|
|
|
|
|
|
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
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Delaware
|
|
13-4204626
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(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
|
|
|
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200 Oceangate, Suite 100
Long Beach, California
|
|
90802
|
(Address of principal executive offices)
|
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(Zip Code)
|
|
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Large accelerated filer
|
x
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Accelerated filer
|
¨
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|
|
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Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
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Smaller reporting company
|
¨
|
|
|
|
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Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
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2013
|
|
2012
|
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2013
|
|
2012
|
||||||||
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(Amounts in thousands, except
net income (loss) per share)
(Unaudited)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Premium revenue
|
$
|
1,584,656
|
|
|
$
|
1,448,600
|
|
|
$
|
4,583,818
|
|
|
$
|
4,066,737
|
|
Premium tax receipts
|
43,723
|
|
|
37,894
|
|
|
127,606
|
|
|
120,953
|
|
||||
Service revenue
|
51,100
|
|
|
48,422
|
|
|
150,528
|
|
|
132,351
|
|
||||
Investment income
|
1,740
|
|
|
1,155
|
|
|
4,884
|
|
|
3,893
|
|
||||
Rental and other income
|
5,860
|
|
|
4,079
|
|
|
16,476
|
|
|
12,315
|
|
||||
Total revenue
|
1,687,079
|
|
|
1,540,150
|
|
|
4,883,312
|
|
|
4,336,249
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Medical care costs
|
1,383,213
|
|
|
1,319,991
|
|
|
3,965,834
|
|
|
3,715,455
|
|
||||
Cost of service revenue
|
40,113
|
|
|
37,004
|
|
|
119,188
|
|
|
98,111
|
|
||||
General and administrative expenses
|
176,233
|
|
|
127,035
|
|
|
478,990
|
|
|
365,564
|
|
||||
Premium tax expenses
|
43,723
|
|
|
37,894
|
|
|
127,606
|
|
|
120,953
|
|
||||
Depreciation and amortization
|
18,871
|
|
|
15,858
|
|
|
52,449
|
|
|
46,916
|
|
||||
Total expenses
|
1,662,153
|
|
|
1,537,782
|
|
|
4,744,067
|
|
|
4,346,999
|
|
||||
Operating income (loss)
|
24,926
|
|
|
2,368
|
|
|
139,245
|
|
|
(10,750
|
)
|
||||
Other expenses:
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
13,532
|
|
|
4,315
|
|
|
38,236
|
|
|
12,421
|
|
||||
Other (income) expense
|
(24
|
)
|
|
184
|
|
|
3,347
|
|
|
1,270
|
|
||||
Total other expenses
|
13,508
|
|
|
4,499
|
|
|
41,583
|
|
|
13,691
|
|
||||
Income (loss) from continuing operations before income tax expense
|
11,418
|
|
|
(2,131
|
)
|
|
97,662
|
|
|
(24,441
|
)
|
||||
Income tax expense (benefit)
|
3,865
|
|
|
(1,966
|
)
|
|
43,791
|
|
|
(11,113
|
)
|
||||
Income (loss) from continuing operations
|
7,553
|
|
|
(165
|
)
|
|
53,871
|
|
|
(13,328
|
)
|
||||
Income (loss) from discontinued operations, net of tax expense (benefit) of $97, $1,474, $(10,046), and $(4,115), respectively
|
16
|
|
|
3,529
|
|
|
8,184
|
|
|
(2,525
|
)
|
||||
Net income (loss)
|
$
|
7,569
|
|
|
$
|
3,364
|
|
|
$
|
62,055
|
|
|
$
|
(15,853
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
0.17
|
|
|
$
|
(0.01
|
)
|
|
$
|
1.18
|
|
|
$
|
(0.29
|
)
|
Income (loss) from discontinued operations
|
—
|
|
|
0.08
|
|
|
0.18
|
|
|
(0.05
|
)
|
||||
Basic net income (loss) per share
|
$
|
0.17
|
|
|
$
|
0.07
|
|
|
$
|
1.36
|
|
|
$
|
(0.34
|
)
|
Diluted income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
0.16
|
|
|
$
|
(0.01
|
)
|
|
$
|
1.15
|
|
|
$
|
(0.29
|
)
|
Income (loss) from discontinued operations
|
—
|
|
|
0.08
|
|
|
0.18
|
|
|
(0.05
|
)
|
||||
Diluted net income (loss) per share
|
$
|
0.16
|
|
|
$
|
0.07
|
|
|
$
|
1.33
|
|
|
$
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
45,699
|
|
|
46,546
|
|
|
45,708
|
|
|
46,301
|
|
||||
Diluted
|
47,062
|
|
|
46,880
|
|
|
46,767
|
|
|
46,301
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(Amounts in thousands)
(Unaudited)
|
||||||||||||||
Net income (loss)
|
$
|
7,569
|
|
|
$
|
3,364
|
|
|
$
|
62,055
|
|
|
$
|
(15,853
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Gross unrealized investment gain (loss)
|
2,087
|
|
|
733
|
|
|
(1,539
|
)
|
|
1,734
|
|
||||
Effect of income taxes
|
793
|
|
|
278
|
|
|
(585
|
)
|
|
659
|
|
||||
Other comprehensive income (loss), net of tax
|
1,294
|
|
|
455
|
|
|
(954
|
)
|
|
1,075
|
|
||||
Comprehensive income (loss)
|
$
|
8,863
|
|
|
$
|
3,819
|
|
|
$
|
61,101
|
|
|
$
|
(14,778
|
)
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2013
|
|
2012
|
||||
|
(Amounts in thousands)
(Unaudited)
|
||||||
Operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
62,055
|
|
|
$
|
(15,853
|
)
|
Adjustments to reconcile net income (loss) to net cash change in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
68,035
|
|
|
58,289
|
|
||
Deferred income taxes
|
(38,442
|
)
|
|
523
|
|
||
Stock-based compensation
|
20,654
|
|
|
15,448
|
|
||
Gain on sale of subsidiary
|
—
|
|
|
(1,747
|
)
|
||
Amortization of convertible senior notes and lease financing obligations
|
16,128
|
|
|
4,414
|
|
||
Change in fair value of derivatives
|
3,383
|
|
|
1,270
|
|
||
Amortization of premium/discount on investments
|
8,053
|
|
|
5,166
|
|
||
Amortization of deferred financing costs
|
3,042
|
|
|
825
|
|
||
Tax deficiency from employee stock compensation
|
(72
|
)
|
|
(159
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Receivables
|
(144,285
|
)
|
|
10,989
|
|
||
Prepaid expenses and other current assets
|
(27,552
|
)
|
|
(10,574
|
)
|
||
Medical claims and benefits payable
|
138,176
|
|
|
133,987
|
|
||
Accounts payable and accrued liabilities
|
20,991
|
|
|
(9,030
|
)
|
||
Deferred revenue
|
(17,410
|
)
|
|
92,354
|
|
||
Income taxes
|
(1,012
|
)
|
|
(21,878
|
)
|
||
Net cash provided by operating activities
|
111,744
|
|
|
264,024
|
|
||
Investing activities:
|
|
|
|
||||
Purchases of equipment
|
(64,426
|
)
|
|
(52,548
|
)
|
||
Purchases of investments
|
(627,953
|
)
|
|
(234,465
|
)
|
||
Sales and maturities of investments
|
227,800
|
|
|
213,665
|
|
||
Proceeds from sale of subsidiary, net of cash surrendered
|
—
|
|
|
9,162
|
|
||
Net cash paid in business combinations
|
(57,684
|
)
|
|
—
|
|
||
Change in deferred contract costs
|
9,545
|
|
|
(18,799
|
)
|
||
Increase in restricted investments
|
(21,124
|
)
|
|
(3,034
|
)
|
||
Change in other non-current assets and liabilities
|
(7,574
|
)
|
|
(4,775
|
)
|
||
Net cash used in investing activities
|
(541,416
|
)
|
|
(90,794
|
)
|
||
Financing activities:
|
|
|
|
||||
Proceeds from issuance of 1.125% Notes, net of deferred financing costs
|
537,973
|
|
|
—
|
|
||
Proceeds from sale-leaseback transactions
|
158,694
|
|
|
—
|
|
||
Purchase of 1.125% Notes call option
|
(149,331
|
)
|
|
—
|
|
||
Proceeds from issuance of warrants
|
75,074
|
|
|
—
|
|
||
Treasury stock purchases
|
(50,000
|
)
|
|
—
|
|
||
Repayment of amounts borrowed under credit facility
|
(40,000
|
)
|
|
(20,000
|
)
|
||
Amount borrowed under credit facility
|
—
|
|
|
60,000
|
|
||
Principal payments on term loan
|
(47,471
|
)
|
|
(846
|
)
|
||
Settlement of interest rate swap
|
(875
|
)
|
|
—
|
|
||
Proceeds from employee stock plans
|
5,156
|
|
|
5,571
|
|
||
Excess tax benefits from employee stock compensation
|
1,238
|
|
|
3,698
|
|
||
Net cash provided by financing activities
|
490,458
|
|
|
48,423
|
|
||
Net increase in cash and cash equivalents
|
60,786
|
|
|
221,653
|
|
||
Cash and cash equivalents at beginning of period
|
795,770
|
|
|
493,827
|
|
||
Cash and cash equivalents at end of period
|
$
|
856,556
|
|
|
$
|
715,480
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2013
|
|
2012
|
||||
|
(Amounts in thousands)
|
||||||
|
(Unaudited)
|
||||||
Supplemental cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Income taxes
|
$
|
72,156
|
|
|
$
|
1,074
|
|
Interest
|
$
|
28,035
|
|
|
$
|
5,663
|
|
Schedule of non-cash investing and financing activities:
|
|
|
|
||||
Retirement of treasury stock
|
$
|
53,000
|
|
|
$
|
—
|
|
Common stock used for stock-based compensation
|
$
|
6,667
|
|
|
$
|
9,852
|
|
Non-cash financing obligation for construction projects
|
$
|
19,222
|
|
|
$
|
—
|
|
Details of business combinations:
|
|
|
|
||||
Fair value of assets acquired
|
$
|
121,845
|
|
|
$
|
—
|
|
Fair value of contingent consideration liabilities incurred
|
(59,947
|
)
|
|
—
|
|
||
Payable to seller
|
(3,882
|
)
|
|
—
|
|
||
Escrow deposit
|
(332
|
)
|
|
$
|
—
|
|
|
Net cash paid in business combinations
|
$
|
57,684
|
|
|
$
|
—
|
|
Details of change in fair value of derivatives:
|
|
|
|
||||
Gain on 1.125% Call Option
|
$
|
42,332
|
|
|
$
|
—
|
|
Loss on embedded cash conversion option
|
(42,225
|
)
|
|
—
|
|
||
Loss on 1.125% Warrants
|
(3,923
|
)
|
|
—
|
|
||
Gain (loss) on interest rate swap
|
433
|
|
|
(1,270
|
)
|
||
Change in fair value of derivatives
|
$
|
(3,383
|
)
|
|
$
|
(1,270
|
)
|
Details of sale of subsidiary:
|
|
|
|
||||
Decrease in carrying value of assets
|
$
|
—
|
|
|
$
|
30,942
|
|
Decrease in carrying value of liabilities
|
—
|
|
|
(23,527
|
)
|
||
Gain on sale
|
—
|
|
|
1,747
|
|
||
Proceeds from sale of subsidiary, net of cash surrendered
|
$
|
—
|
|
|
$
|
9,162
|
|
|
Three Months Ended September 30, 2013
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
906
|
|
|
$
|
818
|
|
|
$
|
2
|
|
|
$
|
820
|
|
|
$
|
130,318
|
|
Ohio
|
3,080
|
|
|
976
|
|
|
(52
|
)
|
|
924
|
|
|
280,964
|
|
|||||
Texas
|
15,744
|
|
|
15,744
|
|
|
—
|
|
|
15,744
|
|
|
320,657
|
|
|||||
Wisconsin
|
1,209
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,676
|
|
|||||
|
$
|
20,939
|
|
|
$
|
17,538
|
|
|
$
|
(50
|
)
|
|
$
|
17,488
|
|
|
$
|
771,615
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Three Months Ended September 30, 2012
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
560
|
|
|
$
|
532
|
|
|
$
|
—
|
|
|
$
|
532
|
|
|
$
|
80,846
|
|
Ohio
|
2,824
|
|
|
1,412
|
|
|
—
|
|
|
1,412
|
|
|
282,489
|
|
|||||
Texas
|
17,685
|
|
|
10,453
|
|
|
—
|
|
|
10,453
|
|
|
344,522
|
|
|||||
Wisconsin
|
419
|
|
|
—
|
|
|
246
|
|
|
246
|
|
|
16,279
|
|
|||||
|
$
|
21,488
|
|
|
$
|
12,397
|
|
|
$
|
246
|
|
|
$
|
12,643
|
|
|
$
|
724,136
|
|
|
Nine Months Ended September 30, 2013
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
2,079
|
|
|
$
|
1,685
|
|
|
$
|
159
|
|
|
$
|
1,844
|
|
|
$
|
298,767
|
|
Ohio
|
9,049
|
|
|
3,115
|
|
|
501
|
|
|
3,616
|
|
|
819,879
|
|
|||||
Texas
|
47,683
|
|
|
47,683
|
|
|
5,995
|
|
|
53,678
|
|
|
969,063
|
|
|||||
Wisconsin
|
3,239
|
|
|
—
|
|
|
1,104
|
|
|
1,104
|
|
|
104,540
|
|
|||||
|
$
|
62,050
|
|
|
$
|
52,483
|
|
|
$
|
7,759
|
|
|
$
|
60,242
|
|
|
$
|
2,192,249
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Nine Months Ended September 30, 2012
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
1,676
|
|
|
$
|
1,350
|
|
|
$
|
658
|
|
|
$
|
2,008
|
|
|
$
|
240,568
|
|
Ohio
|
8,222
|
|
|
6,810
|
|
|
966
|
|
|
7,776
|
|
|
827,219
|
|
|||||
Texas
|
41,687
|
|
|
30,487
|
|
|
—
|
|
|
30,487
|
|
|
892,377
|
|
|||||
Wisconsin
|
1,284
|
|
|
—
|
|
|
492
|
|
|
492
|
|
|
52,209
|
|
|||||
|
$
|
52,869
|
|
|
$
|
38,647
|
|
|
$
|
2,116
|
|
|
$
|
40,763
|
|
|
$
|
2,012,373
|
|
•
|
Each contract calls for the provision of its own specific set of services. While all contracts support the system of record for state MMIS, the actual services we provide vary significantly between contracts; and
|
•
|
The nature of the MMIS installed varies significantly between our older contracts (proprietary mainframe systems) and our new contracts (commercial off-the-shelf technology solutions).
