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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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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
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13-4204626
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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Title of Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.001 Par Value
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New York Stock Exchange
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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•
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Expanding existing markets by acquiring a Medicaid contract in New Mexico, adding approximately 80,000 new members to our Health Plans segment.
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•
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Entering new strategic markets by acquiring the rights to convert certain Medicaid enrollees covered by South Carolina’s new full-risk Medicaid managed care program effective January 1, 2014. On that date, we added approximately 137,000 members to our Health Plans segment.
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•
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Funding future growth by entering into new debt (and related hedge transactions), and lease financing transactions which in aggregate generated net cash of approximately $
482
million, after debt repayment and stock repurchases.
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•
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Building our infrastructure to support our 2014 growth initiatives associated with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act, or ACA).
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•
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New Mexico Health Plan - In August 2013, our New Mexico health plan closed on its acquisition of the Lovelace Community Health Plan’s contract for the New Mexico Medicaid Salud! Program. As a result of this transaction, Lovelace’s Medicaid members became our Medicaid members and now receive their Medicaid managed services and benefits from our New Mexico health plan. We expect the final purchase price for the acquisition, to be determined by the second quarter of 2014, to amount to approximately $
53 million
. As of December 31, 2013, our membership increased by approximately 80,000 members as a result of this transaction.
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•
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Dual Eligibles
- Nine million low-income elderly and disabled people in the United States are covered under both the Medicare and Medicaid programs. These beneficiaries, often called "dual eligibles" or simply "duals," are more likely than other Medicare beneficiaries to be frail, live with multiple chronic conditions, and have functional and cognitive impairments. Medicare is their primary source of health insurance coverage, as it is for millions of elderly and under-65 disabled beneficiaries. Medicaid supplements Medicare by paying for services not covered by Medicare, such as dental care and long-term care services and support, and by helping to cover Medicare’s premiums and cost-sharing requirements. Together, these two programs help to shield very low-income Medicare beneficiaries from potentially unaffordable out-of-pocket medical and long-term care costs.
|
•
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Medicaid Expansion - As of January 1, 2014, in the states that elect to participate, the ACA provides for the expansion of the Medicaid program to provide eligibility to nearly all low-income people under age 65 with incomes at or below 138 percent of the federal poverty line. As a result, millions of low-income adults without children who previously could not qualify for coverage, as well as many low-income parents and, in some instances, children covered through Children's Health Insurance Program (CHIP), are now eligible for Medicaid. Among the 11 states where we currently operate our health plans, the states of California, Illinois, Michigan, New Mexico, Ohio, and Washington have indicated that they intend to participate in the Medicaid expansion; and the states of Florida, South Carolina, Texas, Utah, and Wisconsin have indicated that they do not intend to participate in the expansion. In those states that
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•
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Health Insurance Marketplaces
- On October 1, 2013, Health Insurance Marketplaces became available for consumers to access and begin the enrollment process for coverage beginning January 1, 2014. Health Insurance Marketplaces allow individuals and small groups to purchase health insurance that is federally subsidized. We intend to participate in Health Insurance Marketplaces in all of the states in which we operate, except Illinois and South Carolina. We participate in the Health Insurance Marketplace primarily to continue to serve members whose income may fluctuate above the eligibility threshold for Medicaid, which is 138% of the federal poverty line. By retaining that member in the Health Insurance Marketplace, if the member's income subsequently declines, we will continuously serve that member in all instances.
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•
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Direct Delivery - Growth and aging of the U.S. population foreshadows an increasing shortage of physicians over the next 15 years. Health care reform is expected to worsen this shortage. We believe the shortage will be felt most acutely among already under-served populations, such as the financially vulnerable families and individuals we serve. While we have no plans to become an organization that fully integrates primary care delivery with our health plans, by leveraging our direct delivery capability on a selective basis we can improve access for our plan members in areas that are most under-served by primary care providers. For instance, in the fourth quarter of 2013, we entered into a 10-year agreement with College Health Enterprises (CHE) to perform certain medical and administrative management services for CHE's hospital in Long Beach, California. Under the agreement, we will assume financial benefit and risk for a number of acute care beds at the hospital. We believe that this arrangement will improve hospital access for our members in the Long Beach, California area, and will also enhance our overall direct delivery strategy. As with any new start-up activity, we may incur losses while we modify various business operations during the initial months of the management services agreement.
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•
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Multi-Product Managed Care Organizations - National and regional managed care organizations that have Medicaid members in addition to numerous commercial health plan and Medicare members.
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•
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Medicaid HMOs - National and regional managed care organizations that focus principally on providing health care services to Medicaid beneficiaries, many of which operate in only one city or state.
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•
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Prepaid Health Plans - Health plans that provide less comprehensive services on an at-risk basis or that provide benefit packages on a non-risk basis.
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•
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Primary Care Case Management Programs - Programs established by the states through contracts with primary care providers to provide primary care services to Medicaid beneficiaries, as well as to provide limited oversight of other services.
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•
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Provider Self Services - Providers have the ability to access information regarding their members and claims. Key functionalities include "Check Member Eligibility," "View Claim," and "View/Submit Authorizations."
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•
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Member Self Services
- Members can access information regarding their personal data, and can perform the following key functionalities: "View Benefits," "Request New ID Card," "Print Temporary ID Card," and "Request Change of Address/PCP."
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•
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File Exchange Services - Various trading partners, such as service partners, providers, vendors, management companies, and individual IPAs, are able to exchange data files (such as those that may be required by federal health care privacy regulations, or any other proprietary format) with us using the file exchange functionality.
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•
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We must measure provider access and availability in terms of the time needed to reach the doctor’s office using public transportation;
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•
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Our quality improvement programs must emphasize member education and outreach and include measures designed to promote utilization of preventive services;
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•
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We must have linkages with schools, city or county health departments, and other community-based providers of health care, to demonstrate our ability to coordinate all of the sources from which our members may receive care;
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•
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We must be able to meet the needs of the disabled and others with special needs;
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•
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Our providers and member service representatives must be able to communicate with members who do not speak English or who are deaf; and
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•
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Our member handbook, newsletters, and other communications must be written at the prescribed reading level, and must be available in languages other than English.
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•
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Our provider network is adequate;
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•
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Our quality and utilization management processes comply with state requirements;
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•
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We have adequate procedures in place for responding to member and provider complaints and grievances;
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•
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We can meet requirements for the timely processing of provider claims:
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•
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We can collect and analyze the information needed to manage our quality improvement activities;
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•
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We have the financial resources necessary to pay our anticipated medical care expenses and the infrastructure needed to account for our costs;
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•
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We have the systems required to process enrollment information, to report on care and services provided, and to process claims for payment in a timely fashion; and
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•
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We have the financial resources needed to protect the state, our providers, and our members against the insolvency of one of our health plans.
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•
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Establish the capability to receive and transmit electronically certain administrative health care transactions, like claims payments, in a standardized format;
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•
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Afford privacy to patient health information; and
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•
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Protect the privacy of patient health information through physical and electronic security measures.
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•
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Risks associated with the health care federal excise tax
.
One notable provision of the ACA is an excise tax or annual fee that applies to most health plans, including commercial health plans and Medicaid managed care plans like Molina Healthcare. While characterized as a “fee” in the text of the ACA, the intent of Congress was to impose a broad-based health insurance industry excise tax, with the understanding that the tax could be passed on to consumers, most likely through higher commercial insurance premiums.
However, because Medicaid is a government funded program, Medicaid health plans have no alternative but to look to their respective state partners for payment to offset the impact of this tax. In Medicaid, capitation rates paid to managed care plans are required to be developed using principles of actuarial soundness. Actuarial soundness requires that the full costs of doing business, including the costs of both federal and state taxes, be considered and factored into the applicable payment to the health plan. Thus, for Medicaid managed care plans like Molina Healthcare, the excise tax should be included in the plans’ capitated rates. However, because of the novelty of this new tax, states have been slow to factor the tax into the premiums paid to us. Moreover, because the tax will be based on a health plan’s market share as applied to a total excise tax base of
$8 billion
in 2014 (and rising substantially thereafter), there is uncertainty regarding the precise amount of the tax that will be assessed on us.
While we and others in the health plan industry are working with Congress to delay and/or repeal the tax on Medicaid plans, we are also working with our state partners to obtain reimbursement for the full economic impact of the excise tax. However, state budget constraints, inaccurate actuarial calculations, political opposition to the ACA, inadequate federal oversight of actuarial soundness, and market competition, could result in a failure to receive
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•
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Risks associated with the duals expansion
. Nine million low-income elderly and disabled people are covered under both the Medicare and Medicaid programs. These beneficiaries, often called “dual eligibles,” are more likely than other Medicare beneficiaries to be frail, live with multiple chronic conditions, and have functional and cognitive impairments. Medicare is their primary source of health insurance coverage, as it is for the nearly 50 million elderly and under-65 disabled beneficiaries in 2012. Medicaid supplements Medicare by paying for services not covered by Medicare, such as dental care and long-term care services and support, and by helping to cover Medicare’s premiums and cost-sharing requirements. Together, these two programs help to shield very low-income Medicare beneficiaries from potentially unaffordable out-of-pocket medical and long-term care costs. Policymakers at the federal and state level are increasingly developing initiatives for dual eligibles, both to improve the coordination of their care, and to reduce spending. The Centers for Medicare and Medicaid Services (CMS) has implemented several demonstration projects designed to improve the coordination of care for dual eligibles and to reduce Medicare and Medicaid spending. These demonstrations include issuing contracts to 15 states to design a program to integrate Medicare and Medicaid services for dual eligibles in the relevant state. Our health plans in California, Illinois, Ohio, Michigan, South Carolina and Texas intend to take part in the duals demonstrations in those states. Our California health plan intends to serve duals in Riverside, San Bernardino, and San Diego counties beginning in April 2014, and in Los Angeles County no sooner than July 2014. Our Illinois health plan will begin serving duals in March 2014. Our Ohio health plan will serve duals in three regions in Ohio, beginning with the Southwest region in June 2014, and the Central and Central West regions in July 2014. Our Michigan health plan will serve duals in Wayne and Macomb counties beginning in October 2014. Our South Carolina health plan will serve duals starting in July 2014. Finally, our Texas health plan is expected to begin serving duals in January 2015.
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•
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Risks associated with the Medicaid expansion
. Among other things, as of January 1, 2014, in the states that elect to participate, the ACA provides for the expansion of the Medicaid program to provide eligibility to nearly all low-income people under age 65 with incomes at or below 138 percent of the federal poverty line. As a result, millions of low-income adults without children who previously could not qualify for coverage, as well as many low-income parents and, in some instances, children covered through CHIP, are now eligible for Medicaid. As of December 31, 2013, among the states where we currently operate our health plans, the states of California, Illinois, Michigan, New Mexico, Ohio, and Washington have indicated that they intend to participate in the Medicaid expansion; and the states of Florida, South Carolina, Texas, Utah, and Wisconsin have indicated that they do not intend to participate in the expansion. In those states that participate in the expansion, our Medicaid membership is likely to grow appreciably. The new enrollees in our health plans will represent a population that is different from the population of Medicaid enrollees we have historically managed. In addition, such enrollees may be unfamiliar with managed care, and may have substantial pent-up demand for medical services that could result in greater than anticipated rates of utilization. All of the risk factors described above with regard to the duals demonstration programs apply equally to Medicaid expansion.
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•
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Risks associated with health insurance marketplaces
. Under the ACA, online health insurance marketplaces are organized on a state-by-state basis, although in many instances a state insurance marketplace is operated by the federal government. In the insurance marketplace, individuals and groups can purchase health insurance that is federally subsidized up to 400% of the applicable federal poverty level. We will be participating as a qualified health plan, or QHP, in the insurance marketplaces in nine of the 11 states in which we currently operate our health plans (with Illinois and South Carolina being the sole exceptions). Our principal focus in participating in the marketplace is to capture the “churn” in membership that may result from a Medicaid member’s income rising above the 138% level of the federal poverty line. By retaining that member in our marketplace plan or QHP, if the member’s income subsequently declines, we will continuously serve that same member in all instances and not “lose” the member to another health plan. All of the risk factors described above with regard to the duals demonstration programs apply equally to our participation in the insurance marketplaces.
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•
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Risk associated with implementing regulations
. There are many parts of the ACA that require further guidance in the form of regulations. Due to the breadth and complexity of the ACA, the lack of implementing regulations and interpretive guidance, and the phased nature of the ACA’s implementation, the overall impact of the ACA on our business and on the health industry in general over the coming years is difficult to predict and not yet fully known, and implementing regulations could contain provisions that have a material adverse effect on our business, financial condition, cash flows, or results of operations.
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•
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additional employees who are not familiar with our operations or our corporate culture,
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•
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new provider networks which may operate on terms different from our existing networks,
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•
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additional members who may decide to transfer to other health care providers or health plans,
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•
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disparate information, claims processing, and record-keeping systems,
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•
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internal controls and accounting policies, including those which require the exercise of judgment and complex estimation processes, such as estimates of claims incurred but not reported, accounting for goodwill, intangible assets, stock-based compensation, and income tax matters, and
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•
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new regulatory schemes, relationships, practices, and compliance requirements.
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•
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the implementation of the ACA and duals demonstration programs,
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•
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state and federal budget pressures,
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•
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changes in expectations as to our future financial performance or changes in financial estimates, if any, of public market analysts,
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•
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announcements relating to our business or the business of our competitors,
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•
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changes in government payment levels,
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•
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adverse publicity regarding health maintenance organizations and other managed care organizations,
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•
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government action regarding member eligibility,
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•
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changes in state mandatory programs,
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•
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conditions generally affecting the managed care industry or our provider networks,
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•
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the success of our operating or acquisition strategy,
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•
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the operating and stock price performance of other comparable companies in the health care industry,
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•
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the termination of our Medicaid or CHIP contracts with state or county agencies, or subcontracts with other Medicaid managed care organizations that contract with such state or county agencies,
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•
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regulatory or legislative change,
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•
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general economic conditions, including unemployment rates, inflation, and interest rates, and
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•
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the other factors set forth under "Risk factors" in this Annual Report on Form 10-K.
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•
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a staggered board of directors, so that it would take three successive annual meetings to replace all directors,
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•
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prohibition of stockholder action by written consent, and
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•
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advance notice requirements for the submission by stockholders of nominations for election to the board of directors and for proposing matters that can be acted upon by stockholders at a meeting.
