filed a motion for reconsideration of the KSC Order, and the KSC has yet to rule. On September 9, 2024, Humana filed a motion in the Franklin Circuit Court to dissolve the injunction that retained Anthem as an additional awardee, and the Franklin Circuit Court has not yet ruled on the motion. Pending further KSC or Franklin Circuit Court orders, our Kentucky health plan will continue to operate for the foreseeable future under its current Medicaid contract.

Puerto Rico. In August 2021, Molina Healthcare of Puerto Rico, Inc. (“MHPR”) filed a complaint with the Commonwealth of Puerto Rico, Court of First Instance, San Juan (State Court) asserting breach of contract against

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Puerto Rico Health Insurance Administration (“ASES”). In September 2021, ASES filed a counterclaim and a third-party complaint against MHPR and the Company. In October 2024, the parties finalized a settlement of all outstanding claims, the terms of which are not a material impact on the Company’s business, financial condition, cash flows, or results of operations.

Texas Qui Tam Litigation. On May 7, 2013, a relator filed under seal a qui tam action in Texas state court against Molina Healthcare, Inc. and Molina Healthcare of Texas, Inc., asserting claims under the Texas Medicaid Fraud Prevention Act (“TMFPA”) on behalf of the State of Texas. As required by the TMFPA, the original petition was filed in camera and under seal, and without Molina’s awareness, to permit the State to decide whether to intervene. In 2019, the State declined to intervene. In June 2019, as a result of the State’s election to decline intervention, the trial court unsealed the original petition, at which time Molina became aware of the lawsuit. The relator’s third amended petition was filed on January 19, 2024. The petition alleges that, during the periods in question some ten years ago, Molina failed to assess STAR+PLUS members for personal attendant services, failed to provide those members with contractually required health care benefits, and misrepresented to the State Molina’s capacity to perform the assessments and the status of the assessments. Based on these allegations, the relator contends that Molina is liable to the State under the TMFPA for statutorily defined civil remedies, disgorgement of previous capitation payments, and interest. Molina denies the relator’s allegations as well as any liability in the lawsuit, and intends to defend against the relator’s allegations vigorously. The parties are currently engaged in settlement discussions. Molina does not believe this matter will have a material effect on our business, financial condition, cash flows, or results of operations.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements. We intend such forward-looking statements to be covered under the safe harbor provisions for forward-looking statements contained in 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 located under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions, and all statements other than statements of historical fact contained in this Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by words such as “guidance,” “future,” “anticipates,” “believes,” “embedded,” “estimates,” “expects,” “growth,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “can,” “may,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements regarding our future results of operations and financial position, industry and business trends, regulatory developments, business strategy, strategic transactions and commercial arrangements, membership and market growth and our objectives for future operations. Readers are cautioned not to place undue reliance on any forward-looking statements, as forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly due to numerous known and unknown risks and uncertainties.

Those known risks and uncertainties include, but are not limited to, the risk factors identified in the section titled “Risk Factors” in our 2023 Annual Report on Form 10-K, including without limitation risks related to the following matters:

•the continuing impact of Medicaid redeterminations, including the health acuity levels of our continuing members, and the actuarially sound adjustment of rates with regard to the members we retain;

•budget pressures on state governments and states’ efforts to reduce rates or limit rate increases;

•the constantly evolving market dynamics surrounding the Affordable Care Act (“ACA”) Marketplaces, including issues impacting enrollment, special enrollment periods, member choice, premium subsidies, risk adjustment estimates and results, Marketplace plan insolvencies or receiverships, and the potential for disproportionate enrollment of higher acuity members;

•the success of our efforts to retain existing or awarded government contracts, the success of our bid submissions in response to requests for proposal, and our ability to identify merger and acquisition targets to support our continued growth over time;

•the success of the scaling up of our operations in new states in connection with request for proposal (“RFP”) wins, and the satisfaction of all readiness review requirements under the new Medicaid contracts;

•our ability to integrate, and realize benefits from acquisitions, including the completed acquisitions of My Choice Wisconsin, and Bright Health Medicare, and the timely closing of the announced acquisition of ConnectiCare;

•subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including retroactive Medicaid rate adjustments in a state or changes to estimated amounts payable or receivable related to Marketplace risk adjustment;

•effective management of our medical costs;

•our ability to predict with a reasonable degree of accuracy utilization rates;

•cyber-attacks, ransomware attacks, or other privacy or data security incidents involving either ourselves or our contracted vendors, such as Change Healthcare or CrowdStrike, that result in an inadvertent unauthorized disclosure of protected information or operational delays, and the extent to which our working in a remote work environment heightens our exposure to these risks;

•the ability to manage our operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives;

•operational improvements, efficiencies, and cost savings that are less than anticipated, or that result in unforeseen consequences, from our investments in artificial intelligence (“AI”) administrative tools and initiatives;