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||||||
Shares outstanding at the beginning of the period
|
45,683
|
|
|
46,527
|
|
|
46,762
|
|
|
45,815
|
|
Weighted-average number of shares repurchased
|
—
|
|
|
—
|
|
|
(1,375
|
)
|
|
—
|
|
Weighted-average number of shares issued
|
16
|
|
|
19
|
|
|
321
|
|
|
486
|
|
Denominator for basic net income (loss) per share
|
45,699
|
|
|
46,546
|
|
|
45,708
|
|
|
46,301
|
|
Dilutive effect of employee stock options and stock grants (1)
|
453
|
|
|
334
|
|
|
532
|
|
|
—
|
|
Dilutive effect of convertible senior notes
|
910
|
|
|
—
|
|
|
527
|
|
|
—
|
|
Denominator for diluted net income (loss) per share (2)
|
47,062
|
|
|
46,880
|
|
|
46,767
|
|
|
46,301
|
|
(1)
|
Unvested restricted shares are included in the calculation of diluted net income per share when their grant date fair values are below the average fair value of the common shares for each of the periods presented. Options to purchase common shares are included in the calculation of diluted net income per share when their exercise prices are below the average fair value of the common shares for each of the periods presented. For the three and nine months ended
September 30, 2013
there were no anti-dilutive weighted restricted shares. For the three and nine months ended
September 30, 2013
there were approximately
60,000
and
48,600
anti-dilutive weighted options, respectively. For the three months ended
September 30, 2012
, there were approximately
370,000
anti-dilutive weighted restricted shares and
125,000
anti-dilutive weighted options. Potentially dilutive unvested restricted shares and stock options were not included in the computation of diluted loss per share for the nine months ended
September 30, 2012
, because to do so would have been anti-dilutive.
|
(2)
|
Potentially dilutive shares issuable pursuant to our 1.125% Warrants (defined in Note
11
, "
Long-Term Debt
") were not included in the computation of diluted income per share for the three and nine month period ended
September 30, 2013
, because to do so would have been anti-dilutive. Potentially dilutive shares issuable pursuant to our 3.75% Notes (defined in Note
11
, "
Long-Term Debt
") were not included in the computation of diluted loss per share for the three and nine month period ended
September 30, 2012
, because to do so would have been anti-dilutive.
|
|
Fair Value of Assets Acquired - Health Plans Segment
|
||||||||||||||||
|
Weighted average useful life
|
|
South Carolina
|
|
New Mexico
|
|
Florida
|
|
Total
|
||||||||
|
(Years)
|
|
(In thousands)
|
||||||||||||||
Membership conversion rights
|
12.0
|
|
$
|
21,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,800
|
|
Contract rights
|
10.6
|
|
—
|
|
|
18,300
|
|
|
—
|
|
|
18,300
|
|
||||
Other finite-lived intangibles
|
7.7
|
|
1,060
|
|
|
—
|
|
|
990
|
|
|
2,050
|
|
||||
Goodwill
|
—
|
|
42,140
|
|
|
35,223
|
|
|
2,332
|
|
|
79,695
|
|
||||
|
|
|
$
|
65,000
|
|
|
$
|
53,523
|
|
|
$
|
3,322
|
|
|
$
|
121,845
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(In thousands)
|
||||||||||||||
Restricted stock and performance awards
|
$
|
7,634
|
|
|
$
|
5,093
|
|
|
$
|
18,593
|
|
|
$
|
13,943
|
|
Employee stock purchase plan and stock options
|
870
|
|
|
543
|
|
|
2,061
|
|
|
1,505
|
|
||||
|
$
|
8,504
|
|
|
$
|
5,636
|
|
|
$
|
20,654
|
|
|
$
|
15,448
|
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value
|
|
Weighted
Average
Remaining
Contractual
term
|
|||||
|
|
|
|
|
(In thousands)
|
|
(Years)
|
|||||
Outstanding as of December 31, 2012
|
414,061
|
|
|
$
|
22.39
|
|
|
|
|
|
||
Granted
|
45,000
|
|
|
33.02
|
|
|
|
|
|
|||
Exercised
|
(70,000
|
)
|
|
20.11
|
|
|
|
|
|
|
||
Forfeited
|
(300
|
)
|
|
17.63
|
|
|
|
|
|
|||
Outstanding as of September 30, 2013
|
388,761
|
|
|
24.04
|
|
|
$
|
4,495
|
|
|
3.6
|
|
Stock options exercisable and expected to vest as of September 30, 2013
|
388,761
|
|
|
24.04
|
|
|
$
|
4,495
|
|
|
3.6
|
|
Exercisable as of September 30, 2013
|
333,761
|
|
|
22.50
|
|
|
$
|
4,371
|
|
|
2.7
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Corporate debt securities
|
$
|
467,060
|
|
|
$
|
—
|
|
|
$
|
467,060
|
|
|
$
|
—
|
|
GSEs
|
74,951
|
|
|
74,951
|
|
|
—
|
|
|
—
|
|
||||
Municipal securities
|
107,844
|
|
|
—
|
|
|
107,844
|
|
|
—
|
|
||||
U.S. treasury notes
|
42,207
|
|
|
42,207
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
43,089
|
|
|
—
|
|
|
43,089
|
|
|
—
|
|
||||
Auction rate securities
|
11,674
|
|
|
—
|
|
|
—
|
|
|
11,674
|
|
||||
1.125% Call Option derivative asset
|
191,663
|
|
|
—
|
|
|
—
|
|
|
191,663
|
|
||||
Total assets measured at fair value on a recurring basis
|
$
|
938,488
|
|
|
$
|
117,158
|
|
|
$
|
617,993
|
|
|
$
|
203,337
|
|
|
|
|
|
|
|
|
|
||||||||
Embedded cash conversion option derivative liability
|
$
|
191,556
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
191,556
|
|
Contingent consideration liabilities
|
59,947
|
|
|
—
|
|
|
—
|
|
|
59,947
|
|
||||
Total liabilities measured at fair value on a recurring basis
|
$
|
251,503
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
251,503
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Corporate debt securities
|
$
|
191,008
|
|
|
$
|
—
|
|
|
$
|
191,008
|
|
|
$
|
—
|
|
GSEs
|
29,525
|
|
|
29,525
|
|
|
—
|
|
|
—
|
|
||||
Municipal securities
|
75,848
|
|
|
—
|
|
|
75,848
|
|
|
—
|
|
||||
U.S. treasury notes
|
35,740
|
|
|
35,740
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
10,724
|
|
|
—
|
|
|
10,724
|
|
|
—
|
|
||||
Auction rate securities
|
13,419
|
|
|
—
|
|
|
—
|
|
|
13,419
|
|
||||
Total assets measured at fair value on a recurring basis
|
$
|
356,264
|
|
|
$
|
65,265
|
|
|
$
|
277,580
|
|
|
$
|
13,419
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swap derivative liability
|
$
|
1,307
|
|
|
$
|
—
|
|
|
$
|
1,307
|
|
|
$
|
—
|
|
|
Changes in Level 3 Instruments for the Nine Months Ended September 30, 2013
|
||||||||||||||
|
Total
|
|
Auction Rate Securities
|
|
Derivatives, Net
|
|
Contingent Consideration
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance at December 31, 2012
|
$
|
13,419
|
|
|
$
|
13,419
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net unrealized gains included in other comprehensive income
|
505
|
|
|
505
|
|
|
—
|
|
|
—
|
|
||||
Net unrealized losses included in other expense
|
(3,382
|
)
|
|
—
|
|
|
(3,382
|
)
|
|
—
|
|
||||
Issuances
|
(75,074
|
)
|
|
—
|
|
|
(75,074
|
)
|
|
—
|
|
||||
Auction rate securities settlements and derivative re-designation
|
76,747
|
|
|
(2,250
|
)
|
|
78,997
|
|
|
—
|
|
||||
Acquisitions
|
(59,947
|
)
|
|
—
|
|
|
—
|
|
|
(59,947
|
)
|
||||
Balance at September 30, 2013
|
$
|
(47,732
|
)
|
|
$
|
11,674
|
|
|
$
|
541
|
|
|
$
|
(59,947
|
)
|
The amount of total unrealized gains for the period included in other comprehensive income attributable to the change in accumulated other comprehensive losses relating to assets still held at September 30, 2013
|
$
|
397
|
|
|
$
|
397
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Changes in Level 3 Instruments for the Year Ended December 31, 2012
|
||||||||||||||
|
Total
|
|
Auction Rate Securities
|
|
Derivatives, Net
|
|
Contingent Consideration
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance at December 31, 2011
|
$
|
16,134
|
|
|
$
|
16,134
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net unrealized gains included in other comprehensive income
|
1,635
|
|
|
1,635
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
(4,350
|
)
|
|
(4,350
|
)
|
|
—
|
|
|
—
|
|
||||
Balance at December 31, 2012
|
$
|
13,419
|
|
|
$
|
13,419
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The amount of total unrealized gains for the period included in other comprehensive income attributable to the change in accumulated other comprehensive losses relating to assets still held at December 31, 2012
|
$
|
1,059
|
|
|
$
|
1,059
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
September 30, 2013
|
||||||||||||||||||
|
Carrying
Value
|
|
Total
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
1.125% Notes
|
$
|
411,659
|
|
|
$
|
596,899
|
|
|
$
|
—
|
|
|
$
|
596,899
|
|
|
$
|
—
|
|
3.75% Notes
|
180,225
|
|
|
229,556
|
|
|
—
|
|
|
229,556
|
|
|
—
|
|
|||||
Lease financing obligations
|
178,188
|
|
|
178,500
|
|
|
—
|
|
|
—
|
|
|
178,500
|
|
|||||
|
$
|
770,072
|
|
|
$
|
1,004,955
|
|
|
$
|
—
|
|
|
$
|
826,455
|
|
|
$
|
178,500
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
December 31, 2012
|
||||||||||||||||||
|
Carrying
|
|
Total
|
|
|
|
|
|
|
||||||||||
|
Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
3.75% Notes