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Date Range
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High
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Low
|
||||
2013
|
|
|
|
||||
First Quarter
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$
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33.85
|
|
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$
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25.70
|
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Second Quarter
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$
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38.74
|
|
|
$
|
30.26
|
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Third Quarter
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$
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40.90
|
|
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$
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33.31
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Fourth Quarter
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$
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37.39
|
|
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$
|
31.10
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2012
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|
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||||
First Quarter
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$
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36.83
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$
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22.25
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Second Quarter
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$
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35.37
|
|
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$
|
17.63
|
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Third Quarter
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$
|
27.73
|
|
|
$
|
21.62
|
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Fourth Quarter
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$
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29.82
|
|
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$
|
21.74
|
|
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Total Number
of Shares
Purchased (1)
|
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Average Price
Paid per Share (1)
|
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Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
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Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
|
||||||
October 1 — October 31
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1,690
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|
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$
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36.27
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|
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—
|
|
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$
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50,000,000
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|
November 1 — November 30
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1,857
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|
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$
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31.61
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|
|
85,086
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|
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$
|
47,338,505
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December 1 — December 31
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25,078
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|
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$
|
34.68
|
|
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—
|
|
|
$
|
47,338,505
|
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Total
|
28,625
|
|
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$
|
34.58
|
|
|
85,086
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|
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(1)
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During the quarter we withheld 28,625 shares of common stock under our 2002 Equity Incentive Plan and 2011 Equity Incentive Plan to settle our employees' income tax obligations.
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December 31,
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|||||||||||||||||
Name
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2008
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2009
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2010
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2011
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2012
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2013
|
||||||||||||
Molina Healthcare, Inc.
|
$
|
100.00
|
|
$
|
129.87
|
|
$
|
158.15
|
|
$
|
190.20
|
|
$
|
230.49
|
|
$
|
296.00
|
|
S&P 500
|
100.00
|
|
126.46
|
|
145.51
|
|
148.59
|
|
172.37
|
|
228.19
|
|
||||||
Peer Group
|
100.00
|
|
151.46
|
|
171.84
|
|
200.93
|
|
212.70
|
|
268.11
|
|
|
Year Ended December 31,
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||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010 (2)
|
|
2009
|
||||||||||
Statements of Income Data (1):
|
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||||||||||
Revenue:
|
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||||||||||
Premium revenue
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$
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6,179,170
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|
|
$
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5,544,121
|
|
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$
|
4,211,493
|
|
|
$
|
3,632,142
|
|
|
$
|
3,297,733
|
|
Premium tax revenue
|
172,017
|
|
|
158,991
|
|
|
154,589
|
|
|
139,775
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|
|
128,581
|
|
|||||
Service revenue (2)
|
204,535
|
|
|
187,710
|
|
|
160,447
|
|
|
89,809
|
|
|
—
|
|
|||||
Investment income
|
6,890
|
|
|
5,075
|
|
|
5,446
|
|
|
6,198
|
|
|
8,936
|
|
|||||
Rental income and other revenue
|
26,322
|
|
|
18,312
|
|
|
8,288
|
|
|
7,140
|
|
|
3,671
|
|
|||||
Total revenue
|
6,588,934
|
|
|
5,914,209
|
|
|
4,540,263
|
|
|
3,875,064
|
|
|
3,438,921
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Medical care costs
|
5,380,124
|
|
|
4,991,188
|
|
|
3,664,161
|
|
|
3,190,566
|
|
|
2,984,651
|
|
|||||
Cost of service revenue (2)
|
161,494
|
|
|
141,208
|
|
|
143,987
|
|
|
78,647
|
|
|
—
|
|
|||||
General and administrative expenses
|
665,996
|
|
|
518,615
|
|
|
393,452
|
|
|
326,193
|
|
|
252,643
|
|
|||||
Premium tax expenses
|
172,017
|
|
|
158,991
|
|
|
154,589
|
|
|
139,775
|
|
|
128,581
|
|
|||||
Depreciation and amortization
|
72,743
|
|
|
63,114
|
|
|
48,253
|
|
|
43,246
|
|
|
35,649
|
|
|||||
Total operating expenses
|
6,452,374
|
|
|
5,873,116
|
|
|
4,404,442
|
|
|
3,778,427
|
|
|
3,401,524
|
|
|||||
Gain on purchase of convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,532
|
|
|||||
Operating income
|
136,560
|
|
|
41,093
|
|
|
135,821
|
|
|
96,637
|
|
|
38,929
|
|
|||||
Other expenses, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
52,071
|
|
|
16,769
|
|
|
15,519
|
|
|
15,509
|
|
|
13,777
|
|
|||||
Other expense, net
|
3,343
|
|
|
945
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total other expenses, net
|
55,414
|
|
|
17,714
|
|
|
15,519
|
|
|
15,509
|
|
|
13,777
|
|
|||||
Income from continuing operations before income taxes
|
81,146
|
|
|
23,379
|
|
|
120,302
|
|
|
81,128
|
|
|
25,152
|
|
|||||
Income tax expense
|
36,316
|
|
|
10,513
|
|
|
42,914
|
|
|
30,511
|
|
|
1,970
|
|
|||||
Income from continuing operations
|
44,830
|
|
|
12,866
|
|
|
77,388
|
|
|
50,617
|
|
|
23,182
|
|
|||||
Income (loss) from discontinued operations, net of tax (benefit) expense (3)
|
8,099
|
|
|
(3,076
|
)
|
|
(56,570
|
)
|
|
4,353
|
|
|
7,686
|
|
|||||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
|
$
|
54,970
|
|
|
$
|
30,868
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations
|
$
|
0.98
|
|
|
$
|
0.28
|
|
|
$
|
1.69
|
|
|
$
|
1.23
|
|
|
$
|
0.60
|
|
Income (loss) from discontinued operations
|
0.18
|
|
|
(0.07
|
)
|
|
(1.24
|
)
|
|
0.11
|
|
|
0.20
|
|
|||||
Basic net income per share
|
$
|
1.16
|
|
|
$
|
0.21
|
|
|
$
|
0.45
|
|
|
$
|
1.34
|
|
|
$
|
0.80
|
|
Diluted income per share
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations
|
$
|
0.96
|
|
|
$
|
0.27
|
|
|
$
|
1.67
|
|
|
$
|
1.22
|
|
|
$
|
0.59
|
|
Income (loss) from discontinued operations
|
0.17
|
|
|
(0.06
|
)
|
|
(1.22
|
)
|
|
0.10
|
|
|
0.20
|
|
|||||
Diluted net income per share
|
$
|
1.13
|
|
|
$
|
0.21
|
|
|
$
|
0.45
|
|
|
$
|
1.32
|
|
|
$
|
0.79
|
|
Weighted average number of common shares outstanding
|
45,717,000
|
|
|
46,380,000
|
|
|
45,756,000
|
|
|
41,174,000
|
|
|
38,765,000
|
|
|||||
Weighted average number of common shares and potential dilutive common shares outstanding
|
46,862,000
|
|
|
46,999,000
|
|
|
46,425,000
|
|
|
41,631,000
|
|
|
38,976,000
|
|
|||||
Operating Statistics, Continuing Operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Medical care ratio (4)
|
87.1
|
%
|
|
90.0
|
%
|
|
87.0
|
%
|
|
87.8
|
%
|
|
90.5
|
%
|
|||||
General and administrative expense ratio (5)
|
10.1
|
%
|
|
8.8
|
%
|
|
8.7
|
%
|
|
8.4
|
%
|
|
7.3
|
%
|
|||||
Premium tax ratio (6)
|
2.7
|
%
|
|
2.8
|
%
|
|
3.5
|
%
|
|
3.7
|
%
|
|
3.8
|
%
|
|||||
Members (7)
|
1,931,000
|
|
|
1,797,000
|
|
|
1,618,000
|
|
|
1,532,000
|
|
|
1,377,000
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
935,895
|
|
|
$
|
795,770
|
|
|
$
|
493,827
|
|
|
$
|
455,886
|
|
|
$
|
469,501
|
|
Total assets
|
3,002,937
|
|
|
1,934,822
|
|
|
1,652,146
|
|
|
1,509,214
|
|
|
1,244,035
|
|
|||||
Long-term debt, including current maturities (8)
|
784,862
|
|
|
262,939
|
|
|
218,126
|
|
|
164,014
|
|
|
158,900
|
|
|||||
Total liabilities
|
2,110,000
|
|
|
1,152,508
|
|
|
897,073
|
|
|
790,157
|
|
|
701,297
|
|
|||||
Stockholders’ equity
|
892,937
|
|
|
782,314
|
|
|
755,073
|
|
|
719,057
|
|
|
542,738
|
|
(1)
|
As previously reported, on February 17, 2012 the Division of Purchasing of the Missouri Office of Administration notified our Missouri health plan that it was not awarded a contract under the Missouri HealthNet Managed Care Request for Proposal; therefore, the Missouri health plan’s existing contract with the state expired without renewal on June 30, 2012. In connection with this notification, the Missouri heath plan recorded a non-cash impairment charge of $64.6 million in the fourth quarter of 2011. Effective in 2013, upon the termination of the transition obligations associated with that contract and abandonment of our equity interest in the Missouri health plan, we have recast the results relating to the Missouri health plan as discontinued operations for all periods presented.
|
(2)
|
Service revenue and cost of service revenue represent revenue and costs generated by our Molina Medicaid Solutions segment. Because we acquired this business on May 1, 2010, results for the year ended December 31, 2010 include eight months of results for this segment.
|
(3)
|
Income (loss) from discontinued operations is presented net of income tax (benefit) expense of $(9,912), $(1,238), $922, $4,011, and $5,319, respectively.
|
(4)
|
Medical care ratio represents medical care costs as a percentage of premium revenue. The medical care ratio is a key operating indicator used to measure our performance in delivering efficient and cost effective health care services. Changes in the medical care ratio from period to period result from changes in Medicaid funding by the states, utilization of medical services, our ability to effectively manage costs, contract changes, and changes in accounting estimates related to incurred but not paid claims. See Item 7 in this Form 10-K, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," for further discussion.
|
(5)
|
General and administrative expense ratio represents such expenses as a percentage of total revenue.
|
(6)
|
Premium tax ratio represents such expenses as a percentage of premium revenue plus premium tax revenue.
|
(7)
|
Number of members at end of period.
|
(8)
|
Includes convertible senior notes, lease financing obligations, and other long-term debt.
|
•
|
Net income from continuing operations increased to
$44.8 million
in 2013, from
$12.9 million
in 2012 as a result of higher medical margin (measured as the excess of premium revenue over medical care costs). Higher medical margin was partially offset by increased administrative expenses related to our preparations for significant membership growth expected in 2014.
|
•
|
Premium revenue in 2013 increased
11%
over 2012, due to a
6%
increase in enrollment (on a member-month basis), and a
5%
increase in revenue per member per month (PMPM).
|
•
|
Excluding our Illinois health plan, which was not operational until 2013, eight of our nine health plans reported higher medical margins in 2013 than in 2012. The consolidated medical margin increased by approximately
45%
year over year. Our consolidated medical care ratio (measured as medical care costs as a percentage of premium revenue) decreased to
87.1%
in
2013
, from
90.0%
in
2012
.
|
•
|
General and administrative expenses increased to
10.1%
of revenue in 2013, from
8.8%
in 2012. Increased administrative expenses related to anticipated membership growth represented approximately
2%
of premium revenue, or
$135
million during 2013.
|
•
|
We entered into new debt (and related hedge transactions), and lease financing transactions which in aggregate generated net cash of approximately $
482
million, after debt repayment and stock repurchases.
|
|
As of December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Total Membership by Health Plan (1)(2):
|
|
|
|
|
|
|||
California
|
368,000
|
|
|
336,000
|
|
|
355,000
|
|
Florida
|
89,000
|
|
|
73,000
|
|
|
69,000
|
|
Illinois
|
4,000
|
|
|
—
|
|
|
—
|
|
Michigan
|
213,000
|
|
|
220,000
|
|
|
222,000
|
|
New Mexico
|
168,000
|
|
|
91,000
|
|
|
88,000
|
|
Ohio
|
255,000
|
|
|
244,000
|
|
|
248,000
|
|
Texas
|
252,000
|
|
|
282,000
|
|
|
155,000
|
|
Utah
|
86,000
|
|
|
87,000
|
|
|
84,000
|
|
Washington
|
403,000
|
|
|
418,000
|
|
|
355,000
|
|
Wisconsin
|
93,000
|
|
|
46,000
|
|
|
42,000
|
|
|
1,931,000
|
|
|
1,797,000
|
|
|
1,618,000
|
|
Membership for our Medicare Advantage Plans (2):
|
|
|
|
|
|
|||
California
|
8,800
|
|
|
7,700
|
|
|
6,900
|
|
Florida
|
600
|
|
|
900
|
|
|
800
|
|
Michigan
|
10,400
|
|
|
9,700
|
|
|
8,200
|
|
New Mexico
|
900
|
|
|
900
|
|
|
800
|
|
Ohio
|
500
|
|
|
300
|
|
|
200
|
|
Texas
|
2,800
|
|
|
1,500
|
|
|
700
|
|
Utah
|
8,300
|
|
|
8,200
|
|
|
8,400
|
|
Washington
|
7,100
|
|
|
6,500
|
|
|
5,000
|
|
|
39,400
|
|
|
35,700
|
|
|
31,000
|
|
Membership for our Aged, Blind or Disabled Population (2):
|
|
|
|
|
|
|||
California
|
46,700
|
|
|
44,700
|
|
|
31,500
|
|
Florida
|
14,700
|
|
|
10,300
|
|
|
10,400
|
|
Illinois
|
4,000
|
|
|
—
|
|
|
—
|
|
Michigan
|
45,300
|
|
|
41,900
|
|
|
37,500
|
|
New Mexico
|
11,300
|
|
|
5,700
|
|
|
5,600
|
|
Ohio
|
32,000
|
|
|
28,200
|
|
|
29,100
|
|
Texas
|
90,200
|
|
|
95,900
|
|
|
63,700
|
|
Utah
|
9,700
|
|
|
9,000
|
|
|
8,500
|
|
Washington
|
33,000
|
|
|
30,000
|
|
|
4,800
|
|
Wisconsin
|
1,700
|
|
|
1,700
|
|
|
1,700
|
|
|
288,600
|
|
|
267,400
|
|
|
192,800
|
|
•
|
Fee-for-service:
Nearly all hospital services and the majority of our primary care and physician specialist services are paid on a fee-for-service basis. Under all fee-for-service arrangements, we retain the financial responsibility for medical care provided. Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed. The costs of drugs administered in a physician or hospital setting that are not billed through our pharmacy benefit manager are included in fee-for-service costs.
|
•
|
Capitation:
Many of our primary care physicians and a small portion of our specialists and hospitals are paid on a capitated basis. Under capitation contracts, we typically pay a fixed PMPM payment to the provider without regard to the frequency, extent, or nature of the medical services actually furnished. Under capitated contracts, we remain liable for the provision of certain health care services. Capitation payments are fixed in advance of the periods covered and are not subject to significant accounting estimates. These payments are expensed in the period the providers are obligated to provide services. The financial risk for pharmacy services for a small portion of our membership is delegated to capitated providers.
|
•
|
Pharmacy:
Pharmacy costs include all drug, injectibles, and immunization costs paid through our pharmacy benefit manager. As noted above, drugs and injectibles not paid through our pharmacy benefit manager are included in fee-for-service costs, except in those limited instances where we capitate drug and injectible costs.
|
•
|
Direct delivery:
Costs associated with our operation and/or management of primary care clinics and hospital services in California, Florida, New Mexico, Virginia, and Washington.