•the impact of our working in a permanent remote work environment, including any associated impairment charges or contract termination costs;

•our receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;

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•our ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;

•the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions and requirements;

•our estimates of amounts owed for minimum medical loss ratio regulations and contractual provisions, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions and requirements;

•the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;

•the transition of Medicare-Medicaid pilot programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas serving those dually eligible for both Medicare and Medicaid, the increasing integration of Medicare and Medicaid programmatic and compliance requirements, and the extension or incorporation of federal Medicare requirements developed by CMS into state-administered Medicaid programs;

•the accurate estimation of incurred but not reported or paid medical costs across our health plans;

•efforts by states to recoup previously paid and recognized premium amounts;

•changes in our annual effective tax rate due to federal and/or state legislation, or changes in our mix of earnings and other factors;

•the efficient and effective operations of the vendors on whom our business relies;

•complications, member confusion, or enrollment backlogs related to the renewal of Medicaid coverage;

•fraud, waste and abuse matters, government audits, reviews, or investigations, comment letters, and any fine, sanction, enrollment freeze, debarment, corrective action plan, monitoring program, or premium recovery that may result therefrom;

•the success of our providers, including delegated providers, the adequacy of our provider networks, the successful maintenance of relations with our providers, and the potential loss of providers;

•approval by state regulators of dividends and distributions by our health plan subsidiaries;

•changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;

•high dollar claims related to catastrophic illness;

•the favorable resolution of litigation, arbitration, or administrative proceedings;

•the greater scale and revenues of our health plans in California, New York, Ohio, Texas, and Washington, and risks related to the concentration of our business in those states;

•the failure to comply with the financial or other covenants in the credit agreement governing our revolving credit facility or the indentures governing our outstanding senior notes;

•the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity, and meet our general liquidity needs;

•the failure of a state in which we operate to renew its federal Medicaid waiver;

•changes generally affecting the managed care industry, including any new federal or state legislation that impacts the business space in which we operate;

•increases in government surcharges, taxes, and assessments;

•the impact of inflation on our medical costs and the cost of refinancing our outstanding indebtedness;

•the unexpected loss of the leadership of one or more of our senior executives; and

•increasing competition and consolidation in the Medicaid or general healthcare sector.

Each of the terms “Molina Healthcare, Inc.” “Molina Healthcare,” “Company,” “we,” “our,” and “us,” as used herein, refers collectively to Molina Healthcare, Inc. and its wholly owned subsidiaries, unless otherwise stated. The forward-looking statements in this Form 10-Q are based upon information available to us as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Form 10-Q. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

This Form 10-Q and the following discussion of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the notes to those statements appearing elsewhere in this report, and the audited financial statements and Management’s Discussion and Analysis appearing in our 2023 Annual Report on Form 10-K.

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OVERVIEW

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed healthcare services under the Medicaid and Medicare programs, and through the state insurance marketplaces (the “Marketplace”). We served approximately 5.6 million members as of September 30, 2024, located across 21 states.

THIRD QUARTER 2024 HIGHLIGHTS

We reported net income of $326 million, or $5.65 per diluted share, for the third quarter of 2024, which reflected the following:

•Membership of 5.6 million at September 30, 2024 increased 392,000, or 8%, compared with September 30, 2023, across all segments, primarily due to the new Medicaid contract wins, acquisitions, and growth in our current footprint, partially offset by the impact of Medicaid redeterminations;

•Premium revenue of $9.7 billion, which increased 18% compared with the third quarter of 2023 due to the increased membership in all segments mentioned above;

•Consolidated medical care ratio (“MCR”) of 89.2% compared with 88.7% for the third quarter of 2023, and was higher than expected as we experienced medical cost pressure in our Medicaid and Medicare segments;

•Investment income of $118 million, which increased 5% compared with the third quarter of 2023, and continues to bolster our operating income results;

•General and administrative expense (“G&A”) ratio of 6.5%, compared with 7.1% for the third quarter of 2023, reflecting operating discipline and the continued benefit of fixed cost leverage as we grow our business; and

•After-tax margin of 3.2%, which was in line with our expectations.

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CONSOLIDATED FINANCIAL SUMMARY

The following table summarizes our consolidated results of operations and other financial information for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023

	(In millions, except per-share amounts)
Premium revenue	$	9,694		$	8,240		$	28,644		$	24,167
Less: medical care costs	8,643			7,306			25,425			21,215
Medical margin	1,051			934			3,219			2,952
MCR (1)	89.2		%	88.7		%	88.8		%	87.8		%

Other revenues:
Premium tax revenue	508			176			1,103			517


Investment income	118			112			341			280
Other revenue	20			20			63			60

General and administrative expenses	676			608			2,078			1,817
G&A ratio (2)	6.5		%	7.1		%	6.9		%	7.3		%

Premium tax expenses	508			176			1,103			517

Depreciation and amortization	47			42			138			128
Other	(1)			57			80			90
Operating income