|
$
|
175,468
|
|
|
$
|
208,460
|
|
|
$
|
—
|
|
|
$
|
208,460
|
|
|
$
|
—
|
|
Term loan
|
47,471
|
|
|
47,471
|
|
|
—
|
|
|
—
|
|
|
47,471
|
|
|||||
Credit facility
|
40,000
|
|
|
40,000
|
|
|
—
|
|
|
—
|
|
|
40,000
|
|
|||||
|
$
|
262,939
|
|
|
$
|
295,931
|
|
|
$
|
—
|
|
|
$
|
208,460
|
|
|
$
|
87,471
|
|
|
September 30, 2013
|
||||||||||||||
|
Amortized
|
|
Gross
Unrealized
|
|
Estimated
Fair
|
||||||||||
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Corporate debt securities
|
$
|
467,785
|
|
|
$
|
306
|
|
|
$
|
1,031
|
|
|
$
|
467,060
|
|
GSEs
|
75,022
|
|
|
18
|
|
|
89
|
|
|
74,951
|
|
||||
Municipal securities
|
108,647
|
|
|
109
|
|
|
912
|
|
|
107,844
|
|
||||
U.S. treasury notes
|
42,159
|
|
|
67
|
|
|
19
|
|
|
42,207
|
|
||||
Certificates of deposit
|
43,087
|
|
|
3
|
|
|
1
|
|
|
43,089
|
|
||||
Subtotal - current investments
|
736,700
|
|
|
503
|
|
|
2,052
|
|
|
735,151
|
|
||||
Auction rate securities
|
12,400
|
|
|
—
|
|
|
726
|
|
|
11,674
|
|
||||
|
$
|
749,100
|
|
|
$
|
503
|
|
|
$
|
2,778
|
|
|
$
|
746,825
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2012
|
||||||||||||||
|
Amortized
|
|
Gross
Unrealized
|
|
Estimated
Fair
|
||||||||||
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Corporate debt securities
|
$
|
190,545
|
|
|
$
|
528
|
|
|
$
|
65
|
|
|
$
|
191,008
|
|
GSEs
|
29,481
|
|
|
45
|
|
|
1
|
|
|
29,525
|
|
||||
Municipal securities
|
75,909
|
|
|
185
|
|
|
246
|
|
|
75,848
|
|
||||
U.S. treasury notes
|
35,700
|
|
|
42
|
|
|
2
|
|
|
35,740
|
|
||||
Certificates of deposit
|
10,715
|
|
|
9
|
|
|
—
|
|
|
10,724
|
|
||||
Subtotal - current investments
|
342,350
|
|
|
809
|
|
|
314
|
|
|
342,845
|
|
||||
Auction rate securities
|
14,650
|
|
|
—
|
|
|
1,231
|
|
|
13,419
|
|
||||
|
$
|
357,000
|
|
|
$
|
809
|
|
|
$
|
1,545
|
|
|
$
|
356,264
|
|
|
Cost
|
|
Estimated
Fair Value
|
||||
|
(In thousands)
|
||||||
Due in one year or less
|
$
|
406,330
|
|
|
$
|
406,342
|
|
Due one year through five years
|
330,370
|
|
|
328,809
|
|
||
Due after ten years
|
12,400
|
|
|
11,674
|
|
||
|
$
|
749,100
|
|
|
$
|
746,825
|
|
|
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
Securities
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
Total
Number of
Securities
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||
Corporate debt securities
|
$
|
254,351
|
|
|
$
|
991
|
|
|
99
|
|
|
$
|
5,580
|
|
|
$
|
40
|
|
|
5
|
|
Municipal securities
|
60,428
|
|
|
736
|
|
|
68
|
|
|
12,424
|
|
|
176
|
|
|
29
|
|
||||
GSEs
|
24,271
|
|
|
89
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
U.S. treasury notes
|
12,487
|
|
|
19
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
415
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Auction rate securities
|
—
|
|
|
—
|
|
|
—
|
|
|
11,674
|
|
|
726
|
|
|
17
|
|
||||
|
$
|
351,952
|
|
|
$
|
1,836
|
|
|
195
|
|
|
$
|
29,678
|
|
|
$
|
942
|
|
|
51
|
|
|
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
Securities
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
Total
Number of
Securities
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||
Corporate debt securities
|
$
|
44,457
|
|
|
$
|
65
|
|
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
Municipal securities
|
35,223
|
|
|
246
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
GSEs
|
5,004
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
U.S. treasury notes
|
4,511
|
|
|
2
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Auction rate securities
|
—
|
|
|
—
|
|
|
—
|
|
|
13,419
|
|
|
1,231
|
|
|
21
|
|
||||
|
$
|
89,195
|
|
|
$
|
314
|
|
|
72
|
|
|
$
|
13,419
|
|
|
$
|
1,231
|
|
|
21
|
|
|
September 30,
2013 |
|
December 31,
2012 |
||||
|
(In thousands)
|
||||||
Health Plans segment:
|
|
|
|
||||
California
|
$
|
130,718
|
|
|
$
|
28,553
|
|
Florida
|
2,239
|
|
|
953
|
|
||
Michigan
|
16,311
|
|
|
12,873
|
|
||
New Mexico
|
14,091
|
|
|
9,059
|
|
||
Ohio
|
79,200
|
|
|
40,980
|
|
||
Texas
|
5,280
|
|
|
7,459
|
|
||
Utah
|
10,375
|
|
|
3,359
|
|
||
Washington
|
12,668
|
|
|
17,587
|
|
||
Wisconsin
|
5,033
|
|
|
4,098
|
|
||
Other
|
633
|
|
|
2,177
|
|
||
Total Health Plans segment
|
276,548
|
|
|
127,098
|
|
||
Molina Medicaid Solutions segment
|
17,419
|
|
|
22,584
|
|
||
|
$
|
293,967
|
|
|
$
|
149,682
|
|
|
September 30,
2013 |
|
December 31,
2012 |
||||
|
(In thousands)
|
||||||
California
|
$
|
373
|
|
|
$
|
373
|
|
Florida
|
8,840
|
|
|
5,738
|
|
||
Michigan
|
1,014
|
|
|
1,014
|
|
||
New Mexico
|
24,620
|
|
|
15,915
|
|
||
Ohio
|
9,081
|
|
|
9,082
|
|
||
Texas
|
3,500
|
|
|
3,503
|
|
||
Utah
|
3,308
|
|
|
3,126
|
|
||
Washington
|
151
|
|
|
151
|
|
||
Other
|
4,037
|
|
|
5,199
|
|
||
Total Health Plans segment
|
54,924
|
|
|
44,101
|
|
||
Molina Medicaid Solutions segment
|
10,301
|
|
|
—
|
|
||
|
$
|
65,225
|
|
|
$
|
44,101
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(In thousands)
|
||||||
Due in one year or less
|
$
|
59,633
|
|
|
$
|
59,636
|
|
Due one year through five years
|
5,592
|
|
|
5,596
|
|
||
|
$
|
65,225
|
|
|
$
|
65,232
|
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Year Ended
|
||||||
|
September 30, 2013
|
|
September 30, 2013
|
|
December 31, 2012
|
||||||
|
(Dollars in thousands)
|
||||||||||
Balances at beginning of period
|
$
|
494,530
|
|
|
$
|
465,487
|
|
|
$
|
402,476
|
|
Components of medical care costs related to:
|
|
|
|
|
|
||||||
Current period
|
4,021,461
|
|
|
1,415,670
|
|
|
5,136,055
|
|
|||
Prior periods
|
(54,040
|
)
|
|
(32,575
|
)
|
|
(39,295
|
)
|
|||
Total medical care costs
|
3,967,421
|
|
|
1,383,095
|
|
|
5,096,760
|
|
|||
Payments for medical care costs related to:
|
|
|
|
|
|
||||||
Current period
|
3,410,689
|
|
|
851,025
|
|
|
4,649,363
|
|
|||
Prior periods
|
418,556
|
|
|
364,851
|
|
|
355,343
|
|
|||
Total paid
|
3,829,245
|
|
|
1,215,876
|
|
|
5,004,706
|
|
|||
Balances at end of period
|
$
|
632,706
|
|
|
$
|
632,706
|
|
|
$
|
494,530
|
|
Benefit from prior period as a percentage of:
|
|
|
|
|
|
||||||
Balance at beginning of period
|
10.9
|
%
|
|
7.0
|
%
|
|
9.8
|
%
|
|||
Premium revenue, trailing twelve months
|
0.9
|
%
|
|
0.5
|
%
|
|
0.7
|
%
|
|||
Medical care costs, trailing twelve months
|
1.0
|
%
|
|
0.6
|
%
|
|
0.8
|
%
|
•
|
At our Washington health plan prior to July 2012, certain high-cost newborns that were approved for supplemental security income (SSI) coverage by the state were retroactively dis-enrolled from our Healthy Options (TANF) coverage, and the health plan was reimbursed for the claims paid on behalf of these members. Starting July 1, 2012, these newborns, as well as other high-cost disabled members, are now covered by the health plan under the Healthy Options Blind and Disabled (HOBD) program. At the end of 2012, we had limited claims history with which to estimate the claims liability of the HOBD members, and as a result the liability for these high-cost members was overstated.
|
•
|
At our New Mexico health plan, we overestimated the impact of certain high-dollar outstanding claim payments as of December 31, 2012.
|
•
|
At our Ohio health plan, we overestimated the impact of several potential high-dollar claims relating to our aged, blind or disabled (ABD) members.
|
•
|
At our Ohio health plan, we overestimated the impact of several potential high-dollar claims relating to critically ill members.
|
•
|
At our Michigan health plan, we underestimated the impact of future claims overpayment recoveries when establishing reserves at June 30, 2013.
|
•
|
The overestimation of our liability for medical claims and benefits payable was partially offset by an underestimation of that liability at our Texas health plan as a result of the costs associated with an unusually large number of older claims. This anomaly was caused primarily by the payment of claims that were delayed as a result of hospital provider disputes that have been resolved. The underestimation of the liability at our Texas health plan was responsible for the relatively small amount of prior period development noted above.
|
•
|
At our Washington health plan, we underestimated the amount of recoveries we would collect for certain high-cost newborn claims, resulting in an overestimation of reserves at year end.
|
•
|
At our Texas health plan, we overestimated the cost of new members in STAR+PLUS, in the Dallas region.
|
•
|
The overestimation of our liability for medical claims and benefits payable was partially offset by an underestimation of that liability at our Missouri health plan, as a result of the costs associated with an unusually large number of premature infants during the fourth quarter of 2011.