|
•
|
Other:
Other medical care costs include medically related administrative costs, certain provider incentive costs, reinsurance cost, and other health care expense. Medically related administrative costs include, for example, expenses relating to health education, quality assurance, case management, disease management, and 24-hour on-call nurses. Salary and benefit costs are a substantial portion of these expenses. For the years ended
December 31, 2013
,
2012
, and
2011
, medically related administrative costs were
$153.0 million
,
$125.2 million
,
and
$99.3 million
,
respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Dollar amounts in thousands, except per-share data)
|
||||||||||
Net income per diluted share
|
$
|
0.96
|
|
|
$
|
0.27
|
|
|
$
|
1.67
|
|
Adjusted net income per diluted share
|
$
|
3.13
|
|
|
$
|
1.72
|
|
|
$
|
2.93
|
|
Premium revenue
|
$
|
6,179,170
|
|
|
$
|
5,544,121
|
|
|
$
|
4,211,493
|
|
Service revenue
|
$
|
204,535
|
|
|
$
|
187,710
|
|
|
$
|
160,447
|
|
Operating income
|
$
|
136,560
|
|
|
$
|
41,093
|
|
|
$
|
135,821
|
|
Net income
|
$
|
44,830
|
|
|
$
|
12,866
|
|
|
$
|
77,388
|
|
Total ending membership
|
1,931,000
|
|
|
1,797,000
|
|
|
1,618,000
|
|
|||
Premium revenue
|
93.8
|
%
|
|
93.7
|
%
|
|
92.8
|
%
|
|||
Premium tax revenue
|
2.6
|
%
|
|
2.7
|
%
|
|
3.4
|
%
|
|||
Service revenue
|
3.1
|
%
|
|
3.2
|
%
|
|
3.5
|
%
|
|||
Investment income
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|||
Rental income and other revenue
|
0.4
|
%
|
|
0.3
|
%
|
|
0.2
|
%
|
|||
Total revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|||
|
|
|
|
|
|
||||||
Medical care ratio
|
87.1
|
%
|
|
90.0
|
%
|
|
87.0
|
%
|
|||
General and administrative expense ratio
|
10.1
|
%
|
|
8.8
|
%
|
|
8.7
|
%
|
|||
Premium tax ratio
|
2.7
|
%
|
|
2.8
|
%
|
|
3.5
|
%
|
|||
Operating income
|
2.1
|
%
|
|
0.7
|
%
|
|
3.0
|
%
|
|||
Net income
|
0.7
|
%
|
|
0.2
|
%
|
|
1.7
|
%
|
|||
Effective tax rate
|
44.8
|
%
|
|
45.0
|
%
|
|
35.7
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
Adjustments:
|
|
|
|
|
|
||||||
Depreciation and amortization reported in the consolidated statements of cash flows
|
93,866
|
|
|
78,764
|
|
|
74,383
|
|
|||
Interest expense
|
52,071
|
|
|
16,769
|
|
|
15,519
|
|
|||
Income tax expense
|
26,404
|
|
|
9,275
|
|
|
43,836
|
|
|||
EBITDA
|
$
|
225,270
|
|
|
$
|
114,598
|
|
|
$
|
154,556
|
|
|
Year Ended December 31,
|
||||||||||
2013
|
|
2012
|
|
2011
|
|||||||
|
|
||||||||||
Net income per diluted share, continuing operations
|
$
|
0.96
|
|
|
$
|
0.27
|
|
|
$
|
1.67
|
|
Adjustments, net of tax:
|
|
|
|
|
|
||||||
Depreciation, and amortization of capitalized software
|
0.98
|
|
|
0.75
|
|
|
0.64
|
|
|||
Stock-based compensation
|
0.52
|
|
|
0.31
|
|
|
0.23
|
|
|||
Amortization of convertible senior notes and lease financing obligations
|
0.31
|
|
|
0.08
|
|
|
0.07
|
|
|||
Amortization of intangible assets
|
0.28
|
|
|
0.29
|
|
|
0.32
|
|
|||
Change in fair value of derivatives
|
0.08
|
|
|
0.02
|
|
|
—
|
|
|||
Adjusted net income per diluted share, continuing operations
|
$
|
3.13
|
|
|
$
|
1.72
|
|
|
$
|
2.93
|
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
2013
|
|
2012
|
||||||||||||||||||
|
Amount
|
|
PMPM
|
|
% of
Total
|
|
Amount
|
|
PMPM
|
|
% of
Total
|
||||||||||
Fee for service
|
$
|
3,611,529
|
|
|
$
|
160.43
|
|
|
67.1
|
%
|
|
$
|
3,423,751
|
|
|
$
|
161.67
|
|
|
68.6
|
%
|
Pharmacy
|
935,204
|
|
|
41.54
|
|
|
17.4
|
|
|
835,830
|
|
|
39.47
|
|
|
16.7
|
|
||||
Capitation
|
603,938
|
|
|
26.83
|
|
|
11.2
|
|
|
552,136
|
|
|
26.07
|
|
|
11.1
|
|
||||
Direct delivery
|
48,288
|
|
|
2.14
|
|
|
0.9
|
|
|
33,920
|
|
|
1.60
|
|
|
0.7
|
|
||||
Other
|
181,165
|
|
|
8.05
|
|
|
3.4
|
|
|
145,551
|
|
|
6.87
|
|
|
2.9
|
|
||||
|
$
|
5,380,124
|
|
|
$
|
238.99
|
|
|
100.0
|
%
|
|
$
|
4,991,188
|
|
|
$
|
235.68
|
|
|
100.0
|
%
|
|
Year Ended December 31, 2013
|
||||||||||||||||||||||||
|
Member
Months(2)
|
|
Premium Revenue (1)
|
|
Medical Care Costs (1)
|
|
MCR (3)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
4,233
|
|
|
$
|
749,755
|
|
|
$
|
177.10
|
|
|
$
|
666,592
|
|
|
$
|
157.46
|
|
|
88.9
|
%
|
|
$
|
83,163
|
|
Florida
|
973
|
|
|
264,998
|
|
|
272.23
|
|
|
231,261
|
|
|
237.57
|
|
|
87.3
|
|
|
33,737
|
|
|||||
Illinois
(4)
|
7
|
|
|
8,121
|
|
|
1,201.34
|
|
|
7,869
|
|
|
1,164.10
|
|
|
96.9
|
|
|
252
|
|
|||||
Michigan
|
2,581
|
|
|
676,000
|
|
|
261.91
|
|
|
570,644
|
|
|
221.09
|
|
|
84.4
|
|
|
105,356
|
|
|||||
New Mexico
|
1,492
|
|
|
446,758
|
|
|
299.36
|
|
|
384,466
|
|
|
257.62
|
|
|
86.1
|
|
|
62,292
|
|
|||||
Ohio
|
3,007
|
|
|
1,098,795
|
|
|
365.44
|
|
|
924,675
|
|
|
307.53
|
|
|
84.2
|
|
|
174,120
|
|
|||||
Texas
|
3,178
|
|
|
1,291,001
|
|
|
406.27
|
|
|
1,114,852
|
|
|
350.84
|
|
|
86.4
|
|
|
176,149
|
|
|||||
Utah
|
1,040
|
|
|
310,895
|
|
|
299.05
|
|
|
259,397
|
|
|
249.51
|
|
|
83.4
|
|
|
51,498
|
|
|||||
Washington
|
4,941
|
|
|
1,168,405
|
|
|
236.47
|
|
|
1,028,210
|
|
|
208.10
|
|
|
88.0
|
|
|
140,195
|
|
|||||
Wisconsin
|
1,060
|
|
|
143,465
|
|
|
135.40
|
|
|
114,340
|
|
|
107.91
|
|
|
79.7
|
|
|
29,125
|
|
|||||
Other
(4) (5)
|
—
|
|
|
20,977
|
|
|
—
|
|
|
77,818
|
|
|
—
|
|
|
—
|
|
|
(56,841
|
)
|
|||||
|
22,512
|
|
|
$
|
6,179,170
|
|
|
$
|
274.48
|
|
|
$
|
5,380,124
|
|
|
$
|
238.99
|
|
|
87.1
|
%
|
|
$
|
799,046
|
|
|
Year Ended December 31, 2012
|
||||||||||||||||||||||||
|
Member
Months(2)
|
|
Premium Revenue (1)
|
|
Medical Care Costs (1)
|
|
MCR (3)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
4,177
|
|
|
$
|
665,600
|
|
|
$
|
159.36
|
|
|
$
|
606,494
|
|
|
$
|
145.20
|
|
|
91.1
|
%
|
|
$
|
59,106
|
|
Florida
|
850
|
|
|
228,832
|
|
|
269.36
|
|
|
195,226
|
|
|
229.80
|
|
|
85.3
|
|
|
33,606
|
|
|||||
Michigan
|
2,639
|
|
|
646,551
|
|
|
244.97
|
|
|
570,636
|
|
|
216.20
|
|
|
88.3
|
|
|
75,915
|
|
|||||
New Mexico
|
1,069
|
|
|
321,853
|
|
|
301.08
|
|
|
280,108
|
|
|
262.03
|
|
|
87.0
|
|
|
41,745
|
|
|||||
Ohio
|
3,065
|
|
|
1,095,137
|
|
|
357.36
|
|
|
970,504
|
|
|
316.69
|
|
|
88.6
|
|
|
124,633
|
|
|||||
Texas
|
3,245
|
|
|
1,233,621
|
|
|
380.18
|
|
|
1,155,433
|
|
|
356.08
|
|
|
93.7
|
|
|
78,188
|
|
|||||
Utah
|
1,026
|
|
|
298,392
|
|
|
290.78
|
|
|
245,671
|
|
|
239.41
|
|
|
82.3
|
|
|
52,721
|
|
|||||
Washington
|
4,600
|
|
|
974,712
|
|
|
211.91
|
|
|
845,733
|
|
|
183.87
|
|
|
86.8
|
|
|
128,979
|
|
|||||
Wisconsin
|
508
|
|
|
70,678
|
|
|
139.25
|
|
|
67,968
|
|
|
133.91
|
|
|
96.2
|
|
|
2,710
|
|
|||||
Other
(4) (5)
|
—
|
|
|
8,745
|
|
|
—
|
|
|
53,415
|
|
|
—
|
|
|
—
|
|
|
(44,670
|
)
|
|||||
|
21,179
|
|
|
$
|
5,544,121
|
|
|
$
|
261.79
|
|
|
$
|
4,991,188
|
|
|
$
|
235.68
|
|
|
90.0
|
%
|
|
$
|
552,933
|
|
(1)
|
Premium revenue for the Missouri health plan was
$0.2 million
and
$114.4 million
for the years ended
December 31, 2013
and
2012
, respectively. Medical care costs for the Missouri health plan were
$1.5 million
and
$105.6 million
for the years ended
December 31, 2013
and
2012
, respectively. These amounts are excluded from the tables above.
|
(2)
|
A member month is defined as the aggregate of each month’s ending membership for the period presented.
|
(3)
|
“MCR” represents medical costs as a percentage of premium revenue.
|
(4)
|
The results of the Illinois health plan, until it became operational in 2013, were insignificant and reported in "Other."
|
(5)
|
“Other” medical care costs include primarily medically related administrative costs of the parent company, and direct delivery costs.
|
|
Year Ended December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Service revenue before amortization
|
$
|
207,449
|
|
|
$
|
189,281
|
|
Amortization recorded as reduction of service revenue
|
(2,914
|
)
|
|
(1,571
|
)
|
||
Service revenue
|
204,535
|
|
|
187,710
|
|
||
Cost of service revenue
|
161,494
|
|
|
141,208
|
|
||
General and administrative costs
|
5,285
|
|
|
17,648
|
|
||
Amortization of customer relationship intangibles
|
5,127
|
|
|
5,127
|
|
||
Operating income
|
$
|
32,629
|
|
|
$
|
23,727
|
|
•
|
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.”
|
|
Year Ended December 31,
|
||||||||||||
|
2013
|
|
2012
|
||||||||||
|
Amount
|
|
% of Total
Revenue
|
|
Amount
|
|
% of Total
Revenue
|
||||||
|
(Dollar amounts in thousands)
|
||||||||||||
Depreciation, and amortization of capitalized software, continuing operations
|
$
|
54,837
|
|
|
0.8
|
%
|
|
$
|
42,938
|
|
|
0.7
|
%
|
Amortization of intangible assets, continuing operations
|
17,906
|
|
|
0.3
|
|
|
20,176
|
|
|
0.3
|
|
||
Depreciation and amortization, continuing operations
|
72,743
|
|
|
1.1
|
|
|
63,114
|
|
|
1.0
|
|
||
Depreciation and amortization, discontinued operations
|
2
|
|
|
—
|
|
|
590
|
|
|
—
|
|
||
Amortization recorded as reduction of service revenue
|
2,914
|
|
|
—
|
|
|
1,571
|
|
|
—
|
|
||
Amortization of capitalized software recorded as cost of service revenue
|
18,207
|
|
|
0.3
|
|
|
13,489
|
|
|
0.2
|
|
||
|
$
|
93,866
|
|
|
1.4
|
%
|
|
$
|
78,764
|
|
|
1.2
|
%
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
2012
|
|
2011
|
||||||||||||||||||
|
Amount
|
|
PMPM
|
|
% of
Total |
|
Amount
|
|
PMPM
|
|
% of
Total
|
||||||||||
Fee for service
|
$
|
3,423,751
|
|
|
$
|
161.67
|
|
|
68.6
|
%
|
|
$
|
2,587,380
|
|
|
$
|
136.72
|
|
|
70.6
|
%
|
Pharmacy
|
835,830
|
|
|
39.47
|
|
|
16.7
|
|
|
418,019
|
|
|
22.09
|
|
|
11.4
|
|
||||
Capitation
|
552,136
|
|
|
26.07
|
|
|
11.1
|
|
|
505,892
|
|
|
26.73
|
|
|
13.8
|
|
||||
Direct delivery
|
33,920
|
|
|
1.60
|
|
|
0.7
|
|
|
29,683
|
|
|
1.57
|
|
|
0.8
|
|
||||
Other
|
145,551
|
|
|
6.87
|
|
|
2.9
|
|
|
123,187
|
|
|
6.51
|
|
|
3.4
|
|
||||
|
$
|
4,991,188
|
|
|
$
|
235.68
|
|
|
100.0
|
%
|
|
$
|
3,664,161
|
|
|
$
|
193.62
|
|
|
100.0
|
%
|
|
Year Ended December 31, 2012
|
||||||||||||||||||||||||
|
Member
Months(2)
|
|
Premium Revenue (1)
|
|
Medical Care Costs (1)
|
|
MCR (3)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
4,177
|
|
|
$
|
665,600
|
|
|
$
|
159.36
|
|
|
$
|
606,494
|
|
|
$
|
145.20
|
|
|
91.1
|
%
|
|
$
|
59,106
|
|
Florida
|
850
|
|
|
228,832
|
|
|
269.36
|
|
|
195,226
|
|
|
229.80
|
|
|
85.3
|
|
|
33,606
|
|
|||||
Michigan
|
2,639
|
|
|
646,551
|
|
|
244.97
|
|
|
570,636
|
|
|
216.20
|
|
|
88.3
|
|
|
75,915
|
|
|||||
New Mexico
|
1,069
|
|
|
321,853
|
|
|
301.08
|
|
|
280,108
|
|
|
262.03
|
|
|
87.0
|
|
|
41,745
|
|
|||||
Ohio
|
3,065
|
|
|
1,095,137
|
|
|
357.36
|
|
|
970,504
|
|
|
316.69
|
|
|
88.6
|
|
|
124,633
|
|
|||||
Texas
|
3,245
|
|
|
1,233,621
|
|
|
380.18
|
|
|
1,155,433
|
|
|
356.08
|
|
|
93.7
|
|
|
78,188
|
|
|||||
Utah
|
1,026
|
|
|
298,392
|
|
|
290.78
|
|
|
245,671
|
|
|
239.41
|
|
|
82.3
|
|
|
52,721
|
|
|||||
Washington
|
4,600
|
|
|
974,712
|
|
|
211.91
|
|
|
845,733
|
|
|
183.87
|
|
|
86.8
|
|
|
128,979
|
|
|||||
Wisconsin
|
508
|
|
|
70,678
|
|
|
139.25
|
|
|
67,968
|
|
|
133.91
|
|
|
96.2
|
|
|
2,710
|
|
|||||
Other
(4)
|
—
|
|
|
8,745
|
|
|
—
|
|
|
53,415
|
|
|
—
|
|
|
—
|
|
|
(44,670
|
)
|
|||||
|
21,179
|
|
|
$
|
5,544,121
|
|
|
$
|
261.79
|
|
|
$
|
4,991,188
|
|
|
$
|
235.68
|
|
|
90.0
|
%
|
|
$
|
552,933
|
|
|
Year Ended December 31, 2011
|
||||||||||||||||||||||||
|
Member
Months(2)
|
|
Premium Revenue (1)
|
|
Medical Care Costs (1)
|
|
MCR (3)
|
|
Medical Margin
|
||||||||||||||||
|
|
Total
|
|
PMPM
|
|
Total
|
|
PMPM
|
|
|
|||||||||||||||
California
|
4,190
|
|
|
$
|
567,677
|
|
|
$
|
135.48
|
|
|
$
|
493,419
|
|
|
$
|
117.75
|
|
|
86.9
|
%
|
|
$
|
74,258
|
|
Florida
|
788
|
|
|
203,904
|
|
|
258.65
|
|
|
187,358
|
|
|
237.66
|
|
|
91.9
|
|
|
16,546
|
|
|||||
Michigan
|
2,660
|
|
|
623,394
|
|
|
234.35
|
|
|
537,779
|
|
|
202.16
|
|
|
86.3
|
|
|
85,615
|
|
|||||
New Mexico
|
1,074
|
|
|
328,706
|
|
|
306.08
|
|
|
277,338
|
|
|
258.25
|
|
|
84.4
|
|
|
51,368
|
|
|||||
Ohio
|
2,966
|
|
|
912,219
|
|
|
307.55
|
|
|
766,949
|
|
|
258.57
|
|
|
84.1
|
|
|
145,270
|
|
|||||
Texas
|
1,616
|
|
|
402,178
|
|
|
248.99
|
|
|
382,390
|
|
|
236.74
|
|
|
95.1
|
|
|
19,788
|
|
|||||
Utah
|
972
|
|
|
287,290
|
|
|
295.51
|
|
|
224,513
|
|
|
230.94
|
|
|
78.1
|
|
|
62,777
|
|
|||||
Washington
|
4,171
|
|
|
808,458
|
|
|
193.85
|
|
|
690,513
|
|
|
165.57
|
|
|
85.4
|
|
|
117,945
|
|
|||||
Wisconsin
|
488
|
|
|
69,552
|
|
|
142.47
|
|
|
64,346
|
|
|
131.81
|
|
|
92.5
|
|
|
5,206
|
|
|||||
Other
(4)
|
—
|
|
|
8,115
|
|
|
—
|
|
|
39,556
|
|
|
—
|
|
|
—
|
|
|
(31,441
|
)
|
|||||
|
18,925
|
|
|
$
|
4,211,493
|
|
|
$
|
222.54
|
|
|
$
|
3,664,161
|
|
|
$
|
193.62
|
|
|
87.0
|
%
|
|
$
|
547,332
|
|
(1)
|
Premium revenue for the Missouri health plan was
$114.4 million
and
$229.6 million
for the years ended
December 31, 2012
and
2011
, respectively. Medical care costs for the Missouri health plan were
$105.6 million
and
$195.8 million
for the years ended
December 31, 2012
and
2011
, respectively. These amounts are excluded from the tables above.
|
(2)
|
A member month is defined as the aggregate of each month’s ending membership for the period presented.
|
(3)
|
“MCR” represents medical costs as a percentage of premium revenue.
|
(4)
|
“Other” medical care costs include primarily medically related administrative costs of the parent company, and direct delivery costs.
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(In thousands)
|
||||||
Service revenue before amortization
|
$
|
189,281
|
|
|
$
|
167,269
|
|
Amortization recorded as reduction of service revenue
|
(1,571
|
)
|
|
(6,822
|
)
|
||
Service revenue
|
187,710
|
|
|
160,447
|
|
||
Cost of service revenue
|
141,208
|
|
|
143,987
|
|
||
General and administrative costs
|
17,648
|
|
|
9,270
|
|
||
Amortization of customer relationship intangibles
|
5,127
|
|
|
5,127
|
|
||
Operating income
|
$
|
23,727
|
|
|
$
|
2,063
|
|
|
Year Ended December 31,
|
||||||||||||
|
2012
|
|
2011
|
||||||||||
|
Amount
|
|
% of Total
Revenue
|
|
Amount
|
|
% of Total
Revenue
|
||||||
|
(Dollar amounts in thousands)
|
||||||||||||
Depreciation, and amortization of capitalized software, continuing operations
|
$
|
42,938
|
|
|
0.7
|
%
|
|
$
|
30,803
|
|
|
0.7
|
%
|
Amortization of intangible assets, continuing operations
|
20,176
|
|
|
0.3
|
|
|
17,450
|
|
|
0.4
|
|
||
Depreciation and amortization, continuing operations
|
63,114
|
|
|
1.0
|
|
|
48,253
|
|
|
1.1
|
|
||
Depreciation and amortization, discontinued operations
|
590
|
|
|
—
|
|
|
2,437
|
|
|
—
|
|
||
Amortization recorded as reduction of service revenue
|
1,571
|
|
|
—
|
|
|
6,822
|
|
|
0.1
|
|
||
Amortization of capitalized software recorded as cost of service revenue
|
13,489
|
|
|
0.2
|
|
|
16,871
|
|
|
0.4
|
|
||
|
$
|
78,764
|
|
|
1.2
|
%
|
|
$
|
74,383
|
|
|
1.6
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
Change
|
||||||
|
(In thousands)
|
||||||||||
Net cash provided by operating activities
|
$
|
190,083
|
|
|
$
|
347,784
|
|
|
$
|
(157,701
|
)
|
Net cash used in investing activities
|
(543,311
|
)
|
|
(93,584
|
)
|
|
(449,727
|
)
|
|||
Net cash provided by financing activities
|
493,353
|
|
|
47,743
|
|
|
445,610
|
|
|||
Net increase in cash and cash equivalents
|
$
|
140,125
|
|
|
$
|
301,943
|
|
|
$
|
(161,818
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
Change
|
||||||
|
(In thousands)
|
||||||||||
Net cash provided by operating activities
|
$
|
347,784
|
|
|
$
|
225,395
|
|
|
$
|
122,389
|
|
Net cash used in investing activities
|
(93,584
|
)
|
|
(236,927
|
)
|
|
143,343
|
|
|||
Net cash provided by financing activities
|
47,743
|
|
|
49,473
|
|
|
(1,730
|
)
|
|||
Net increase in cash and cash equivalents
|
$
|
301,943
|
|
|
$
|
37,941
|
|
|
$
|
264,002
|
|
•
|
The determination of medical claims and benefits payable for our Health Plans segment (see discussion below).
|
•
|
Health Plans segment contractual provisions that may limit revenue based upon the costs incurred or the profits realized under a specific contract. For a comprehensive discussion of this topic, refer to Item 8 of this Form 10-K, Notes to Consolidated Financial Statements, in Note
2
, "
Significant Accounting Policies
."
|
•
|
Health Plans segment quality incentives that allow us to recognize incremental revenue if certain quality standards are met. For a comprehensive discussion of this topic, refer to Item 8 of this Form 10-K, Notes to Consolidated Financial Statements, in Note
2
, "
Significant Accounting Policies
."
|
•
|
The recognition of revenue and costs associated with our Molina Medicaid Solutions segment. For a comprehensive discussion of this topic, refer to Item 8 of this Form 10-K, Notes to Consolidated Financial Statements, in Note
2
, "
Significant Accounting Policies
."
|
|
December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Fee-for-service claims incurred but not paid (IBNP)
|
$
|
424,173
|
|
|
$
|
377,614
|
|
|
$
|
301,020
|
|
Pharmacy payable
|
45,037
|
|
|
38,992
|
|
|
26,178
|
|
|||
Capitation payable
|
20,267
|
|
|
49,066
|
|
|
53,532
|
|
|||
Other (1)
|
180,310
|
|
|
28,858
|
|
|
21,746
|
|
|||
|
$
|
669,787
|
|
|
$
|
494,530
|
|
|
$
|
402,476
|
|
(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 income. As of
December 31, 2013
, we recorded non-risk provider payables relating to such intermediary arrangements of approximately
$151.3 million
.
|
Increase (Decrease) in Estimated Completion Factors
|
Increase (Decrease) in
Medical Claims and
Benefits Payable
|
||
(6)%
|
$
|
155,752
|
|
(4)%
|
103,834
|
|
|
(2)%
|
51,917
|
|
|
2%
|
(51,917
|
)
|
|
4%
|
(103,834
|
)
|
|
6%
|
(155,752
|
)
|
(Decrease) Increase in Trended Per member Per Month Cost Estimates
|
(Decrease) Increase in
Medical Claims and
Benefits Payable
|
||
(6)%
|
$
|
(80,787
|
)
|
(4)%
|
(53,858
|
)
|
|
(2)%
|
(26,929
|
)
|
|
2%
|
26,929
|
|
|
4%
|
53,858
|
|
|
6%
|
80,787
|
|
|
Year ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Dollars in thousands, except
per-member amounts)
|
||||||||||
Balances at beginning of period
|
$
|
494,530
|
|
|
$
|
402,476
|
|
|
$
|
354,356
|
|
Components of medical care costs related to:
|
|
|
|
|
|
||||||
Current period
|
5,434,443
|
|
|
5,136,055
|
|
|
3,911,803
|
|
|||
Prior period
|
(52,779
|
)
|
|
(39,295
|
)
|
|
(51,809
|
)
|
|||
Total medical care costs
|
5,381,664
|
|
|
5,096,760
|
|
|
3,859,994
|
|
|||
|
|
|
|
|
|
||||||
Change in non-risk provider payables
|
111,267
|
|
|
(7,004
|
)
|
|
20,630
|
|
|||
|
|
|
|
|
|
||||||
Payments for medical care costs related to:
|
|
|
|
|
|
||||||
Current period
|
4,932,195
|
|
|
4,689,395
|
|
|
3,564,030
|
|
|||
Prior period
|
385,479
|
|
|
308,307
|
|
|
268,474
|
|
|||
Total paid
|
5,317,674
|
|
|
4,997,702
|
|
|
3,832,504
|
|
|||
Balances at end of period
|
$
|
669,787
|
|
|
$
|
494,530
|
|
|
$
|
402,476
|
|
Benefit from prior periods as a percentage of:
|
|
|
|
|
|
||||||
Balance at beginning of period
|
10.7
|
%
|
|
9.8
|
%
|
|
14.6
|
%
|
|||
Premium revenue
|
0.9
|
%
|
|
0.7
|
%
|
|
1.2
|
%
|
|||
Medical care costs
|
1.0
|
%
|
|
0.8
|
%
|
|
1.3
|
%
|
|||
|
|
|
|
|
|
||||||
Claims Data:
|
|
|
|
|
|
||||||
Days in claims payable, fee for service
|
43
|
|
|
40
|
|
|
40
|
|
|||
Number of members at end of period
|
1,931,000
|
|
|
1,797,000
|
|
|
1,697,000
|
|
|||
Number of claims in inventory at end of period
|
145,800
|
|
|
122,700
|
|
|
111,100
|
|
|||
Billed charges of claims in inventory at end of period
|
$
|
276,500
|
|
|
$
|
255,200
|
|
|
$
|
207,600
|
|
Claims in inventory per member at end of period
|
0.08
|
|
|
0.07
|
|
|
0.07
|
|
|||
Billed charges of claims in inventory per member end of period
|
$
|
143.19
|
|
|
$
|
142.01
|
|
|
$
|
122.33
|
|
Number of claims received during the period
|
21,317,500
|
|
|
20,842,400
|
|
|
17,207,500
|
|
|||
Billed charges of claims received during the period
|
$
|
21,414,600
|
|
|
$
|
19,429,300
|
|
|
$
|
14,306,500
|
|
|
Total
|
|
2014
|
|
2015-2016
|
|
2017-2018
|
|
2019 and Beyond
|
||||||||||
Principal amount of convertible senior notes (1)
|
$
|
737,000
|
|
|
$
|
187,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
Medical claims and benefits payable
|
669,787
|
|
|
669,787
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Lease financing obligations
|
392,021
|
|
|
11,065
|
|
|
23,136
|
|
|
24,545
|
|
|
333,275
|
|
|||||
Operating leases
|
109,038
|
|
|
29,117
|
|
|
39,086
|
|
|
27,266
|
|
|
13,569
|
|
|||||
Lease financing obligations - related party
|
84,974
|
|
|
3,330
|
|
|
14,018
|
|
|
15,088
|
|
|
52,538
|
|
|||||
Contingent consideration liability (2)
|
57,548
|
|
|
57,548
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest on long-term debt
|
42,642
|
|
|
11,447
|
|
|
12,375
|
|
|
12,375
|
|
|
6,445
|
|
|||||
Purchase commitments
|
27,522
|
|
|
21,548
|
|
|
5,974
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
2,120,532
|
|
|
$
|
990,842
|
|
|
$
|
94,589
|
|
|
$
|
79,274
|
|
|
$
|
955,827
|
|
(1)
|
Represents the principal amounts due on our 1.125% Cash Convertible Senior Notes due 2020 and our 3.75% Convertible Senior Notes due 2014.
|
(2)
|
Represents the estimate of contingent consideration due to the sellers in connection with two business combinations completed in 2013, of which $38.1 million was paid in January 2014. The remaining balance is payable in 2014. For further information, refer to Item 8 of this Form 10-K, Notes to Consolidated Financial Statements, in Note
4
, "
Business Combinations
."