|
•
|
At our Texas health plan, we have noted an unusually large number of older claims dated older than 12 months. This has caused some distortion in the claims lag pattern that we use to estimate the incurred claims.
|
•
|
At our Michigan health plan, there were a large number of claim recoveries recorded in June 2013 due to overpayments that resulted from a system configuration issue. These recoveries impacted the completion factors used to estimate incurred claims. While we attempted to remove this distortion from the claims data to develop a more accurate reserve estimate, this type of correction in claims data adds a degree of uncertainty for the Michigan reserves as of September 30, 2013.
|
•
|
Our New Mexico health plan acquired approximately
80,000
new members in August 2013 from another health plan. This acquisition roughly doubled the size of the membership in a single month. For the September 30, 2013 reserve calculation, we have assumed that these new members will incur costs at about the same rate as the New Mexico members that were previously enrolled. With only two months of paid claims for these new members, it is too soon to know whether that assumption is correct or not.
|
|
Total
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
Thereafter
|
||||||||||||||
1.125% Notes
|
$
|
550,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
3.75% Notes
|
187,000
|
|
|
—
|
|
|
187,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
$
|
737,000
|
|
|
$
|
—
|
|
|
$
|
187,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
|
Principal Balance
|
|
Unamortized Discount
|
|
Net Carrying Amount
|
||||||
|
(In thousands)
|
||||||||||
September 30, 2013:
|
|
|
|
|
|
||||||
1.125% Notes
|
$
|
550,000
|
|
|
$
|
138,341
|
|
|
$
|
411,659
|
|
3.75% Notes
|
187,000
|
|
|
6,775
|
|
|
180,225
|
|
|||
|
$
|
737,000
|
|
|
$
|
145,116
|
|
|
$
|
591,884
|
|
December 31, 2012:
|
|
|
|
|
|
||||||
3.75% Notes
|
$
|
187,000
|
|
|
$
|
11,532
|
|
|
$
|
175,468
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(In thousands)
|
||||||||||||||
Interest cost recognized for the period relating to the:
|
|
|
|
|
|
|
|
||||||||
Contractual interest coupon rate
|
$
|
3,300
|
|
|
$
|
1,753
|
|
|
$
|
9,127
|
|
|
$
|
5,259
|
|
Amortization of the discount
|
6,059
|
|
|
1,499
|
|
|
15,747
|
|
|
4,414
|
|
||||
Total interest cost recognized
|
$
|
9,359
|
|
|
$
|
3,252
|
|
|
$
|
24,874
|
|
|
$
|
9,673
|
|
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(In thousands)
|
||||||||||||||
Derivative gains (losses):
|
|
|
|
|
|
|
|
||||||||
1.125% Call Option
|
$
|
(15,460
|
)
|
|
$
|
—
|
|
|
$
|
42,332
|
|
|
$
|
—
|
|
Embedded cash conversion option
|
15,461
|
|
|
—
|
|
|
(42,225
|
)
|
|
—
|
|
||||
1.125% Warrants
|
—
|
|
|
—
|
|
|
(3,923
|
)
|
|
—
|
|
||||
Interest rate swap
|
—
|
|
|
(184
|
)
|
|
433
|
|
|
(1,270
|
)
|
||||
|
$
|
1
|
|
|
$
|
(184
|
)
|
|
$
|
(3,383
|
)
|
|
$
|
(1,270
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(In thousands)
|
||||||||||||||
Revenue from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Health Plans:
|
|
|
|
|
|
|
|
||||||||
Premium revenue
|
$
|
1,584,656
|
|
|
$
|
1,448,600
|
|
|
$
|
4,583,818
|
|
|
$
|
4,066,737
|
|
Premium tax receipts
|
43,723
|
|
|
37,894
|
|
|
127,606
|
|
|
120,953
|
|
||||
Investment income
|
1,740
|
|
|
1,155
|
|
|
4,884
|
|
|
3,893
|
|
||||
Rental and other income
|
5,860
|
|
|
4,079
|
|
|
16,476
|
|
|
12,315
|
|
||||
Molina Medicaid Solutions:
|
|
|
|
|
|
|
|
||||||||
Service revenue
|
51,100
|
|
|
48,422
|
|
|
150,528
|
|
|
132,351
|
|
||||
|
$
|
1,687,079
|
|
|
$
|
1,540,150
|
|
|
$
|
4,883,312
|
|
|
$
|
4,336,249
|
|
Depreciation and amortization reported in the consolidated statements of cash flows:
|
|
|
|
|
|
|
|
||||||||
Health Plans
|
$
|
17,545
|
|
|
$
|
14,753
|
|
|
$
|
48,467
|
|
|
$
|
43,600
|
|
Molina Medicaid Solutions
|
6,583
|
|
|
5,526
|
|
|
19,568
|
|
|
14,689
|
|
||||
|
$
|
24,128
|
|
|
$
|
20,279
|
|
|
$
|
68,035
|
|
|
$
|
58,289
|
|
Operating income (loss) from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Health Plans
|
$
|
16,929
|
|
|
$
|
(5,788
|
)
|
|
$
|
118,600
|
|
|
$
|
(33,957
|
)
|
Molina Medicaid Solutions
|
7,997
|
|
|
8,156
|
|
|
20,645
|
|
|
23,207
|
|
||||
Total operating income (loss) from continuing operations
|
24,926
|
|
|
2,368
|
|
|
139,245
|
|
|
(10,750
|
)
|
||||
Interest expense
|
13,532
|
|
|
4,315
|
|
|
38,236
|
|
|
12,421
|
|
||||
Other (income) expense
|
(24
|
)
|
|
184
|
|
|
3,347
|
|
|
1,270
|
|
||||
Income (loss) from continuing operations before
|
|
|
|
|
|
|
|
||||||||
income taxes
|
$
|
11,418
|
|
|
$
|
(2,131
|
)
|
|
$
|
97,662
|
|
|
$
|
(24,441
|
)
|
|
September 30,
2013 |
|
December 31,
2012 |
||||
|
(In thousands)
|
||||||
Goodwill and intangible assets, net:
|
|
|
|
||||
Health Plans
|
$
|
252,360
|
|
|
$
|
139,710
|
|
Molina Medicaid Solutions
|
83,058
|
|
|
89,089
|
|
||
|
$
|
335,418
|
|
|
$
|
228,799
|
|
Total assets:
|
|
|
|
||||
Health Plans
|
$
|
2,748,724
|
|
|
$
|
1,702,212
|
|
Molina Medicaid Solutions
|
176,342
|
|
|
232,610
|
|
||
|
$
|
2,925,066
|
|
|
$
|
1,934,822
|
|
•
|
The ongoing activities of the VIE-collecting and remitting interest and fees and NMTC compliance-were all considered in the initial design and are not expected to significantly affect economic performance throughout the life of the VIE;
|
•
|
Contractual arrangements obligate us to comply with NMTC rules and regulations and provide various other guarantees to Investment Fund and CDEs;
|
•
|
Wells Fargo lacks a material interest in the underling economics of the project; and
|
•
|
We are obligated to absorb losses of the VIE.
|
•
|
those identified and discussed in our periodic reports and filings with the SEC;
|
•
|
uncertainties associated with the implementation of the Affordable Care Act, including the impact of, and state rate development associated with, the health insurance industry excise tax, the expansion of Medicaid eligibility in participating states to previously uninsured populations unfamiliar with managed care, the implementation of insurance exchanges or marketplaces and related technical problems, the effect of various implementing regulations, and uncertainties regarding the impact of other federal or state health care and insurance reform measures, including the duals demonstration programs in California, Illinois, and Ohio;
|
•
|
the success of our medical cost containment initiatives in Texas;
|
•
|
significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria;
|
•
|
management of our medical costs, including seasonal flu patterns and rates of utilization that are consistent with our expectations and our accruals for incurred but not reported medical costs;
|
•
|
the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states, and our ability to increase our revenues consistent with our expectations;
|
•
|
accurate estimation of incurred but not reported medical costs across our health plans;
|
•
|
risks associated with the continued growth in new Medicaid and Medicare enrollees, and the development of actuarially sound rates with respect to such new enrollees, including duals;
|
•
|
retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including Medicaid pharmaceutical rebates;
|
•
|
continuation and renewal of the government contracts of both our health plans and Molina Medicaid Solutions and the terms under which such contracts are renewed;
|
•
|
government audits and reviews, and any enrollment freeze or monitoring program that may result therefrom;
|
•
|
changes with respect to our provider contracts and the loss of providers;
|
•
|
the establishment of a federal or state medical cost expenditure floor as a percentage of the premiums we receive, and the interpretation and implementation of medical cost expenditure floors, administrative cost and profit ceilings, and profit sharing arrangements;
|
•
|
interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures;
|
•
|
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;
|
•
|
our management of a portion of CHE's hospital in Long Beach, California;
|
•
|
the relatively small number of states in which we operate health plans;
|
•
|
the availability of adequate financing to fund and capitalize our expansion and growth activities and to meet our liquidity needs, including the interest expense and other costs associated with such financing;
|
•
|
a state's failure to renew its federal Medicaid waiver;
|
•
|
inadvertent unauthorized disclosure of protected health information;
|
•
|
changes generally affecting the managed care or Medicaid management information systems industries;
|
•
|
increases in government surcharges, taxes, and assessments;
|
•
|
changes in general economic conditions, including unemployment rates; and
|
•
|
increasing consolidation in the Medicaid industry.
|
•
|
Net income for continuing operations for the third quarter of 2013 increased when compared with the third quarter of 2012 as a result of higher medical margins. Those medical margins were partially offset by increased administrative expense related to the Company's preparations for significant membership growth expected in 2014.
|
•
|
Premium revenue for the third quarter of 2013 increased 9% over the third quarter of 2012, due to a 5% increase in enrollment, and a 4% increase in revenue per member per month (PMPM). The 5% enrollment increase was primarily due to the acquisition of a contract covering approximately 80,000 members in New Mexico effective August 1, 2013.
|
•
|
Our consolidated medical care ratio decreased to
87.3%
in the third quarter of 2013, from
91.1%
in the third quarter of 2012. The decline in the consolidated medical care ratio was the result of improved operating results at most of our health plans. Medical care ratios decreased in eight of our nine health plans, while medical margin (measured as the excess of premium revenue over medical care costs) increased in the same eight of nine health plans.
|
•
|
General and administrative expenses increased to
10.4%
of revenue in the third quarter of 2013, from
8.2%
in the third quarter of 2012, primarily due to higher costs incurred as a result of our preparations for significant membership growth in 2014 in connection with the Affordable Care Act. Increased administrative expense related to anticipated membership growth in 2014 represented approximately 1.8% of premium revenue, or $30 million, during the third quarter of 2013.