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(Amounts in thousands,
except per-share data)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
935,895
|
|
|
$
|
795,770
|
|
Investments
|
703,052
|
|
|
342,845
|
|
||
Receivables
|
298,935
|
|
|
149,682
|
|
||
Income tax refundable
|
32,742
|
|
|
—
|
|
||
Deferred income taxes
|
26,556
|
|
|
32,443
|
|
||
Prepaid expenses and other current assets
|
42,484
|
|
|
28,386
|
|
||
Total current assets
|
2,039,664
|
|
|
1,349,126
|
|
||
Property, equipment, and capitalized software, net
|
292,083
|
|
|
221,443
|
|
||
Deferred contract costs
|
45,675
|
|
|
58,313
|
|
||
Intangible assets, net
|
98,871
|
|
|
77,711
|
|
||
Goodwill
|
230,738
|
|
|
151,088
|
|
||
Restricted investments
|
63,093
|
|
|
44,101
|
|
||
Auction rate securities
|
10,898
|
|
|
13,419
|
|
||
Derivative asset
|
186,351
|
|
|
—
|
|
||
Other assets
|
35,564
|
|
|
19,621
|
|
||
|
$
|
3,002,937
|
|
|
$
|
1,934,822
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Medical claims and benefits payable
|
$
|
669,787
|
|
|
$
|
494,530
|
|
Accounts payable and accrued liabilities
|
319,965
|
|
|
184,034
|
|
||
Deferred revenue
|
122,216
|
|
|
141,798
|
|
||
Income taxes payable
|
—
|
|
|
6,520
|
|
||
Current maturities of long-term debt
|
182,008
|
|
|
1,155
|
|
||
Total current liabilities
|
1,293,976
|
|
|
828,037
|
|
||
Convertible senior notes
|
416,368
|
|
|
175,468
|
|
||
Lease financing obligations
|
159,394
|
|
|
—
|
|
||
Lease financing obligations - related party
|
27,092
|
|
|
—
|
|
||
Other long-term debt
|
—
|
|
|
86,316
|
|
||
Deferred income taxes
|
580
|
|
|
37,900
|
|
||
Derivative liability
|
186,239
|
|
|
1,307
|
|
||
Other long-term liabilities
|
26,351
|
|
|
23,480
|
|
||
Total liabilities
|
2,110,000
|
|
|
1,152,508
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock, $0.001 par value; 150,000 shares authorized; outstanding:
|
46
|
|
|
47
|
|
||
45,871 shares at December 31, 2013 and 46,762 shares at December 31, 2012
|
|
|
|
||||
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
340,848
|
|
|
285,524
|
|
||
Accumulated other comprehensive loss
|
(1,086
|
)
|
|
(457
|
)
|
||
Treasury stock, at cost; outstanding: 111 shares at December 31, 2012
|
—
|
|
|
(3,000
|
)
|
||
Retained earnings
|
553,129
|
|
|
500,200
|
|
||
Total stockholders’ equity
|
892,937
|
|
|
782,314
|
|
||
|
$
|
3,002,937
|
|
|
$
|
1,934,822
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands, except per-share data)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Premium revenue
|
$
|
6,179,170
|
|
|
$
|
5,544,121
|
|
|
$
|
4,211,493
|
|
Premium tax revenue
|
172,017
|
|
|
158,991
|
|
|
154,589
|
|
|||
Service revenue
|
204,535
|
|
|
187,710
|
|
|
160,447
|
|
|||
Investment income
|
6,890
|
|
|
5,075
|
|
|
5,446
|
|
|||
Rental income and other revenue
|
26,322
|
|
|
18,312
|
|
|
8,288
|
|
|||
Total revenue
|
6,588,934
|
|
|
5,914,209
|
|
|
4,540,263
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Medical care costs
|
5,380,124
|
|
|
4,991,188
|
|
|
3,664,161
|
|
|||
Cost of service revenue
|
161,494
|
|
|
141,208
|
|
|
143,987
|
|
|||
General and administrative expenses
|
665,996
|
|
|
518,615
|
|
|
393,452
|
|
|||
Premium tax expenses
|
172,017
|
|
|
158,991
|
|
|
154,589
|
|
|||
Depreciation and amortization
|
72,743
|
|
|
63,114
|
|
|
48,253
|
|
|||
Total operating expenses
|
6,452,374
|
|
|
5,873,116
|
|
|
4,404,442
|
|
|||
Operating income
|
136,560
|
|
|
41,093
|
|
|
135,821
|
|
|||
Other expenses, net:
|
|
|
|
|
|
||||||
Interest expense
|
52,071
|
|
|
16,769
|
|
|
15,519
|
|
|||
Other expense, net
|
3,343
|
|
|
945
|
|
|
—
|
|
|||
Total other expenses, net
|
55,414
|
|
|
17,714
|
|
|
15,519
|
|
|||
Income from continuing operations before income tax expense
|
81,146
|
|
|
23,379
|
|
|
120,302
|
|
|||
Income tax expense
|
36,316
|
|
|
10,513
|
|
|
42,914
|
|
|||
Income from continuing operations
|
44,830
|
|
|
12,866
|
|
|
77,388
|
|
|||
Income (loss) from discontinued operations, net of tax (benefit) expense of $(9,912), $(1,238), and $922, respectively
|
8,099
|
|
|
(3,076
|
)
|
|
(56,570
|
)
|
|||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Basic income per share:
|
|
|
|
|
|
||||||
Income from continuing operations
|
$
|
0.98
|
|
|
$
|
0.28
|
|
|
$
|
1.69
|
|
Income (loss) from discontinued operations
|
0.18
|
|
|
(0.07
|
)
|
|
(1.24
|
)
|
|||
Basic net income per share
|
$
|
1.16
|
|
|
$
|
0.21
|
|
|
$
|
0.45
|
|
Diluted income per share:
|
|
|
|
|
|
||||||
Income from continuing operations
|
$
|
0.96
|
|
|
$
|
0.27
|
|
|
$
|
1.67
|
|
Income (loss) from discontinued operations
|
0.17
|
|
|
(0.06
|
)
|
|
(1.22
|
)
|
|||
Diluted net income per share
|
$
|
1.13
|
|
|
$
|
0.21
|
|
|
$
|
0.45
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
45,717
|
|
|
46,380
|
|
|
45,756
|
|
|||
Diluted
|
46,862
|
|
|
46,999
|
|
|
46,425
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
Other comprehensive (loss) income, before tax:
|
|
|
|
|
|
||||||
Gross unrealized investment (loss) gain
|
(1,015
|
)
|
|
1,529
|
|
|
1,167
|
|
|||
Effect of income tax (benefit) expense
|
(386
|
)
|
|
581
|
|
|
380
|
|
|||
Other comprehensive (loss) income, net of tax
|
(629
|
)
|
|
948
|
|
|
787
|
|
|||
Comprehensive income
|
$
|
52,300
|
|
|
$
|
10,738
|
|
|
$
|
21,605
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
|
|||||||||||||||
|
Outstanding
|
|
Amount
|
|
|
|
|
|
Total
|
|||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||||
Balance at January 1, 2011
|
45,463
|
|
|
$
|
45
|
|
|
$
|
251,612
|
|
|
$
|
(2,192
|
)
|
|
$
|
469,592
|
|
|
$
|
—
|
|
|
$
|
719,057
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,818
|
|
|
—
|
|
|
20,818
|
|
||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
787
|
|
|
—
|
|
|
—
|
|
|
787
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,000
|
)
|
|
(7,000
|
)
|
||||||
Retirement of treasury stock
|
(400
|
)
|
|
—
|
|
|
(7,000
|
)
|
|
—
|
|
|
—
|
|
|
7,000
|
|
|
—
|
|
||||||
Employee stock grants and employee stock plan purchases
|
752
|
|
|
1
|
|
|
20,473
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,474
|
|
||||||
Tax benefit from employee stock compensation
|
—
|
|
|
—
|
|
|
937
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
937
|
|
||||||
Balance at December 31, 2011
|
45,815
|
|
|
46
|
|
|
266,022
|
|
|
(1,405
|
)
|
|
490,410
|
|
|
—
|
|
|
755,073
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,790
|
|
|
—
|
|
|
9,790
|
|
||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
948
|
|
|
—
|
|
|
—
|
|
|
948
|
|
||||||
Purchase of treasury stock
|
(111
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,000
|
)
|
|
(3,000
|
)
|
||||||
Employee stock grants and employee stock plan purchases
|
1,058
|
|
|
1
|
|
|
16,361
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,362
|
|
||||||
Tax benefit from employee stock compensation
|
—
|
|
|
—
|
|
|
3,141
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,141
|
|
||||||
Balance at December 31, 2012
|
46,762
|
|
|
47
|
|
|
285,524
|
|
|
(457
|
)
|
|
500,200
|
|
|
(3,000
|
)
|
|
782,314
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,929
|
|
|
—
|
|
|
52,929
|
|
||||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(629
|
)
|
|
—
|
|
|
—
|
|
|
(629
|
)
|
||||||
Purchase of treasury stock
|
(1,710
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52,660
|
)
|
|
(52,662
|
)
|
||||||
Retirement of treasury stock
|
—
|
|
|
—
|
|
|
(55,660
|
)
|
|
—
|
|
|
—
|
|
|
55,660
|
|
|
—
|
|
||||||
Issuance of warrants
|
—
|
|
|
—
|
|
|
78,997
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
78,997
|
|
||||||
Employee stock grants and employee stock plan purchases
|
819
|
|
|
1
|
|
|
30,385
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,386
|
|
||||||
Tax benefit from employee stock compensation
|
—
|
|
|
—
|
|
|
1,602
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
||||||
Balance at December 31, 2013
|
45,871
|
|
|
$
|
46
|
|
|
$
|
340,848
|
|
|
$
|
(1,086
|
)
|
|
$
|
553,129
|
|
|
$
|
—
|
|
|
$
|
892,937
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
(In thousands)
|
|
|
||||||
Operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
93,866
|
|
|
78,764
|
|
|
74,383
|
|
|||
Deferred income taxes
|
(31,047
|
)
|
|
(9,887
|
)
|
|
13,836
|
|
|||
Stock-based compensation
|
28,694
|
|
|
20,018
|
|
|
17,052
|
|
|||
Amortization of convertible senior notes and lease financing obligations
|
22,820
|
|
|
5,942
|
|
|
5,512
|
|
|||
Amortization of premium/discount on investments
|
11,787
|
|
|
6,746
|
|
|
7,242
|
|
|||
Amortization of deferred financing costs
|
3,692
|
|
|
1,089
|
|
|
2,818
|
|
|||
Change in fair value of derivatives
|
3,378
|
|
|
1,307
|
|
|
—
|
|
|||
Change in fair value of contingent consideration liabilities
|
(2,400
|
)
|
|
—
|
|
|
—
|
|
|||
Loss on disposal of property and equipment
|
1,345
|
|
|
2,608
|
|
|
—
|
|
|||
Tax deficiency from employee stock compensation
|
(73
|
)
|
|
(526
|
)
|
|
(714
|
)
|
|||
Gain on sale of subsidiary
|
—
|
|
|
(1,747
|
)
|
|
—
|
|
|||
Impairment of goodwill and intangible assets
|
—
|
|
|
—
|
|
|
64,575
|
|
|||
Gain on acquisition
|
—
|
|
|
—
|
|
|
(1,676
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Medical claims and benefits payable
|
175,257
|
|
|
92,054
|
|
|
48,120
|
|
|||
Receivables
|
(149,253
|
)
|
|
18,216
|
|
|
352
|
|
|||
Accounts payable and accrued liabilities
|
60,996
|
|
|
23,345
|
|
|
2,778
|
|
|||
Income taxes
|
(39,262
|
)
|
|
18,172
|
|
|
(24,855
|
)
|
|||
Prepaid expenses and other current assets
|
(23,064
|
)
|
|
(8,958
|
)
|
|
3,308
|
|
|||
Deferred revenue
|
(19,582
|
)
|
|
90,851
|
|
|
(8,154
|
)
|
|||
Net cash provided by operating activities
|
190,083
|
|
|
347,784
|
|
|
225,395
|
|
|||
Investing activities:
|
|
|
|
|
|
||||||
Purchases of investments
|
(770,083
|
)
|
|
(306,437
|
)
|
|
(345,968
|
)
|
|||
Sales and maturities of investments
|
399,595
|
|
|
298,006
|
|
|
302,667
|
|
|||
Purchases of equipment
|
(98,049
|
)
|
|
(78,145
|
)
|
|
(60,581
|
)
|
|||
Net cash paid in business combinations
|
(61,521
|
)
|
|
—
|
|
|
(84,253
|
)
|
|||
Increase in restricted investments
|
(18,992
|
)
|
|
(2,647
|
)
|
|
(4,064
|
)
|
|||
Change in deferred contract costs
|
12,638
|
|
|
(11,610
|
)
|
|
(42,830
|
)
|
|||
Proceeds from sale of subsidiary, net of cash surrendered
|
—
|
|
|
9,162
|
|
|
—
|
|
|||
Change in other noncurrent assets and liabilities
|
(6,899
|
)
|
|
(1,913
|
)
|
|
(1,898
|
)
|
|||
Net cash used in investing activities
|
(543,311
|
)
|
|
(93,584
|
)
|
|
(236,927
|
)
|
|||
Financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of 1.125% Notes, net of deferred issuance 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
|
(52,662
|
)
|
|
(3,000
|
)
|
|
(7,000
|
)
|
|||
Principal payments on term loan
|
(47,471
|
)
|
|
(1,129
|
)
|
|
—
|
|
|||
Repayment of amount borrowed under credit facility
|
(40,000
|
)
|
|
(20,000
|
)
|
|
—
|
|
|||
Proceeds from employee stock plans
|
9,402
|
|
|
8,205
|
|
|
7,347
|
|
|||
Excess tax benefits from employee stock compensation
|
1,674
|
|
|
3,667
|
|
|
1,651
|
|
|||
Amount borrowed under credit facility
|
—
|
|
|
60,000
|
|
|
—
|
|
|||
Amount borrowed under term loan
|
—
|
|
|
—
|
|
|
48,600
|
|
|||
Credit facility fees paid
|
—
|
|
|
—
|
|
|
(1,125
|
)
|
|||
Net cash provided by financing activities
|
493,353
|
|
|
47,743
|
|
|
49,473
|
|
|||
Net increase in cash and cash equivalents
|
140,125
|
|
|
301,943
|
|
|
37,941
|
|
|||
Cash and cash equivalents at beginning of period
|
795,770
|
|
|
493,827
|
|
|
455,886
|
|
|||
Cash and cash equivalents at end of period
|
$
|
935,895
|
|
|
$
|
795,770
|
|
|
$
|
493,827
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Amounts in thousands)
|
||||||||||
|
(Unaudited)
|
||||||||||
Supplemental cash flow information:
|
|
|
|
|
|
||||||
Cash paid (received) during the period for:
|
|
|
|
|
|
||||||
Income taxes
|
$
|
95,240
|
|
|
$
|
(4,634
|
)
|
|
$
|
54,663
|
|
Interest
|
$
|
34,881
|
|
|
$
|
10,099
|
|
|
$
|
11,399
|
|
Schedule of non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Retirement of treasury stock
|
$
|
55,662
|
|
|
$
|
—
|
|
|
$
|
7,000
|
|
Common stock used for stock-based compensation
|
$
|
(7,711
|
)
|
|
$
|
(11,862
|
)
|
|
$
|
(3,926
|
)
|
Non-cash lease financing obligations - related party
|
$
|
27,211
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Details of business combinations:
|
|
|
|
|
|
||||||
Fair value of assets acquired
|
$
|
(121,801
|
)
|
|
$
|
—
|
|
|
$
|
(81,256
|
)
|
Fair value of contingent consideration liabilities incurred
|
59,948
|
|
|
—
|
|
|
—
|
|
|||
Payable to seller
|
—
|
|
|
—
|
|
|
(1,952
|
)
|
|||
Decrease in fair value of liabilities assumed
|
—
|
|
|
—
|
|
|
(1,045
|
)
|
|||
Escrow deposit
|
332
|
|
|
—
|
|
|
—
|
|
|||
Net cash paid in business combinations
|
$
|
(61,521
|
)
|
|
$
|
—
|
|
|
$
|
(84,253
|
)
|
Details of change in fair value of derivatives:
|
|
|
|
|
|
||||||
Gain on 1.125% Call Option
|
$
|
37,020
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Loss on embedded cash conversion option
|
(36,908
|
)
|
|
—
|
|
|
—
|
|
|||
Loss on 1.125% Warrants
|
(3,923
|
)
|
|
—
|
|
|
—
|
|
|||
Gain (loss) on interest rate swap
|
433
|
|
|
(1,307
|
)
|
|
—
|
|
|||
Change in fair value of derivatives
|
$
|
(3,378
|
)
|
|
$
|
(1,307
|
)
|
|
$
|
—
|
|
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
|
|
|
$
|
—
|
|
•
|
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 determination of medical claims and benefits payable of our Health Plans segment;
|
•
|
The valuation of certain investments;
|
•
|
Settlements under risk or savings sharing programs;
|
•
|
The assessment of deferred contract costs, deferred revenue, long-lived and intangible assets, and goodwill for impairment;
|
•
|
The determination of professional and general liability claims, and reserves for potential absorption of claims unpaid by insolvent providers;
|
•
|
The determination of reserves for the outcome of litigation;
|
•
|
The determination of valuation allowances for deferred tax assets; and
|
•
|
The determination of unrecognized tax benefits.