|
•
|
California - San Diego, Riverside and San Bernardino counties commence April 1, 2014
|
•
|
Illinois - 15 counties in the Central Region commence February 1, 2014
|
•
|
Ohio - 13 counties in Southwest, Central and West Central Regions commence March 1, 2014
|
|
September 30,
2013 |
|
June 30,
2013 |
|
December 31,
2012 |
|
September 30,
2012 |
||||
Total Ending Membership by Health Plan:
|
|
|
|
|
|
|
|
||||
California
|
363,000
|
|
|
355,000
|
|
|
336,000
|
|
|
346,000
|
|
Florida
|
84,000
|
|
|
81,000
|
|
|
73,000
|
|
|
71,000
|
|
Michigan
|
213,000
|
|
|
215,000
|
|
|
220,000
|
|
|
219,000
|
|
New Mexico
|
172,000
|
|
|
92,000
|
|
|
91,000
|
|
|
90,000
|
|
Ohio
|
261,000
|
|
|
240,000
|
|
|
244,000
|
|
|
272,000
|
|
Texas
|
258,000
|
|
|
266,000
|
|
|
282,000
|
|
|
291,000
|
|
Utah
|
87,000
|
|
|
87,000
|
|
|
87,000
|
|
|
85,000
|
|
Washington
|
409,000
|
|
|
413,000
|
|
|
418,000
|
|
|
411,000
|
|
Wisconsin
|
95,000
|
|
|
98,000
|
|
|
46,000
|
|
|
41,000
|
|
Total
|
1,942,000
|
|
|
1,847,000
|
|
|
1,797,000
|
|
|
1,826,000
|
|
Total Ending Membership for our Medicare Advantage Plans:
|
|
|
|
|
|
|
|
||||
California
|
8,600
|
|
|
8,100
|
|
|
7,700
|
|
|
7,300
|
|
Florida
|
600
|
|
|
600
|
|
|
900
|
|
|
900
|
|
Michigan
|
10,000
|
|
|
9,500
|
|
|
9,700
|
|
|
9,300
|
|
New Mexico
|
900
|
|
|
900
|
|
|
900
|
|
|
900
|
|
Ohio
|
400
|
|
|
400
|
|
|
300
|
|
|
200
|
|
Texas
|
2,500
|
|
|
2,300
|
|
|
1,500
|
|
|
1,100
|
|
Utah
|
8,200
|
|
|
7,800
|
|
|
8,200
|
|
|
8,300
|
|
Washington
|
6,900
|
|
|
6,600
|
|
|
6,500
|
|
|
6,100
|
|
Total
|
38,100
|
|
|
36,200
|
|
|
35,700
|
|
|
34,100
|
|
Total Ending Membership for our Aged, Blind or Disabled Population:
|
|
|
|
|
|
|
|
||||
California
|
46,300
|
|
|
45,400
|
|
|
44,700
|
|
|
44,100
|
|
Florida
|
12,200
|
|
|
11,200
|
|
|
10,300
|
|
|
10,300
|
|
Michigan
|
45,400
|
|
|
45,000
|
|
|
41,900
|
|
|
40,700
|
|
New Mexico
|
11,400
|
|
|
6,000
|
|
|
5,700
|
|
|
5,600
|
|
Ohio
|
33,000
|
|
|
28,000
|
|
|
28,200
|
|
|
29,000
|
|
Texas
|
90,800
|
|
|
92,000
|
|
|
95,900
|
|
|
101,300
|
|
Utah
|
9,500
|
|
|
9,400
|
|
|
9,000
|
|
|
8,900
|
|
Washington
|
33,000
|
|
|
31,700
|
|
|
30,000
|
|
|
23,400
|
|
Wisconsin
|
1,700
|
|
|
1,600
|
|
|
1,700
|
|
|
1,600
|
|
Total
|
283,300
|
|
|
270,300
|
|
|
267,400
|
|
|
264,900
|
|
•
|
Fee-for-service
— Expenses paid for specific encounters or episodes of care according to a fee schedule or other basis established by the state or by contract with the provider.
|
•
|
Capitation
— Expenses for PMPM payments to the provider without regard to the frequency, extent, or nature of the medical services actually furnished.
|
•
|
Pharmacy
— Expenses for all drug, injectable, and immunization costs paid through our pharmacy benefit manager.
|
•
|
Other
— Expenses for medically related administrative costs of approximately $107.0 million, and $94.6 million, for the
nine months ended
September 30, 2013
and
2012
, respectively, as well as certain provider incentive costs, reinsurance, costs to operate our medical clinics, and other medical expenses.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2013
|
|
2012
|
|
2013
|
|
2012
|
|||||||||
|
(In thousands)
|
||||||||||||||
Net income (loss)
|
$
|
7,569
|
|
|
$
|
3,364
|
|
|
$
|
62,055
|
|
|
$
|
(15,853
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization reported in the consolidated statements of cash flows
|
24,128
|
|
|
20,279
|
|
|
68,035
|
|
|
58,289
|
|
||||
Interest expense
|
13,532
|
|
|
4,315
|
|
|
38,236
|
|
|
12,421
|
|
||||
Income tax expense (benefit)
|
3,962
|
|
|
(492
|
)
|
|
33,745
|
|
|
(15,228
|
)
|
||||
EBITDA
|
$
|
49,191
|
|
|
$
|
27,466
|
|
|
$
|
202,071
|
|
|
$
|
39,629
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2013
|
|
2012
|
|
2013
|
|
2012
|
|||||||||
|
(In thousands)
|
||||||||||||||
Net income (loss) per diluted share, continuing operations
|
$
|
0.16
|
|
|
$
|
(0.01
|
)
|
|
$
|
1.15
|
|
|
$
|
(0.29
|
)
|
Adjustments, net of tax:
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization of capitalized software
|
0.25
|
|
|
0.20
|
|
|
0.71
|
|
|
0.56
|
|
||||
Stock-based compensation
|
0.15
|
|
|
0.09
|
|
|
0.36
|
|
|
0.24
|
|
||||
Amortization of intangible assets
|
0.07
|
|
|
0.07
|
|
|
0.20
|
|
|
0.22
|
|
||||
Amortization of convertible senior notes and lease financing obligations
|
0.08
|
|
|
0.02
|
|
|
0.21
|
|
|
0.06
|
|
||||
Change in fair value of derivatives
|
—
|
|
|
—
|
|
|
0.08
|
|
|
0.02
|
|
||||
Adjusted net income per diluted share, continuing operations
|
$
|
0.71
|
|
|
$
|
0.37
|
|
|
$
|
2.71
|
|
|
$
|
0.81
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||
|
2013
|
|
2012
|
||||||||||||||||||
|
Amount
|
|
PMPM
|
|
% of
Total
|
|
Amount
|
|
PMPM
|
|
% of
Total
|
||||||||||
Fee for service
|
$
|
928,165
|
|
|
$
|
161.39
|
|
|
67.1
|
%
|
|
$
|
913,137
|
|
|
$
|
166.88
|
|
|
69.2
|
%
|
Pharmacy
|
237,073
|
|
|
41.22
|
|
|
17.1
|
|
|
219,823
|
|
|
40.17
|
|
|
16.7
|
|
||||
Capitation
|
162,554
|
|
|
28.27
|
|
|
11.8
|
|
|
142,724
|
|
|
26.08
|
|
|
10.8
|
|
||||
Other
|
55,421
|
|
|
9.64
|
|
|
4.0
|
|
|
44,307
|
|
|
8.10
|
|
|
3.3
|
|
||||
Total
|
$
|
1,383,213
|
|
|
$
|
240.52
|
|
|
100.0
|
%
|
|
$
|
1,319,991
|
|
|
$
|
241.23
|
|
|
100.0
|
%
|
|
Three Months Ended September 30, 2013
|
||||||||||||||||||||||||
|
Member
Months (1)
|
|
Premium Revenue
|
|
Medical Care Costs
|
|
MCR (2)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
1,076
|
|
|
$
|
184,235
|
|
|
$
|
171.16
|
|
|
$
|
166,774
|
|
|
$
|
154.93
|
|
|
90.5
|
%
|
|
$
|
17,461
|
|
Florida
|
251
|
|
|
67,688
|
|
|
269.58
|
|
|
60,127
|
|
|
239.46
|
|
|
88.8
|
|
|
7,561
|
|
|||||
Michigan
|
641
|
|
|
174,706
|
|
|
272.65
|
|
|
143,498
|
|
|
223.95
|
|
|
82.1
|
|
|
31,208
|
|
|||||
New Mexico
|
435
|
|
|
130,318
|
|
|
299.19
|
|
|
111,599
|
|
|
256.21
|
|
|
85.6
|
|
|
18,719
|
|
|||||
Ohio
|
786
|
|
|
280,964
|
|
|
357.66
|
|
|
245,148
|
|
|
312.07
|
|
|
87.3
|
|
|
35,816
|
|
|||||
Texas
|
780
|
|
|
320,657
|
|
|
411.17
|
|
|
287,446
|
|
|
368.59
|
|
|
89.6
|
|
|
33,211
|
|
|||||
Utah
|
261
|
|
|
84,525
|
|
|
323.83
|
|
|
66,555
|
|
|
254.98
|
|
|
78.7
|
|
|
17,970
|
|
|||||
Washington
|
1,234
|
|
|
294,808
|
|
|
238.96
|
|
|
254,430
|
|
|
206.23
|
|
|
86.3
|
|
|
40,378
|
|
|||||
Wisconsin
|
287
|
|
|
39,676
|
|
|
138.36
|
|
|
27,694
|
|
|
96.58
|
|
|
69.8
|
|
|
11,982
|
|
|||||
Other
(3)
|
—
|
|
|
7,079
|
|
|
—
|
|
|
19,942
|
|
|
—
|
|
|
—
|
|
|
(12,863
|
)
|
|||||
|
5,751
|
|
|
$
|
1,584,656
|
|
|
$
|
275.55
|
|
|
$
|
1,383,213
|
|
|
$
|
240.52
|
|
|
87.3
|
%
|
|
$
|
201,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended September 30, 2012
|
||||||||||||||||||||||||
|
Member
Months (1)
|
|
Premium Revenue
|
|
Medical Care Costs
|
|
MCR (2)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
1,041
|
|
|
$
|
162,389
|
|
|
$
|
156.00
|
|
|
$
|
156,106
|
|
|
$
|
149.96
|
|
|
96.1
|
%
|
|
$
|
6,283
|
|
Florida
|
214
|
|
|
57,433
|
|
|
268.58
|
|
|
48,250
|
|
|
225.64
|
|
|
84.0
|
|
|
9,183
|
|
|||||
Michigan
|
656
|
|
|
159,591
|
|
|
243.32
|
|
|
143,513
|
|
|
218.80
|
|
|
89.9
|
|
|
16,078
|
|
|||||
New Mexico
|
269
|
|
|
80,846
|
|
|
300.79
|
|
|
73,721
|
|
|
274.28
|
|
|
91.2
|
|
|
7,125
|
|
|||||
Ohio
|
805
|
|
|
282,489
|
|
|
350.63
|
|
|
253,447
|
|
|
314.58
|
|
|
89.7
|
|
|
29,042
|
|
|||||
Texas
|
890
|
|
|
344,522
|
|
|
387.03
|
|
|
316,716
|
|
|
355.80
|
|
|
91.9
|
|
|
27,806
|
|
|||||
Utah
|
256
|
|
|
73,484
|
|
|
287.21
|
|
|
62,630
|
|
|
244.79
|
|
|
85.2
|
|
|
10,854
|
|
|||||
Washington
|
1,217
|
|
|
269,191
|
|
|
221.28
|
|
|
236,928
|
|
|
194.76
|
|
|
88.0
|
|
|
32,263
|
|
|||||
Wisconsin
|
124
|
|
|
16,279
|
|
|
131.21
|
|
|
15,217
|
|
|
122.65
|
|
|
93.5
|
|
|
1,062
|
|
|||||
Other
(3)
|
—
|
|
|
2,376
|
|
|
—
|
|
|
13,463
|
|
|
—
|
|
|
—
|
|
|
(11,087
|
)
|
|||||
|
5,472
|
|
|
$
|
1,448,600
|
|
|
$
|
264.74
|
|
|
$
|
1,319,991
|
|
|
$
|
241.23
|
|
|
91.1
|
%
|
|
$
|
128,609
|
|
(1)
|
A member month is defined as the aggregate of each month’s ending membership for the period presented.
|
(2)
|
"MCR" represents medical costs as a percentage of premium revenue.
|
(3)
|
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.