|
•
|
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.”
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Depreciation, and amortization of capitalized software, continuing operations
|
$
|
54,837
|
|
|
$
|
42,938
|
|
|
$
|
30,803
|
|
Amortization of intangible assets, continuing operations
|
17,906
|
|
|
20,176
|
|
|
17,450
|
|
|||
Depreciation and amortization, continuing operations
|
72,743
|
|
|
63,114
|
|
|
48,253
|
|
|||
Depreciation and amortization, discontinued operations
|
2
|
|
|
590
|
|
|
2,437
|
|
|||
Amortization recorded as reduction of service revenue
|
2,914
|
|
|
1,571
|
|
|
6,822
|
|
|||
Amortization of capitalized software recorded as cost of service revenue
|
18,207
|
|
|
13,489
|
|
|
16,871
|
|
|||
Total
|
$
|
93,866
|
|
|
$
|
78,764
|
|
|
$
|
74,383
|
|
•
|
The contract backlog intangible asset comprises all contractual cash flows anticipated to be received during the remaining contracted period for each specific contract relating to work that was performed prior to acquisition. Because each acquired contract constitutes a single revenue stream, amortization of the contract backlog intangible is recorded to contra-service revenue so that amortization is matched to any revenues associated with contract performance that occurred prior to the acquisition date. The contract backlog intangible asset is amortized on a straight-line basis for each specific contract over periods generally ranging from
one
to
six
years. The contract backlog intangible assets will be fully amortized in 2015.
|
•
|
The customer relationship intangible asset comprises all contractual cash flows that are anticipated to be received during the option periods of each specific contract as well as anticipated renewals of those contracts. The customer relationship intangible is amortized on a straight-line basis for each specific contract over periods generally ranging from
four
to
nine
years.
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||
California
|
$
|
749,755
|
|
|
12.1
|
%
|
|
$
|
665,600
|
|
|
12.0
|
%
|
|
$
|
567,677
|
|
|
13.5
|
%
|
Florida
|
264,998
|
|
|
4.3
|
|
|
228,832
|
|
|
4.1
|
|
|
203,904
|
|
|
4.8
|
|
|||
Illinois
|
8,121
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Michigan
|
676,000
|
|
|
11.0
|
|
|
646,551
|
|
|
11.7
|
|
|
623,394
|
|
|
14.8
|
|
|||
New Mexico
|
446,758
|
|
|
7.2
|
|
|
321,853
|
|
|
5.8
|
|
|
328,706
|
|
|
7.8
|
|
|||
Ohio
|
1,098,795
|
|
|
17.8
|
|
|
1,095,137
|
|
|
19.7
|
|
|
912,219
|
|
|
21.7
|
|
|||
Texas
|
1,291,001
|
|
|
20.9
|
|
|
1,233,621
|
|
|
22.2
|
|
|
402,178
|
|
|
9.5
|
|
|||
Utah
|
310,895
|
|
|
5.0
|
|
|
298,392
|
|
|
5.4
|
|
|
287,290
|
|
|
6.8
|
|
|||
Washington
|
1,168,405
|
|
|
18.9
|
|
|
974,712
|
|
|
17.6
|
|
|
808,458
|
|
|
19.2
|
|
|||
Wisconsin
|
143,465
|
|
|
2.3
|
|
|
70,678
|
|
|
1.3
|
|
|
69,552
|
|
|
1.7
|
|
|||
Direct delivery
|
20,977
|
|
|
0.4
|
|
|
8,745
|
|
|
0.2
|
|
|
8,115
|
|
|
0.2
|
|
|||
|
$
|
6,179,170
|
|
|
100
|
%
|
|
$
|
5,544,121
|
|
|
100
|
%
|
|
$
|
4,211,493
|
|
|
100
|
%
|
|
Year Ended December 31, 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
|
$
|
3,113
|
|
|
$
|
2,618
|
|
|
$
|
154
|
|
|
$
|
2,772
|
|
|
$
|
446,758
|
|
Ohio
|
12,093
|
|
|
3,465
|
|
|
606
|
|
|
4,071
|
|
|
1,098,795
|
|
|||||
Texas
|
43,688
|
|
|
37,053
|
|
|
5,995
|
|
|
43,048
|
|
|
1,291,001
|
|
|||||
Wisconsin
|
4,417
|
|
|
2,667
|
|
|
2,301
|
|
|
4,968
|
|
|
143,465
|
|
|||||
|
$
|
63,311
|
|
|
$
|
45,803
|
|
|
$
|
9,056
|
|
|
$
|
54,859
|
|
|
$
|
2,980,019
|
|
|
Year Ended December 31, 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
|
$
|
2,244
|
|
|
$
|
1,889
|
|
|
$
|
643
|
|
|
$
|
2,532
|
|
|
$
|
321,853
|
|
Ohio
|
12,033
|
|
|
8,079
|
|
|
966
|
|
|
9,045
|
|
|
1,095,137
|
|
|||||
Texas
|
58,516
|
|
|
52,521
|
|
|
—
|
|
|
52,521
|
|
|
1,233,621
|
|
|||||
Wisconsin
|
1,771
|
|
|
—
|
|
|
593
|
|
|
593
|
|
|
70,678
|
|
|||||
|
$
|
74,564
|
|
|
$
|
62,489
|
|
|
$
|
2,202
|
|
|
$
|
64,691
|
|
|
$
|
2,721,289
|
|
|
Year Ended December 31, 2011
|
||||||||||||||||||
|
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
|
$
|
2,271
|
|
|
$
|
1,558
|
|
|
$
|
378
|
|
|
$
|
1,936
|
|
|
$
|
328,706
|
|
Ohio
|
10,212
|
|
|
8,363
|
|
|
3,501
|
|
|
11,864
|
|
|
912,219
|
|
|||||
Texas
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
402,178
|
|
|||||
Wisconsin
|
1,705
|
|
|
542
|
|
|
—
|
|
|
542
|
|
|
69,552
|
|
|||||
|
$
|
14,188
|
|
|
$
|
10,463
|
|
|
$
|
3,879
|
|
|
$
|
14,342
|
|
|
$
|
1,712,655
|
|
•
|
Fee-for-service:
Nearly all hospital services and the majority of our primary care and physician specialist services are paid on a fee-for-service basis. Under all fee-for-service arrangements, we retain the financial responsibility for medical care provided. Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed. The costs of drugs administered in a physician or hospital setting that are not billed through our pharmacy benefit manager are included in fee-for-service costs.
|
•
|
Capitation:
Many of our primary care physicians and a small portion of our specialists and hospitals are paid on a capitated basis. Under capitation contracts, we typically pay a fixed PMPM payment to the provider without regard to the frequency, extent, or nature of the medical services actually furnished. Under capitated contracts, we remain liable for the provision of certain health care services. Capitation payments are fixed in advance of the periods covered and are not subject to significant accounting estimates. These payments are expensed in the period the providers are obligated to provide services. The financial risk for pharmacy services for a small portion of our membership is delegated to capitated providers.
|
•
|
Pharmacy:
Pharmacy costs include all drug, injectibles, and immunization costs paid through our pharmacy benefit manager. As noted above, drugs and injectibles not paid through our pharmacy benefit manager are included in fee-for-service costs, except in those limited instances where we capitate drug and injectible costs.
|
•
|
Direct delivery:
Costs associated with our operation and/or management of primary care clinics and hospital services in California, Florida, New Mexico, Virginia, and Washington.
|
•
|
Other:
Other medical care costs include medically related administrative costs, certain provider incentive costs, reinsurance cost, and other health care expense. Medically related administrative costs include, for example, expenses relating to health education, quality assurance, case management, disease management, and 24-hour on-call nurses. Salary and benefit costs are a substantial portion of these expenses. For the years ended
December 31, 2013
,
2012
, and
2011
, medically related administrative costs were
$153.0 million
,
$125.2 million
,
and
$99.3 million
,
respectively.
|
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||||||||||||||
|
Amount
|
|
PMPM
|
|
% of
Total
|
|
Amount
|
|
PMPM
|
|
% of
Total
|
|
Amount
|
|
PMPM
|
|
% of
Total
|
|||||||||||||||
Fee-for-service
|
$
|
3,611,529
|
|
|
$
|
160.43
|
|
|
67.1
|
%
|
|
$
|
3,423,751
|
|
|
$
|
161.67
|
|
|
68.6
|
%
|
|
$
|
2,587,380
|
|
|
$
|
136.72
|
|
|
70.6
|
%
|
Pharmacy
|
935,204
|
|
|
41.54
|
|
|
17.4
|
|
|
835,830
|
|
|
39.47
|
|
|
16.7
|
|
|
418,019
|
|
|
22.09
|
|
|
11.4
|
|
||||||
Capitation
|
603,938
|
|
|
26.83
|
|
|
11.2
|
|
|
552,136
|
|
|
26.07
|
|
|
11.1
|
|
|
505,892
|
|
|
26.73
|
|
|
13.8
|
|
||||||
Direct delivery
|
48,288
|
|
|
2.14
|
|
|
0.9
|
|
|
33,920
|
|
|
1.60
|
|
|
0.7
|
|
|
29,683
|
|
|
1.57
|
|
|
0.8
|
|
||||||
Other
|
181,165
|
|
|
8.05
|
|
|
3.4
|
|
|
145,551
|
|
|
6.87
|
|
|
2.9
|
|
|
123,187
|
|
|
6.51
|
|
|
3.4
|
|
||||||
Total
|
$
|
5,380,124
|
|
|
$
|
238.99
|
|
|
100.0
|
%
|
|
$
|
4,991,188
|
|
|
$
|
235.68
|
|
|
100.0
|
%
|
|
$
|
3,664,161
|
|
|
$
|
193.62
|
|
|
100.0
|
%
|
•
|
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.
|
|
December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
|
(In thousands)
|
|||||||
Shares outstanding at the beginning of the period
|
46,762
|
|
|
45,815
|
|
|
45,463
|
|
Weighted-average number of shares repurchased
|
(1,445
|
)
|
|
(2
|
)
|
|
(160
|
)
|
Weighted-average number of shares issued
|
400
|
|
|
567
|
|
|
453
|
|
Denominator for basic net income per share
|
45,717
|
|
|
46,380
|
|
|
45,756
|
|
Dilutive effect of employee stock options and stock grants (1)
|
643
|
|
|
619
|
|
|
669
|
|
Dilutive effect of convertible senior notes (2)
|
502
|
|
|
—
|
|
|
—
|
|
Denominator for diluted net income per share
|
46,862
|
|
|
46,999
|
|
|
46,425
|
|
(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 our 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 our common shares for each of the periods presented. For the years ended
December 31, 2013
,
2012
, and
2011
there were approximately
51,000
,
87,000
and
137,000
anti-dilutive weighted options, respectively. For the years ended December 31, 2013 and
2011
anti-dilutive restricted shares were insignificant. For the year ended
December 31, 2012
there were approximately
304,000
anti-dilutive restricted shares.