|
|
Three Months Ended September 30,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Service revenue before amortization
|
$
|
51,829
|
|
|
$
|
48,958
|
|
Amortization recorded as reduction of service revenue
|
(729
|
)
|
|
(536
|
)
|
||
Service revenue
|
51,100
|
|
|
48,422
|
|
||
Cost of service revenue
|
40,113
|
|
|
37,004
|
|
||
General and administrative costs
|
1,708
|
|
|
1,980
|
|
||
Amortization of customer relationship intangibles recorded as amortization
|
1,282
|
|
|
1,282
|
|
||
Operating income
|
$
|
7,997
|
|
|
$
|
8,156
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2013
|
|
2012
|
||||||||||||||||||
|
Amount
|
|
PMPM
|
|
% of
Total
|
|
Amount
|
|
PMPM
|
|
% of
Total
|
||||||||||
Fee for service
|
$
|
2,674,785
|
|
|
$
|
160.14
|
|
|
67.5
|
%
|
|
$
|
2,566,161
|
|
|
$
|
162.76
|
|
|
69.1
|
%
|
Pharmacy
|
691,903
|
|
|
41.42
|
|
|
17.4
|
|
|
606,004
|
|
|
38.44
|
|
|
16.3
|
|
||||
Capitation
|
441,287
|
|
|
26.42
|
|
|
11.1
|
|
|
412,692
|
|
|
26.17
|
|
|
11.1
|
|
||||
Other
|
157,859
|
|
|
9.45
|
|
|
4.0
|
|
|
130,598
|
|
|
8.28
|
|
|
3.5
|
|
||||
Total
|
$
|
3,965,834
|
|
|
$
|
237.43
|
|
|
100.0
|
%
|
|
$
|
3,715,455
|
|
|
$
|
235.65
|
|
|
100.0
|
%
|
|
Nine Months Ended September 30, 2013
|
||||||||||||||||||||||||
|
Member
Months (1)
|
|
Premium Revenue
|
|
Medical Care Costs
|
|
MCR (2)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
3,132
|
|
|
$
|
552,950
|
|
|
$
|
176.54
|
|
|
$
|
497,314
|
|
|
$
|
158.78
|
|
|
89.9
|
%
|
|
$
|
55,636
|
|
Florida
|
712
|
|
|
187,689
|
|
|
263.62
|
|
|
161,446
|
|
|
226.76
|
|
|
86.0
|
|
|
26,243
|
|
|||||
Michigan
|
1,941
|
|
|
508,748
|
|
|
262.14
|
|
|
432,105
|
|
|
222.65
|
|
|
84.9
|
|
|
76,643
|
|
|||||
New Mexico
|
984
|
|
|
298,767
|
|
|
303.59
|
|
|
252,001
|
|
|
256.07
|
|
|
84.3
|
|
|
46,766
|
|
|||||
Ohio
|
2,234
|
|
|
819,879
|
|
|
367.03
|
|
|
688,266
|
|
|
308.11
|
|
|
83.9
|
|
|
131,613
|
|
|||||
Texas
|
2,417
|
|
|
969,063
|
|
|
400.90
|
|
|
829,854
|
|
|
343.31
|
|
|
85.6
|
|
|
139,209
|
|
|||||
Utah
|
781
|
|
|
236,992
|
|
|
303.41
|
|
|
193,261
|
|
|
247.42
|
|
|
81.5
|
|
|
43,731
|
|
|||||
Washington
|
3,722
|
|
|
892,627
|
|
|
239.85
|
|
|
779,339
|
|
|
209.41
|
|
|
87.3
|
|
|
113,288
|
|
|||||
Wisconsin
|
780
|
|
|
104,540
|
|
|
134.04
|
|
|
82,543
|
|
|
105.84
|
|
|
79.0
|
|
|
21,997
|
|
|||||
Other
(3)
|
—
|
|
|
12,563
|
|
|
—
|
|
|
49,705
|
|
|
—
|
|
|
—
|
|
|
(37,142
|
)
|
|||||
|
16,703
|
|
|
$
|
4,583,818
|
|
|
$
|
274.43
|
|
|
$
|
3,965,834
|
|
|
$
|
237.43
|
|
|
86.5
|
%
|
|
$
|
617,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Nine Months Ended September 30, 2012
|
||||||||||||||||||||||||
|
Member
Months (1)
|
|
Premium Revenue
|
|
Medical Care Costs
|
|
MCR (2)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
3,156
|
|
|
$
|
486,714
|
|
|
$
|
154.21
|
|
|
$
|
446,694
|
|
|
$
|
141.53
|
|
|
91.8
|
%
|
|
$
|
40,020
|
|
Florida
|
632
|
|
|
170,940
|
|
|
270.50
|
|
|
146,261
|
|
|
231.44
|
|
|
85.6
|
|
|
24,679
|
|
|||||
Michigan
|
1,983
|
|
|
480,098
|
|
|
242.13
|
|
|
419,406
|
|
|
211.52
|
|
|
87.4
|
|
|
60,692
|
|
|||||
New Mexico
|
801
|
|
|
240,568
|
|
|
300.51
|
|
|
208,668
|
|
|
260.66
|
|
|
86.7
|
|
|
31,900
|
|
|||||
Ohio
|
2,313
|
|
|
827,219
|
|
|
357.61
|
|
|
735,432
|
|
|
317.93
|
|
|
88.9
|
|
|
91,787
|
|
|||||
Texas
|
2,389
|
|
|
892,377
|
|
|
373.54
|
|
|
890,042
|
|
|
372.57
|
|
|
99.7
|
|
|
2,335
|
|
|||||
Utah
|
767
|
|
|
225,533
|
|
|
293.93
|
|
|
183,930
|
|
|
239.71
|
|
|
81.6
|
|
|
41,603
|
|
|||||
Washington
|
3,352
|
|
|
684,466
|
|
|
204.22
|
|
|
592,398
|
|
|
176.75
|
|
|
86.5
|
|
|
92,068
|
|
|||||
Wisconsin
|
374
|
|
|
52,209
|
|
|
139.46
|
|
|
54,861
|
|
|
146.54
|
|
|
105.1
|
|
|
(2,652
|
)
|
|||||
Other
(3)
|
—
|
|
|
6,613
|
|
|
—
|
|
|
37,763
|
|
|
—
|
|
|
—
|
|
|
(31,150
|
)
|
|||||
|
15,767
|
|
|
$
|
4,066,737
|
|
|
$
|
257.93
|
|
|
$
|
3,715,455
|
|
|
$
|
235.65
|
|
|
91.4
|
%
|
|
$
|
351,282
|
|
(1)
|
A member month is defined as the aggregate of each month’s ending membership for the period presented.
|
(2)
|
“MCR” represents medical costs as a percentage of premium revenue.
|
(3)
|
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.
|
|
Nine Months Ended September 30,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Service revenue before amortization
|
$
|
152,714
|
|
|
$
|
133,193
|
|
Amortization recorded as reduction of service revenue
|
(2,186
|
)
|
|
(842
|
)
|
||
Service revenue
|
150,528
|
|
|
132,351
|
|
||
Cost of service revenue
|
119,188
|
|
|
98,111
|
|
||
General and administrative costs
|
6,849
|
|
|
7,187
|
|
||
Amortization of customer relationship intangibles recorded as amortization
|
3,846
|
|
|
3,846
|
|
||
Operating income
|
$
|
20,645
|
|
|
$
|
23,207
|
|
•
|
Amortization of purchased intangibles relating to customer relationships is reported as amortization within the heading “Depreciation and amortization;”
|
•
|
Amortization of purchased intangibles relating to contract backlog is recorded as a reduction of “Service revenue;” and
|
•
|
Amortization of capitalized software is recorded within the heading “Cost of service revenue.”
|
|
Three Months Ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
||||||||||
|
Amount
|
|
% of Total
Revenue
|
|
Amount
|
|
% of Total
Revenue
|
||||||
|
(Dollar amounts in thousands)
|
||||||||||||
Depreciation, and amortization of capitalized software, continuing operations
|
$
|
14,237
|
|
|
0.8
|
%
|
|
$
|
11,352
|
|
|
0.7
|
%
|
Amortization of intangible assets, continuing operations
|
4,634
|
|
|
0.3
|
|
|
4,506
|
|
|
0.3
|
|
||
Depreciation and amortization, continuing operations
|
18,871
|
|
|
1.1
|
|
|
15,858
|
|
|
1.0
|
|
||
Depreciation and amortization, discontinued operations
|
—
|
|
|
—
|
|
|
176
|
|
|
—
|
|
||
Amortization recorded as reduction of service revenue
|
729
|
|
|
—
|
|
|
536
|
|
|
0.1
|
|
||
Amortization of capitalized software recorded as cost of service revenue
|
4,528
|
|
|
0.3
|
|
|
3,709
|
|
|
0.2
|
|
||
Depreciation and amortization reported in the consolidated statements of cash flows
|
$
|
24,128
|
|
|
1.4
|
%
|
|
$
|
20,279
|
|
|
1.3
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
||||||||||
|
Amount
|
|
% of Total
Revenue |
|
Amount
|
|
% of Total
Revenue |
||||||
|
(Dollar amounts in thousands)
|
||||||||||||
Depreciation, and amortization of capitalized software, continuing operations
|
$
|
39,578
|
|
|
0.8
|
%
|
|
$
|
31,321
|
|
|
0.7
|
%
|
Amortization of intangible assets, continuing operations
|
12,871
|
|
|
0.3
|
|
|
15,595
|
|
|
0.4
|
|
||
Depreciation and amortization, continuing operations
|
52,449
|
|
|
1.1
|
|
|
46,916
|
|
|
1.1
|
|
||
Depreciation and amortization, discontinued operations
|
2
|
|
|
—
|
|
|
530
|
|
|
—
|
|
||
Amortization recorded as reduction of service revenue
|
2,186
|
|
|
—
|
|
|
842
|
|
|
—
|
|
||
Amortization of capitalized software recorded as cost of service revenue
|
13,398
|
|
|
0.3
|
|
|
10,001
|
|
|
0.2
|
|
||
Depreciation and amortization reported in the consolidated statements of cash flows
|
$
|
68,035
|
|
|
1.4
|
%
|
|
$
|
58,289
|
|
|
1.3
|
%
|
|
Nine Months Ended September 30,
|
||||||||||
|
2013
|
|
2012
|
|
Change
|
||||||
|
(In thousands)
|
||||||||||
Net cash provided by operating activities
|
$
|
111,744
|
|
|
$
|
264,024
|
|
|
$
|
(152,280
|
)
|
Net cash used in investing activities
|
(541,416
|
)
|
|
(90,794
|
)
|
|
(450,622
|
)
|
|||
Net cash provided by financing activities
|
490,458
|
|
|
48,423
|
|
|
442,035
|
|
|||
Net increase in cash and cash equivalents
|
$
|
60,786
|
|
|
$
|
221,653
|
|
|
$
|
(160,867
|
)
|
|
Total
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
Thereafter
|
||||||||||||||
1.125% Notes
|
$
|
550,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
3.75% Notes
|
187,000
|
|
|
—
|
|
|
187,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
$
|
737,000
|
|
|
$
|
—
|
|
|
$
|
187,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
•
|
Health plan contractual provisions that may limit revenue based upon the costs incurred or the profits realized under a specific contract;
|
•
|
Health plan quality incentives that allow us to recognize incremental revenue if certain quality standards are met;
|
•
|
The recognition of revenue and costs associated with contracts held by our Molina Medicaid Solutions segment; and
|
•
|
The determination of medical claims and benefits payable.