|
(2)
|
Potentially dilutive shares issuable pursuant to our 1.125% Warrants (defined in Note
12
, "
Long-Term Debt
") were not included in the computation of diluted net income per share for the year ended
December 31, 2013
, because to do so would have been anti-dilutive. Potentially dilutive shares issuable pursuant to our 3.75% Notes (defined in Note
12
, "
Long-Term Debt
") were not included in the computation of diluted net income per share for the years ended
December 31, 2012
, and
2011
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
|
Indefinite
|
|
42,140
|
|
|
35,178
|
|
|
2,332
|
|
|
79,650
|
|
||||
|
|
|
$
|
65,000
|
|
|
$
|
53,478
|
|
|
$
|
3,322
|
|
|
$
|
121,800
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Corporate debt securities
|
$
|
449,772
|
|
|
$
|
—
|
|
|
$
|
449,772
|
|
|
$
|
—
|
|
GSEs
|
68,817
|
|
|
68,817
|
|
|
—
|
|
|
—
|
|
||||
Municipal securities
|
113,330
|
|
|
—
|
|
|
113,330
|
|
|
—
|
|
||||
U.S. treasury notes
|
37,376
|
|
|
37,376
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
33,757
|
|
|
—
|
|
|
33,757
|
|
|
—
|
|
||||
Auction rate securities
|
10,898
|
|
|
—
|
|
|
—
|
|
|
10,898
|
|
||||
1.125% Call Option derivative asset
|
186,351
|
|
|
—
|
|
|
—
|
|
|
186,351
|
|
||||
Total assets measured at fair value on a recurring basis
|
$
|
900,301
|
|
|
$
|
106,193
|
|
|
$
|
596,859
|
|
|
$
|
197,249
|
|
|
|
|
|
|
|
|
|
||||||||
Embedded cash conversion option derivative liability
|
$
|
186,239
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
186,239
|
|
Contingent consideration liabilities
|
57,548
|
|
|
—
|
|
|
—
|
|
|
57,548
|
|
||||
Total liabilities measured at fair value on a recurring basis
|
$
|
243,787
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
243,787
|
|
|
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
|
||||||||||
|
Auction Rate Securities
|
|
Derivatives, Net
|
|
Contingent Consideration Liabilities
|
||||||
|
|
|
|
||||||||
Balance at December 31, 2011
|
$
|
16,134
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net unrealized gains included in other comprehensive income
|
1,635
|
|
|
—
|
|
|
—
|
|
|||
Auction rate securities settlements
|
(4,350
|
)
|
|
—
|
|
|
—
|
|
|||
Balance at December 31, 2012
|
13,419
|
|
|
—
|
|
|
—
|
|
|||
Net unrealized gains included in other comprehensive income
|
729
|
|
|
—
|
|
|
—
|
|
|||
Net unrealized losses included in other expenses
|
—
|
|
|
(3,810
|
)
|
|
—
|
|
|||
Derivative issuance
|
—
|
|
|
(75,074
|
)
|
|
—
|
|
|||
Auction rate securities settlements
|
(3,250
|
)
|
|
—
|
|
|
—
|
|
|||
Derivative re-designation
|
—
|
|
|
78,996
|
|
|
—
|
|
|||
Acquisitions
|
—
|
|
|
—
|
|
|
(57,548
|
)
|
|||
Balance at December 31, 2013
|
$
|
10,898
|
|
|
$
|
112
|
|
|
$
|
(57,548
|
)
|
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, 2013
|
$
|
541
|
|
|
$
|
—
|
|
|
$
|
—
|
|
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
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Carrying
|
|
Total
|
|
|
|
|
|
|
||||||||||
|
Amount
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
1.125% Notes
|
$
|
416,368
|
|
|
$
|
572,627
|
|
|
$
|
—
|
|
|
$
|
572,627
|
|
|
$
|
—
|
|
3.75% Notes
|
181,872
|
|
|
219,491
|
|
|
—
|
|
|
219,491
|
|
|
—
|
|
|||||
|
$
|
598,240
|
|
|
$
|
792,118
|
|
|
$
|
—
|
|
|
$
|
792,118
|
|
|
$
|
—
|
|
|
|
||||||||||||||||||
|
December 31, 2012
|
||||||||||||||||||
|
Carrying
|
|
Total
|
|
|
|
|
|
|
||||||||||
|
Amount
|
|
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
|
|
|
December 31, 2013
|
||||||||||||||
|
Amortized
|
|
Gross
Unrealized
|
|
Estimated
|
||||||||||
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Corporate debt securities
|
$
|
450,162
|
|
|
$
|
442
|
|
|
$
|
832
|
|
|
$
|
449,772
|
|
GSEs
|
68,898
|
|
|
6
|
|
|
87
|
|
|
68,817
|
|
||||
Municipal securities
|
114,126
|
|
|
119
|
|
|
915
|
|
|
113,330
|
|
||||
U.S. treasury notes
|
37,360
|
|
|
44
|
|
|
28
|
|
|
37,376
|
|
||||
Certificates of deposit
|
33,756
|
|
|
2
|
|
|
1
|
|
|
33,757
|
|
||||
Subtotal - current investments
|
704,302
|
|
|
613
|
|
|
1,863
|
|
|
703,052
|
|
||||
Auction rate securities
|
11,400
|
|
|
—
|
|
|
502
|
|
|
10,898
|
|
||||
|
$
|
715,702
|
|
|
$
|
613
|
|
|
$
|
2,365
|
|
|
$
|
713,950
|
|
|
December 31, 2012
|
||||||||||||||
|
Amortized
|
|
Gross
Unrealized
|
|
Estimated
|
||||||||||
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair 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
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(In thousands)
|
||||||
Due in one year or less
|
$
|
350,488
|
|
|
$
|
350,605
|
|
Due one year through five years
|
353,814
|
|
|
352,447
|
|
||
Due after ten years
|
11,400
|
|
|
10,898
|
|
||
|
$
|
715,702
|
|
|
$
|
713,950
|
|
|
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
|
$
|
210,057
|
|
|
$
|
802
|
|
|
91
|
|
|
$
|
2,540
|
|
|
$
|
30
|
|
|
3
|
|
GSEs
|
53,308
|
|
|
87
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Municipal securities
|
30,715
|
|
|
398
|
|
|
49
|
|
|
31,091
|
|
|
517
|
|
|
39
|
|
||||
U.S. treasury notes
|
12,037
|
|
|
28
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
414
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Auction rate securities
|
—
|
|
|
—
|
|
|
—
|
|
|
10,898
|
|
|
502
|
|
|
15
|
|
||||
|
$
|
306,531
|
|
|
$
|
1,316
|
|
|
174
|
|
|
$
|
44,529
|
|
|
$
|
1,049
|
|
|
57
|
|
|
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
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
GSEs
|
5,004
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Municipal securities
|
35,223
|
|
|
246
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
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
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Health Plans segment:
|
|
|
|
||||
California
|
$
|
148,654
|
|
|
$
|
28,553
|
|
Florida
|
2,901
|
|
|
953
|
|
||
Illinois
|
5,773
|
|
|
—
|
|
||
Michigan
|
15,253
|
|
|
12,873
|
|
||
New Mexico
|
17,056
|
|
|
9,059
|
|
||
Ohio
|
43,969
|
|
|
40,980
|
|
||
Texas
|
9,736
|
|
|
7,459
|
|
||
Utah
|
10,953
|
|
|
3,359
|
|
||
Washington
|
13,455
|
|
|
17,587
|
|
||
Wisconsin
|
8,087
|
|
|
4,098
|
|
||
Direct delivery and other
|
2,463
|
|
|
2,177
|
|
||
Total Health Plans segment
|
278,300
|
|
|
127,098
|
|
||
Molina Medicaid Solutions segment
|
20,635
|
|
|
22,584
|
|
||
|
$
|
298,935
|
|
|
$
|
149,682
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Land
|
$
|
15,764
|
|
|
$
|
15,764
|
|
Building and improvements
|
165,670
|
|
|
124,163
|
|
||
Furniture and equipment
|
131,478
|
|
|
97,865
|
|
||
Capitalized software
|
187,105
|
|
|
154,708
|
|
||
|
500,017
|
|
|
392,500
|
|
||
Less: accumulated depreciation and amortization on building and improvements, furniture and equipment
|
(103,918
|
)
|
|
(84,156
|
)
|
||
Less: accumulated amortization for capitalized software
|
(104,016
|
)
|
|
(86,901
|
)
|
||
|
(207,934
|
)
|
|
(171,057
|
)
|
||
Property, equipment, and capitalized software, net
|
$
|
292,083
|
|
|
$
|
221,443
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
Balance
|
||||||
|
(In thousands)
|
||||||||||
Intangible assets:
|
|
|
|
|
|
||||||
Contract rights and licenses
|
$
|
176,428
|
|
|
$
|
92,789
|
|
|
$
|
83,639
|
|
Customer relationships
|
24,550
|
|
|
18,801
|
|
|
5,749
|
|
|||
Contract backlog
|
23,600
|
|
|
19,624
|
|
|
3,976
|
|
|||
Provider networks
|
13,370
|
|
|
7,863
|
|
|
5,507
|
|
|||
Balance at December 31, 2013
|
$
|
237,948
|
|
|
$
|
139,077
|
|
|
$
|
98,871
|
|
Intangible assets:
|
|
|
|
|
|
||||||
Contract rights and licenses
|
$
|
135,932
|
|
|
$
|
81,376
|
|
|
$
|
54,556
|
|
Customer relationships
|
24,550
|
|
|
12,513
|
|
|
12,037
|
|
|||
Contract backlog
|
23,600
|
|
|
17,870
|
|
|
5,730
|
|
|||
Provider networks
|
11,990
|
|
|
6,602
|
|
|
5,388
|
|
|||
Balance at December 31, 2012
|
$
|
196,072
|
|
|
$
|
118,361
|
|
|
$
|
77,711
|
|
|
December 31, 2012
|
|
Acquisitions
|
|
December 31, 2013
|
||||||
|
(In thousands)
|
||||||||||
Goodwill, gross
|
$
|
209,618
|
|
|
$
|
79,650
|
|
|
$
|
289,268
|
|
Accumulated impairment losses
|
(58,530
|
)
|
|
—
|
|
|
(58,530
|
)
|
|||
Goodwill, net
|
$
|
151,088
|
|
|
$
|
79,650
|
|
|
$
|
230,738
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
California
|
$
|
373
|
|
|
$
|
373
|
|
Florida
|
9,242
|
|
|
5,738
|
|
||
Illinois
|
310
|
|
|
310
|
|
||
Michigan
|
1,014
|
|
|
1,014
|
|
||
New Mexico
|
24,622
|
|
|
15,915
|
|
||
Ohio
|
9,080
|
|
|
9,082
|
|
||
Texas
|
3,500
|
|
|
3,503
|
|
||
Utah
|
3,301
|
|
|
3,126
|
|
||
Washington
|
151
|
|
|
151
|
|
||
Other
|
1,196
|
|
|
4,889
|
|
||
Total Health Plans segment
|
52,789
|
|
|
44,101
|
|
||
Molina Medicaid Solutions segment
|
10,304
|
|
|
—
|
|
||
|
$
|
63,093
|
|
|
$
|
44,101
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(In thousands)
|
||||||
Due in one year or less
|
$
|
58,542
|
|
|
$
|
58,543
|
|
Due one year through five years
|
4,551
|
|
|
4,555
|
|
||
|
$
|
63,093
|
|
|
$
|
63,098
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Dollars in thousands)
|
||||||||||
Balances at beginning of period
|
$
|
494,530
|
|
|
$
|
402,476
|
|
|
$
|
354,356
|
|
Components of medical care costs related to:
|
|
|
|
|
|
||||||
Current period
|
5,434,443
|
|
|
5,136,055
|
|
|
3,911,803
|
|
|||
Prior periods
|
(52,779
|
)
|
|
(39,295
|
)
|
|
(51,809
|
)
|
|||
Total medical care costs
|
5,381,664
|
|
|
5,096,760
|
|
|
3,859,994
|
|
|||
|
|
|
|
|
|
||||||
Change in non-risk provider payables
|
111,267
|
|
|
(7,004
|
)
|
|
20,630
|
|
|||
|
|
|
|
|
|
||||||
Payments for medical care costs related to:
|
|
|
|
|
|
||||||
Current period
|
4,932,195
|
|
|
4,689,395
|
|
|
3,564,030
|
|
|||
Prior periods
|
385,479
|
|
|
308,307
|
|
|
268,474
|
|
|||
Total paid
|
5,317,674
|
|
|
4,997,702
|
|
|
3,832,504
|
|
|||
Balances at end of period
|
$
|
669,787
|
|
|
$
|
494,530
|
|
|
$
|
402,476
|
|
Benefit from prior period as a percentage of:
|
|
|
|
|
|
||||||
Balance at beginning of period
|
10.7
|
%
|
|
9.8
|
%
|
|
14.6
|
%
|
|||
Premium revenue
|
0.9
|
%
|
|
0.7
|
%
|
|
1.2
|
%
|
|||
Medical care costs
|
1.0
|
%
|
|
0.8
|
%
|
|
1.3
|
%
|
•
|
At our Washington health plan certain high-cost newborns, as well as other high-cost disabled members, were covered by the health plan effective July 1, 2012. At the end of 2012, we had limited claims history with which to estimate the claims liability of these members, and overstated the liability for such members.
|
•
|
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 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 (the name of our ABD program in Texas), in the Dallas region.
|
•
|
In early 2011, the state of Michigan was delayed in the enrollment of newborns in managed care plans; the delay was resolved by mid-2011. This caused a large number of claims with older dates of service to be paid during late 2011, resulting in an artificial increase in lag time for claims payment at our Michigan health plan. We adjusted reserves downward for this issue at December 31, 2011, but the adjustment did not capture all of the claims overestimation.
|
•
|
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 Ohio health plan, we overestimated the impact of a buildup in claims inventory.
|
•
|
At our California health plan, we overestimated the impact of the settlement of disputed provider claims.
|
•
|
At our New Mexico health plan, we underestimated the impact of a reduction in the outpatient facility fee schedule.
|
•
|
At our Texas health plan, we have noted an unusually large number of claims dated older than
12
months. This has caused distortion in the claims lag pattern that we use to estimate 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 added a degree of uncertainty for the Michigan reserves as of December 31, 2013.
|
•
|
The state of Florida changed their inpatient Medicaid payment methodology effective July 1, 2013. The majority of our Florida health plan’s provider contracts were also changed accordingly. These changes were intended to be cost neutral, but may have an impact on our specific mix of claims and providers. Also, a new Florida long-term care product became effective on December 1, 2013. This product covers some members who are institutionalized and others who could become institutionalized and would incur very high costs. This added a degree of uncertainty to the reserve estimate as of December 31, 2013.
|
•
|
Our Ohio health plan added approximately
25,000
Temporary Assistance for Needy Families (TANF) program members from new regions effective July 1, 2013. Also effective July 1, 2013, the health plan began covering blind and disabled children under a new product. These
two
new groups of members added a degree of uncertainty to the reserve estimate as of December 31, 2013.
|
|
Total
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Thereafter
|
||||||||||||||
1.125% Notes
|
$
|
550,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
3.75% Notes
|
187,000
|
|
|
187,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
$
|
737,000
|
|
|
$
|
187,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
550,000
|
|
•
|
During any fiscal quarter after our fiscal quarter ending December 31, 2007, if the closing sale price per share of our common stock, for each of at least
20
trading days during the period of
30
consecutive trading days ending on the last trading day of the previous fiscal quarter, is greater than or equal to
120%
of the conversion price per share of our common stock;
|
•
|
During the five business day period immediately following any five consecutive trading day period in which the trading price per one thousand dollar principal amount of the 3.75% Notes for each trading day of such period was less than
98%
of the product of the closing price per share of our common stock on such day and the conversion rate in effect on such day; or
|
•
|
Upon the occurrence of specified corporate transactions or other specified events.
|
•
|
An amount in cash (the "principal return") equal to the sum of, for each of the
20
Volume-Weighted Average Price (VWAP) trading days during the conversion period, the lesser of the daily conversion value for such VWAP trading day and fifty dollars (representing 1/20th of one thousand dollars); and
|
•
|
A number of shares based upon, for each of the
20
VWAP trading days during the conversion period, any excess of the daily conversion value above
fifty
dollars.