|
|
Three Months Ended September 30, 2013
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
906
|
|
|
$
|
818
|
|
|
$
|
2
|
|
|
$
|
820
|
|
|
$
|
130,318
|
|
Ohio
|
3,080
|
|
|
976
|
|
|
(52
|
)
|
|
924
|
|
|
280,964
|
|
|||||
Texas
|
15,744
|
|
|
15,744
|
|
|
—
|
|
|
15,744
|
|
|
320,657
|
|
|||||
Wisconsin
|
1,209
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,676
|
|
|||||
|
$
|
20,939
|
|
|
$
|
17,538
|
|
|
$
|
(50
|
)
|
|
$
|
17,488
|
|
|
$
|
771,615
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Three Months Ended September 30, 2012
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
560
|
|
|
$
|
532
|
|
|
$
|
—
|
|
|
$
|
532
|
|
|
$
|
80,846
|
|
Ohio
|
2,824
|
|
|
1,412
|
|
|
—
|
|
|
1,412
|
|
|
282,489
|
|
|||||
Texas
|
17,685
|
|
|
10,453
|
|
|
—
|
|
|
10,453
|
|
|
344,522
|
|
|||||
Wisconsin
|
419
|
|
|
—
|
|
|
246
|
|
|
246
|
|
|
16,279
|
|
|||||
|
$
|
21,488
|
|
|
$
|
12,397
|
|
|
$
|
246
|
|
|
$
|
12,643
|
|
|
$
|
724,136
|
|
|
Nine Months Ended September 30, 2013
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
2,079
|
|
|
$
|
1,685
|
|
|
$
|
159
|
|
|
$
|
1,844
|
|
|
$
|
298,767
|
|
Ohio
|
9,049
|
|
|
3,115
|
|
|
501
|
|
|
3,616
|
|
|
819,879
|
|
|||||
Texas
|
47,683
|
|
|
47,683
|
|
|
5,995
|
|
|
53,678
|
|
|
969,063
|
|
|||||
Wisconsin
|
3,239
|
|
|
—
|
|
|
1,104
|
|
|
1,104
|
|
|
104,540
|
|
|||||
|
$
|
62,050
|
|
|
$
|
52,483
|
|
|
$
|
7,759
|
|
|
$
|
60,242
|
|
|
$
|
2,192,249
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Nine Months Ended September 30, 2012
|
||||||||||||||||||
|
Maximum
Available Quality
Incentive
Premium -
Current Year
|
|
Amount of
Current Year
Quality Incentive
Premium Revenue
Recognized
|
|
Amount of
Quality Incentive
Premium Revenue
Recognized from
Prior Year
|
|
Total Quality
Incentive
Premium Revenue
Recognized
|
|
Total Premium Revenue
Recognized
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
New Mexico
|
$
|
1,676
|
|
|
$
|
1,350
|
|
|
$
|
658
|
|
|
$
|
2,008
|
|
|
$
|
240,568
|
|
Ohio
|
8,222
|
|
|
6,810
|
|
|
966
|
|
|
7,776
|
|
|
827,219
|
|
|||||
Texas
|
41,687
|
|
|
30,487
|
|
|
—
|
|
|
30,487
|
|
|
892,377
|
|
|||||
Wisconsin
|
1,284
|
|
|
—
|
|
|
492
|
|
|
492
|
|
|
52,209
|
|
|||||
|
$
|
52,869
|
|
|
$
|
38,647
|
|
|
$
|
2,116
|
|
|
$
|
40,763
|
|
|
$
|
2,012,373
|
|
•
|
Each contract calls for the provision of its own specific set of services. While all contracts support the system of record for state MMIS, the actual services we provide vary significantly between contracts; and
|
•
|
The nature of the MMIS installed varies significantly between our older contracts (proprietary mainframe systems) and our new contracts (commercial off-the-shelf technology solutions).
|
•
|
Transaction processing costs;
|
•
|
Employee costs incurred in performing transaction services;
|
•
|
Vendor costs incurred in performing transaction services;
|
•
|
Costs incurred in performing required monitoring of and reporting on contract performance;
|
•
|
Costs incurred in maintaining and processing member and provider eligibility; and
|
•
|
Costs incurred in communicating with members and providers.
|
|
September 30,
2013 |
|
December 31,
2012 |
|
September 30,
2012 |
||||||
|
(In thousands)
|
||||||||||
Fee-for-service claims incurred but not paid (IBNP)
|
$
|
393,318
|
|
|
$
|
377,614
|
|
|
$
|
414,725
|
|
Capitation payable
|
77,051
|
|
|
49,066
|
|
|
55,314
|
|
|||
Pharmacy
|
45,451
|
|
|
38,992
|
|
|
42,681
|
|
|||
Other
(1)
|
116,886
|
|
|
28,858
|
|
|
23,743
|
|
|||
|
$
|
632,706
|
|
|
$
|
494,530
|
|
|
$
|
536,463
|
|
(1)
|
“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of operations. As of September 30, 2013, we recorded provider payables of approximately
$64.1 million
for new intermediary arrangements that began in the third quarter of 2013.
|
Increase (Decrease) in Estimated Completion Factors
|
Increase (Decrease) in
Medical Claims and
Benefits Payable
|
||
(6)%
|
$
|
145,282
|
|
(4)%
|
96,854
|
|
|
(2)%
|
48,427
|
|
|
2%
|
(48,427
|
)
|
|
4%
|
(96,854
|
)
|
|
6%
|
(145,282
|
)
|
(Decrease) Increase in Trended Per member Per Month Cost Estimates
|
(Decrease) Increase in
Medical Claims and
Benefits Payable
|
||
(6)%
|
$
|
(134,294
|
)
|
(4)%
|
(89,529
|
)
|
|
(2)%
|
(44,765
|
)
|
|
2%
|
44,765
|
|
|
4%
|
89,529
|
|
|
6%
|
134,294
|
|
•
|
At our Washington health plan prior to July 2012, certain high-cost newborns that were approved for supplemental security income (SSI) coverage by the state were retroactively dis-enrolled from our Healthy Options (TANF) coverage, and the health plan was reimbursed for the claims paid on behalf of these members. Starting July 1, 2012, these newborns, as well as other high-cost disabled members, are now covered by the health plan under the Healthy Options Blind and Disabled (HOBD) program. At the end of 2012, we had limited claims history with which to estimate the claims liability of the HOBD members, and as a result the liability for these high-cost members was overstated.
|
•
|
At our New Mexico health plan, we overestimated the impact of certain high-dollar outstanding claim payments as of December 31, 2012.
|
•
|
At our Ohio health plan, we overestimated the impact of several potential high-dollar claims relating to our aged, blind or disabled (ABD) members.
|
•
|
At our Ohio health plan, we overestimated the impact of several potential high-dollar claims relating to critically ill members.
|
•
|
At our Michigan health plan, we underestimated the impact of future claims overpayment recoveries when establishing reserves at June 30, 2013.
|
•
|
The overestimation of our liability for medical claims and benefits payable was partially offset by an underestimation of that liability at our Texas health plan as a result of the costs associated with an unusually large number of older claims. This anomaly was caused primarily by the payment of claims that were delayed as a result of hospital provider disputes that have been resolved. The underestimation of the liability at our Texas health plan was responsible for the relatively small amount of prior period development noted above.
|
•
|
At our Washington health plan, we underestimated the amount of recoveries we would collect for certain high-cost newborn claims, resulting in an overestimation of reserves at year end.
|
•
|
At our Texas health plan, we overestimated the cost of new members in STAR+PLUS, in the Dallas region.
|
•
|
The overestimation of our liability for medical claims and benefits payable was partially offset by an underestimation of that liability at our Missouri health plan, as a result of the costs associated with an unusually large number of premature infants during the fourth quarter of 2011.
|
•
|
At our Texas health plan, we have noted an unusually large number of older claims dated older than 12 months. This has caused some distortion in the claims lag pattern that we use to estimate the incurred claims.
|
•
|
At our Michigan health plan, there were a large number of claim recoveries recorded in June 2013 due to overpayments that resulted from a system configuration issue. These recoveries impacted the completion factors used to estimate incurred claims. While we attempted to remove this distortion from the claims data to develop a more accurate reserve estimate, this type of correction in claims data adds a degree of uncertainty for the Michigan reserves as of September 30, 2013.
|
•
|
Our New Mexico health plan acquired approximately
80,000
new members in August 2013 from another health plan. This acquisition roughly doubled the size of the membership in a single month. For the September 30, 2013 reserve calculation, we have assumed that these new members will incur costs at about the same rate as the New Mexico members that were previously enrolled. With only two months of paid claims for these new members, it is too soon to know whether that assumption is correct or not.
|
|
Nine Months Ended September 30,
|
|
Three Months Ended September 30,
|
|
Year Ended December 31, 2012
|
||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|||||||||||
|
(Dollars in thousands, except per-member amounts)
|
||||||||||||||||||
Balances at beginning of period
|
$
|
494,530
|
|
|
$
|
402,476
|
|
|
$
|
465,487
|
|
|
$
|
525,538
|
|
|
$
|
402,476
|
|
Components of medical care costs related to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current period
|
4,021,461
|
|
|
3,860,825
|
|
|
1,415,670
|
|
|
1,361,539
|
|
|
5,136,055
|
|
|||||
Prior periods
|
(54,040
|
)
|
|
(37,689
|
)
|
|
(32,575
|
)
|
|
(46,968
|
)
|
|
(39,295
|
)
|
|||||
Total medical care costs
|
3,967,421
|
|
|
3,823,136
|
|
|
1,383,095
|
|
|
1,314,571
|
|
|
5,096,760
|
|
|||||
Payments for medical care costs related to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current period
|
3,410,689
|
|
|
3,332,896
|
|
|
851,025
|
|
|
875,236
|
|
|
4,649,363
|
|
|||||
Prior periods
|
418,556
|
|
|
356,253
|
|
|
364,851
|
|
|
428,410
|
|
|
355,343
|
|
|||||
Total paid
|
3,829,245
|
|
|
3,689,149
|
|
|
1,215,876
|
|
|
1,303,646
|
|
|
5,004,706
|
|
|||||
Balances at end of period
|
$
|
632,706
|
|
|
$
|
536,463
|
|
|
$
|
632,706
|
|
|
$
|
536,463
|
|
|
$
|
494,530
|
|
Benefit from prior period as a percentage of:
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at beginning of period
|
10.9
|
%
|
|
9.0
|
%
|
|
7.0
|
%
|
|
8.9
|
%
|
|
9.8
|
%
|
|||||
Premium revenue, trailing twelve months
|
0.9
|
%
|
|
0.7
|
%
|
|
0.5
|
%
|
|
0.8
|
%
|
|
0.7
|
%
|
|||||
Medical care costs, trailing twelve months
|
1.0
|
%
|
|
0.8
|
%
|
|
0.6
|
%
|
|
1.0
|
%
|
|
0.8
|
%
|
|||||
Claims Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Days in claims payable, fee for service
|
41
|
|
|
45
|
|
|
41
|
|
|
45
|
|
|
40
|
|
|||||
Number of members at end of period
|
1,942,000
|
|
|
1,826,000
|
|
|
1,942,000
|
|
|
1,826,000
|
|
|
1,797,000
|
|
|||||
Number of claims in inventory at end of period
|
137,100
|
|
|
163,600
|
|
|
137,100
|
|
|
163,600
|
|
|
122,700
|
|
|||||
Billed charges of claims in inventory at end of period
|
$
|
257,600
|
|
|
$
|
304,600
|
|
|
$
|
257,600
|
|
|
$
|
304,600
|
|
|
$
|
255,200
|
|
Claims in inventory per member at end of period
|
0.07
|
|
|
0.09
|
|
|
0.07
|
|
|
0.09
|
|
|
0.07
|
|
|||||
Billed charges of claims in inventory per member at end of period
|
$
|
132.65
|
|
|
$
|
166.81
|
|
|
$
|
132.65
|
|
|
$
|
166.81
|
|
|
$
|
142.01
|
|
Number of claims received during the period
|
15,751,500
|
|
|
15,455,000
|
|
|
5,227,000
|
|
|
5,079,200
|
|
|
20,842,400
|
|
|||||
Billed charges of claims received during the period
|
$
|
15,848,900
|
|
|
$
|
14,339,700
|
|
|
$
|
5,371,100
|
|
|
$
|
4,951,000
|
|
|
$
|
19,429,300
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
|
Total Number
of
Shares
Purchased (a)
|
|
Average Price Paid
per Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs
|
|
Maximum Number (or
Approximate Dollar Value)
of Shares that May Yet Be
Purchased Under the Plans
or Programs
|
||||||
July 1 - July 31
|
815
|
|
|
$
|
37.89
|
|
|
—
|
|
|
$
|
50,000,000
|
|
August 1 - August 31
|
1,969
|
|
|
$
|
37.45
|
|
|
—
|
|
|
$
|
50,000,000
|
|
September 1 - September 30
|
25,171
|
|
|
$
|
34.94
|
|
|
—
|
|
|
$
|
50,000,000
|
|
Total
|
27,955
|
|
|
$
|
35.76
|
|
|
—
|
|
|
|
(a)
|
During the
three months ended September 30, 2013
, we withheld 27,955 shares of common stock under our 2002 Equity Incentive Plan and 2011 Equity Incentive Plan to settle our employees’ income tax obligations.
|
Exhibit No.
|
|
Title
|
|
|
|
10.1
|
|
Settlement Agreement entered into on October 30, 2013, by and between the Department of Health Care Services and Molina Healthcare of California and Molina Healthcare of California Partner Plan, Inc.
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Taxonomy Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
MOLINA HEALTHCARE, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
Dated:
|
October 30, 2013
|
|
/s/ JOSEPH M. MOLINA, M.D.
|
|
|
|
Joseph M. Molina, M.D.
|
|
|
|
Chairman of the Board,
|
|
|
|
Chief Executive Officer and President
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Dated:
|
October 30, 2013
|
|
/s/ JOHN C. MOLINA, J.D.
|
|
|
|
John C. Molina, J.D.
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
(Principal Financial Officer)
|
Exhibit No.
|
|
Title
|
|
|
|
10.1
|
|
Settlement Agreement entered into on October 30, 2013, by and between the Department of Health Care Services and Molina Healthcare of California and Molina Healthcare of California Partner Plan, Inc.
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Taxonomy Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
•
|
Contract number 07-65851 (primary) and Contract number 07-65852 (secondary): Extension through December 31, 2019, for Sacramento County
|
•
|
Contract number 06-55498 (primary) and Contract number 06-55503 (secondary): Extension through March 31, 2020, for Riverside and San Bernardino Counties
|
•
|
Contract number 09-86161 (primary) and Contract number 09-86162 (secondary): Extension through June 30, 2020, for San Diego County
|
•
|
Contract number 13-90285 (primary) and Contract number 13-90286 (secondary): Original Contract Period of five years and Extension through October 31, 2023, for Imperial County.
|
•
|
2006-07: DHCS Office of Admin. Hearings and Appeals Case No. MC8-0707-125-DC; and
|
•
|
2007-08: DHCS Office of Admin. Hearings and Appeals Case No. MC9-1008-480-CS; and
|
•
|
2008-09: DHCS Office of Admin. Hearings and Appeals Case No. MC10-0709-063-FL; and
|
•
|
2010-11: DHCS Office of Admin. Hearings and Appeals Case Nos. MC11-0111-583-VH and MC11-0411-774-RW.
|
1.
|
The methodology for the Settlement Account shall be based on Molina’s following lines of business: direct Medi-Cal contracts (including those covering Seniors and Persons with Disabilities), Healthy Families, Dual Eligibles (both Medi-Cal and Medicare portions), and any Medi-Cal expansion populations.
|
2.
|
The “Settlement Account Balance” will be established on January 1, 2014, with an initial balance of zero dollars due to Molina. This balance will be adjusted annually to reflect the calendar year settlement account “surplus” earned or “deficit” incurred by the Department. A surplus results when the Settlement Percentage is positive as described in Paragraph 6, below. A deficit results when the Settlement Percentage is negative as described in Paragraph 7, below.
|
3.
|
For purposes of this Settlement Account Agreement, Profit is defined as: Premiums Earned (excluding premiums to pay for the Gross Premiums Insurance Tax, Health Insurer Fee, and any other similar assessment, hereinafter collectively referred to as the “Assessment Exclusions”), less the sum of: (i) annual medical costs incurred, and (ii) general and administrative expenses. All calculated amounts shall relate to the lines of business described above in Paragraph 1. Annual medical costs incurred includes claims for services provided and paid during the specific calendar year as well as claims for services provided during the applicable calendar year and paid by June 30 of the following calendar year (the “Run-Out Period”). In the event of the early termination of a contract, the Run-Out Period shall be the six-month period following the effective date of the termination of that contract. The calculation of Profit shall not include any other income or expenses, including but not limited to investment income or expenses. Premiums Earned shall include only those premiums paid to Molina for the months of service within the Settlement Account Agreement Term (as defined in Paragraph 9 below) and shall not include any premiums paid for months of service outside the Settlement Account Agreement Term. Because the Health Insurer Fee is non-deductible for federal and State tax purposes, it is assumed that premiums will be grossed-up by the amount of the fee to
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4.
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The Target Profitability Margin to be utilized for purposes of calculating the surplus or deficit for a calendar year shall be three and a quarter percent (3.25%). The Actual Profitability Margin is calculated for a calendar year by taking the Profit as defined in Paragraph 3 above, divided by the total Premiums Earned.
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5.
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The Settlement Percentage for a calendar year during the Settlement Account Agreement Term (as defined in Paragraph 9 below) shall be calculated by subtracting the Target Profitability Margin from the Actual Profitability Margin each as defined in Paragraph 4. For example, if the Actual Profitability Margin for a calendar year calculated in accordance with Paragraph 4 is 4.25 percent, then the Settlement Percentage is a positive 1 percent (4.25 percent – 3.25 percent), creating a surplus. And for example, if the Actual Profitability Margin for a calendar year calculated in accordance with Paragraph 4 is 2.25 percent, then the Settlement Percentage is a negative 1.0 percent (2.25 percent – 3.25 percent), creating a deficit.
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6.
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If the Settlement Percentage is positive, then the Department earns a settlement surplus for that calendar year in an amount equal to fifty percent (50%) of the Settlement Percentage multiplied by the Premiums Earned for the same calendar year. For calendar year 2014 only, the amount of the Department’s Settlement Percentage is seventy-five (75%) percent rather than fifty percent (50%).
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7.
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If the Settlement Percentage is negative for any calendar year, then the Department incurs a deficit for that calendar year in an amount equal to fifty percent (50%) of the Settlement Percentage multiplied by the Premiums Earned for the same calendar year. For calendar year 2014 only, the amount of the Department’s Settlement Percentage is seventy-five (75%) percent rather than fifty percent (50%).
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8.
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The Settlement Account Balance calculation shall be performed by Molina and submitted to the Department within thirty (30) days after the end of the applicable Run-Out Period. The Department shall have sixty (60) days (the “Certification Period”) to certify this calculation submitted by Molina. Once this calculation has been agreed to by the parties, that dollar amount shall be added (if positive) or subtracted (if negative) to/from the Settlement Account Balance. If there is any change in the Premiums Earned by Molina for a calendar year, the Settlement Percentage, settlement account balance, and Alternative Minimum Amount calculations shall be revised based on the final Premiums Earned attributable to that calendar year. Additionally, if Molina and the Department determine that they are unable to agree to the Settlement Account Balance calculation submitted by Molina by the end of the Certification Period, then the parties shall promptly refer the matter to an independent certified public accounting firm of nationally recognized standing as mutually agreed upon by Molina and the Department (the “Disputes Auditor”) for determination of the Settlement Account Balance calculation, which determination shall be final and binding on each of Molina and the Department. Each of Molina and the Department agree that they will require the Disputes Auditor to render its determination of the Settlement Account Balance calculation within thirty (30) days after the matter is referred to
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9.
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The term of this Settlement Account Agreement is four calendar years, commencing on January 1, 2014 (“ Settlement Account Agreement Term”).
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10.
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At the conclusion of the Settlement Account Agreement Term and the applicable Run-Out Period, the Settlement Account Balance shall be reconciled and settled within one hundred eighty (180) calendar days. In the event the Settlement Account Balance is in a deficit position, the Department shall remit to Molina the greater of: (i) the amount of the Settlement Account Balance, or (ii) the Alternative Minimum Amount payable under Paragraph 13. In no event shall the amount payable by the Department to Molina exceed Forty Million Dollars ($40,000,000). In the event the Settlement Account Balance is in a surplus position, then neither party shall be obligated to pay the other any monies except for the Alternative Minimum Amount payable to Molina under Paragraph 13 below and any previously paid Partial Settlement Payment.
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11.
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If the Department terminates any of Molina’s contracts for the lines of business described in Paragraph 1 prior to expiration of the Settlement Account Agreement Term or if any of the contract extensions identified in Section 1.a of the Settlement Agreement are otherwise determined to be invalid as described in Section 11 of the Settlement Agreement, then a Partial Settlement of the Settlement Account Balance shall occur as described in Paragraph 12 below. In the event Molina elects to terminate a contract for the lines of business described in Paragraph 1, Molina shall not be entitled to receive a Partial Settlement Payment with regard to such terminated contract.
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12.
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In the event a contract identified in Section 1.a of the Settlement Agreement is terminated by the Department or otherwise determined to be invalid as described in Paragraph 11 above, the Department will make a Partial Settlement Payment to Molina. The Partial Settlement Payment will be calculated as described in this Paragraph 12. Molina shall calculate the percentage of Premiums Earned the terminated contract(s) provided for all lines of business as specified in Paragraph 1 of this Attachment A. This calculation shall be based on the last full calendar year the terminated contract was in effect. Molina shall also calculate the then-applicable Alternative Minimum Amount payable (as described in Paragraph 13 below) based on all calendar years of the Settlement Account Agreement completed prior to contract termination. The Department shall, within ninety (90) days of receiving the required calculations from Molina, make a Partial Settlement Payment to Molina equal to the percentage of Premium Earned provided by the terminated contract(s) multiplied by the Alternative Minimum Amount payable as calculated in Paragraph 13 below.
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13.
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At the conclusion of the Settlement Account Agreement Term, the Settlement Account Balance will be reconciled and settled within one hundred eighty (180) calendar days. The amount
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14.
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Cash settlement of the Settlement Agreement will take place within one hundred eighty (180) days after the conclusion of the Settlement Account Agreement Term.
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15.
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A Settlement Account Balance calculation made in accordance with Paragraph 8 shall be recalculated in the event of a change in Premiums Earned which change the value of a cash settlement after the cash settlement has occurred. The difference between the original cash settlement and the recalculated cash settlement shall result in a payment from the Department to Molina, or from Molina to the Department, and shall be due no later than ninety (90) days after payment of revised Premiums Earned is made. Interest shall be assessed on any payment required by this Paragraph at the same rate as is assessed on any revised Premiums Earned that triggered payment pursuant to this Paragraph. Interest shall accrue from the date the original cash settlement is paid.
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16.
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Section 17 of the Settlement Agreement applies to all payments made by the Department under this Settlement Account Agreement.
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Dated: October 30, 2013
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/s/ Joseph M. Molina, M.D.
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Joseph M. Molina, M.D.
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Chairman of the Board,
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Chief Executive Officer and President
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Dated: October 30, 2013
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/s/ John C. Molina, J.D.
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John C. Molina, J.D.
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Chief Financial Officer and Treasurer
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Dated: October 30, 2013
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/s/ Joseph M. Molina, M.D.
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Joseph M. Molina, M.D.
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Chairman of the Board,
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Chief Executive Officer and President
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Dated: October 30, 2013
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/s/ John C. Molina, J.D.
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John C. Molina, J.D.
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Chief Financial Officer and Treasurer
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