|
|
Principal Balance
|
|
Unamortized Discount
|
|
Net Carrying Amount
|
||||||
|
(In thousands)
|
||||||||||
December 31, 2013:
|
|
|
|
|
|
||||||
1.125% Notes
|
$
|
550,000
|
|
|
$
|
133,632
|
|
|
$
|
416,368
|
|
3.75% Notes
|
187,000
|
|
|
5,128
|
|
|
181,872
|
|
|||
|
$
|
737,000
|
|
|
$
|
138,760
|
|
|
$
|
598,240
|
|
December 31, 2012:
|
|
|
|
|
|
||||||
3.75% Notes
|
$
|
187,000
|
|
|
$
|
11,532
|
|
|
$
|
175,468
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Interest cost recognized for the period relating to the:
|
|
|
|
|
|
||||||
Contractual interest coupon rate
|
$
|
12,427
|
|
|
$
|
7,012
|
|
|
$
|
7,012
|
|
Amortization of the discount
|
22,103
|
|
|
5,942
|
|
|
5,512
|
|
|||
Total interest cost recognized
|
$
|
34,530
|
|
|
$
|
12,954
|
|
|
$
|
12,524
|
|
|
|
|
December 31,
|
||||||
|
Balance Sheet Location
|
|
2013
|
|
2012
|
||||
|
|
|
(In thousands)
|
||||||
Derivative asset:
|
|
|
|
|
|
||||
1.125% Call Option
|
Non-current assets: Derivative asset
|
|
$
|
186,351
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||
Derivative liability:
|
|
|
|
|
|
||||
Embedded cash conversion option
|
Non-current liabilities: Derivative liability
|
|
$
|
186,239
|
|
|
$
|
—
|
|
Interest rate swap
|
Non-current liabilities: Derivative liability
|
|
—
|
|
|
1,307
|
|
||
|
|
|
$
|
186,239
|
|
|
$
|
1,307
|
|
|
Year Ended December 31,
|
||||||
|
2013
|
|
2012
|
||||
Derivative gains (losses):
|
|
|
|
||||
1.125% Call Option
|
$
|
37,020
|
|
|
$
|
—
|
|
Embedded cash conversion option
|
(36,908
|
)
|
|
—
|
|
||
1.125% Warrants
|
(3,923
|
)
|
|
—
|
|
||
Interest rate swap
|
433
|
|
|
(1,307
|
)
|
||
|
$
|
(3,378
|
)
|
|
$
|
(1,307
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
66,883
|
|
|
$
|
23,019
|
|
|
$
|
24,435
|
|
State
|
581
|
|
|
1,254
|
|
|
1,587
|
|
|||
Total current
|
67,464
|
|
|
24,273
|
|
|
26,022
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(25,498
|
)
|
|
(9,205
|
)
|
|
16,905
|
|
|||
State
|
(5,650
|
)
|
|
(4,555
|
)
|
|
(13
|
)
|
|||
Total deferred
|
(31,148
|
)
|
|
(13,760
|
)
|
|
16,892
|
|
|||
Total provision for income taxes
|
$
|
36,316
|
|
|
$
|
10,513
|
|
|
$
|
42,914
|
|
|
Year Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Statutory federal tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
(0.5
|
)
|
|
(9.2
|
)
|
|
0.9
|
|
Change in unrecognized tax benefits
|
(3.7
|
)
|
|
0.7
|
|
|
(0.3
|
)
|
Nondeductible compensation
|
9.6
|
|
|
6.2
|
|
|
—
|
|
Nondeductible lobbying
|
1.6
|
|
|
4.2
|
|
|
0.6
|
|
Purchase accounting adjustment
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
Nondeductible fair value of 1.125% Warrants
|
2.4
|
|
|
—
|
|
|
—
|
|
Change in fair value of contingent consideration liabilities
|
(0.3
|
)
|
|
4.8
|
|
|
—
|
|
Other
|
0.7
|
|
|
3.3
|
|
|
0.3
|
|
Effective tax rate
|
44.8
|
%
|
|
45.0
|
%
|
|
35.7
|
%
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(In thousands)
|
||||||
Accrued expenses
|
$
|
19,545
|
|
|
$
|
15,381
|
|
Reserve liabilities
|
1,712
|
|
|
2,936
|
|
||
State taxes
|
(1,323
|
)
|
|
(606
|
)
|
||
Other accrued medical costs
|
2,540
|
|
|
2,518
|
|
||
Net operating losses
|
27
|
|
|
27
|
|
||
Unrealized losses (gains)
|
380
|
|
|
(283
|
)
|
||
Unearned premiums
|
10,543
|
|
|
15,675
|
|
||
Prepaid expenses
|
(5,354
|
)
|
|
(4,390
|
)
|
||
Basis in debt
|
(2,162
|
)
|
|
—
|
|
||
Deferred compensation
|
2,087
|
|
|
1,611
|
|
||
Other, net
|
(928
|
)
|
|
176
|
|
||
Valuation allowance
|
(511
|
)
|
|
(602
|
)
|
||
Deferred tax asset, net of valuation allowance — current
|
26,556
|
|
|
32,443
|
|
||
Reserve liabilities
|
1,909
|
|
|
2,013
|
|
||
State tax credit carryover
|
7,027
|
|
|
4,149
|
|
||
Net operating losses
|
2,326
|
|
|
3,341
|
|
||
Unrealized losses
|
286
|
|
|
563
|
|
||
Depreciation and amortization
|
(40,433
|
)
|
|
(44,198
|
)
|
||
Deferred compensation
|
3,404
|
|
|
3,323
|
|
||
Lease financing obligation
|
27,543
|
|
|
—
|
|
||
Debt basis
|
466
|
|
|
(5,410
|
)
|
||
Other, net
|
(24
|
)
|
|
702
|
|
||
Valuation allowance
|
(3,084
|
)
|
|
(2,383
|
)
|
||
Deferred tax liability, net of valuation allowance — long term
|
(580
|
)
|
|
(37,900
|
)
|
||
Net deferred income tax asset (liability)
|
$
|
25,976
|
|
|
$
|
(5,457
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Gross unrecognized tax benefits at beginning of period
|
$
|
(10,622
|
)
|
|
$
|
(10,712
|
)
|
|
$
|
(10,962
|
)
|
Increases in tax positions for prior years
|
—
|
|
|
(441
|
)
|
|
(137
|
)
|
|||
Decreases in tax positions for prior years
|
3,615
|
|
|
320
|
|
|
—
|
|
|||
Increases in tax positions for current year
|
(2,084
|
)
|
|
—
|
|
|
—
|
|
|||
Decreases in tax positions for current year
|
886
|
|
|
—
|
|
|
—
|
|
|||
Lapse in statute of limitations
|
175
|
|
|
211
|
|
|
387
|
|
|||
Gross unrecognized tax benefits at end of period
|
$
|
(8,030
|
)
|
|
$
|
(10,622
|
)
|
|
$
|
(10,712
|
)
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
|
Pretax
Charges
|
|
Net-of-Tax
Amount
|
|
Pretax
Charges
|
|
Net-of-Tax
Amount
|
|
Pretax
Charges
|
|
Net-of-Tax
Amount
|
||||||||||||
Restricted stock and performance awards
|
$
|
26,116
|
|
|
$
|
22,489
|
|
|
$
|
18,106
|
|
|
$
|
12,943
|
|
|
$
|
15,914
|
|
|
$
|
9,946
|
|
Employee stock purchase plan and stock options
|
2,578
|
|
|
2,012
|
|
|
1,912
|
|
|
1,613
|
|
|
1,138
|
|
|
712
|
|
||||||
|
$
|
28,694
|
|
|
$
|
24,501
|
|
|
$
|
20,018
|
|
|
$
|
14,556
|
|
|
$
|
17,052
|
|
|
$
|
10,658
|
|
|
Shares
|
|
Weighted
Average
Exercise Price
|
|
Aggregate
Intrinsic
Value
|
|
Weighted
Average
Remaining
Contractual
term
|
|||||
|
|
|
|
|
(In thousands)
|
|
(Years)
|
|||||
Stock options outstanding as of December 31, 2012
|
414,061
|
|
|
$
|
22.39
|
|
|
|
|
|
||
Granted
|
45,000
|
|
|
33.02
|
|
|
|
|
|
|||
Exercised
|
(79,540
|
)
|
|
20.09
|
|
|
|
|
|
|||
Forfeited
|
(300
|
)
|
|
17.63
|
|
|
|
|
|
|||
Stock options outstanding as of December 31, 2013
|
379,221
|
|
|
24.14
|
|
|
$
|
4,024
|
|
|
3.4
|
|
Stock options exercisable and expected to vest as of December 31, 2013
|
379,221
|
|
|
24.14
|
|
|
$
|
4,024
|
|
|
3.4
|
|
Exercisable as of December 31, 2013
|
324,221
|
|
|
22.58
|
|
|
$
|
3,947
|
|
|
2.5
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
Number
Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Weighted-
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted-
Average
Exercise
Price
|
||||||
$16.89 – $19.11
|
78,671
|
|
|
2.0
|
|
$
|
19.05
|
|
|
78,671
|
|
|
$
|
19.05
|
|
$20.88
|
147,000
|
|
|
3.2
|
|
20.88
|
|
|
147,000
|
|
|
20.88
|
|
||
$22.86 – $34.82
|
153,550
|
|
|
4.4
|
|
29.87
|
|
|
98,550
|
|
|
27.93
|
|
||
|
379,221
|
|
|
|
|
|
|
324,221
|
|
|
|
•
|
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.
|
|
Lease Financing Obligations
|
|
Lease Financing Obligations - Related Party
|
|
Operating Leases
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
2014
|
$
|
11,065
|
|
|
$
|
3,330
|
|
|
$
|
29,117
|
|
|
$
|
43,512
|
|
2015
|
11,397
|
|
|
6,880
|
|
|
23,196
|
|
|
41,473
|
|
||||
2016
|
11,739
|
|
|
7,138
|
|
|
15,890
|
|
|
34,767
|
|
||||
2017
|
12,091
|
|
|
7,405
|
|
|
14,434
|
|
|
33,930
|
|
||||
2018
|
12,454
|
|
|
7,683
|
|
|
12,832
|
|
|
32,969
|
|
||||
Thereafter
|
333,275
|
|
|
52,538
|
|
|
13,569
|
|
|
399,382
|
|
||||
Total minimum lease payments
|
$
|
392,021
|
|
|
$
|
84,974
|
|
|
$
|
109,038
|
|
|
$
|
586,033
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Revenue from continuing operations:
|
|
|
|
|
|
||||||
Health Plans segment:
|
|
|
|
|
|
||||||
Premium revenue
|
$
|
6,179,170
|
|
|
$
|
5,544,121
|
|
|
$
|
4,211,493
|
|
Premium tax revenue
|
172,017
|
|
|
158,991
|
|
|
154,589
|
|
|||
Investment income
|
6,890
|
|
|
5,075
|
|
|
5,446
|
|
|||
Rental income and other revenue
|
26,322
|
|
|
18,312
|
|
|
8,288
|
|
|||
Molina Medicaid Solutions segment:
|
|
|
|
|
|
||||||
Service revenue
|
204,535
|
|
|
187,710
|
|
|
160,447
|
|
|||
|
$
|
6,588,934
|
|
|
$
|
5,914,209
|
|
|
$
|
4,540,263
|
|
Depreciation and amortization reported in the consolidated statements of cash flows:
|
|
|
|
|
|
||||||
Health Plans segment
|
$
|
67,446
|
|
|
$
|
58,577
|
|
|
$
|
45,734
|
|
Molina Medicaid Solutions segment
|
26,420
|
|
|
20,187
|
|
|
28,649
|
|
|||
|
$
|
93,866
|
|
|
$
|
78,764
|
|
|
$
|
74,383
|
|
Operating income from continuing operations:
|
|
|
|
|
|
||||||
Health Plans segment
|
$
|
103,931
|
|
|
$
|
17,366
|
|
|
$
|
133,758
|
|
Molina Medicaid Solutions segment
|
32,629
|
|
|
23,727
|
|
|
2,063
|
|
|||
Total operating income from continuing operations
|
136,560
|
|
|
41,093
|
|
|
135,821
|
|
|||
Interest expense
|
52,071
|
|
|
16,769
|
|
|
15,519
|
|
|||
Other expenses
|
3,343
|
|
|
945
|
|
|
—
|
|
|||
Income from continuing operations before income taxes
|
$
|
81,146
|
|
|
$
|
23,379
|
|
|
$
|
120,302
|
|
|
As of December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Goodwill and intangible assets, net:
|
|
|
|
|
|
||||||
Health Plans segment
|
$
|
248,562
|
|
|
$
|
139,710
|
|
|
$
|
159,963
|
|
Molina Medicaid Solutions segment
|
81,047
|
|
|
89,089
|
|
|
95,787
|
|
|||
|
$
|
329,609
|
|
|
$
|
228,799
|
|
|
$
|
255,750
|
|
Total assets:
|
|
|
|
|
|
||||||
Health Plans segment
|
$
|
2,809,439
|
|
|
$
|
1,702,212
|
|
|
$
|
1,429,283
|
|
Molina Medicaid Solutions segment
|
193,498
|
|
|
232,610
|
|
|
222,863
|
|
|||
|
$
|
3,002,937
|
|
|
$
|
1,934,822
|
|
|
$
|
1,652,146
|
|
|
For The Quarter Ended
|
||||||||||||||
|
March 31,
2013(1) |
|
June 30, 2013(3)
|
|
September 30, 2013
|
|
December 31,
2013 |
||||||||
|
(In thousands, except per-share data)
|
||||||||||||||
Premium revenue (2)
|
$
|
1,497,433
|
|
|
$
|
1,501,729
|
|
|
$
|
1,584,656
|
|
|
$
|
1,595,352
|
|
Service revenue
|
49,756
|
|
|
49,672
|
|
|
51,100
|
|
|
54,007
|
|
||||
Operating income (loss), Health Plans segment
|
61,520
|
|
|
40,151
|
|
|
16,929
|
|
|
(14,669
|
)
|
||||
Operating income, Molina Medicaid Solutions segment
|
6,353
|
|
|
6,295
|
|
|
7,997
|
|
|
11,984
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
30,522
|
|
|
$
|
15,796
|
|
|
$
|
7,553
|
|
|
$
|
(9,041
|
)
|
(Loss) income from discontinued operations
|
(607
|
)
|
|
8,775
|
|
|
16
|
|
|
(85
|
)
|
||||
Net income (loss)
|
$
|
29,915
|
|
|
$
|
24,571
|
|
|
$
|
7,569
|
|
|
$
|
(9,126
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share (4):
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.65
|
|
|
$
|
0.54
|
|
|
$
|
0.17
|
|
|
$
|
(0.20
|
)
|
Diluted
|
$
|
0.64
|
|
|
$
|
0.53
|
|
|
$
|
0.16
|
|
|
$
|
(0.20
|
)
|
|
For The Quarter Ended
|
||||||||||||||
|
March 31,
2012(1) |
|
June 30, 2012
|
|
September 30, 2012
|
|
December 31,
2012 |
||||||||
|
(In thousands, except per-share data)
|
||||||||||||||
Premium revenue (2)
|
$
|
1,225,363
|
|
|
$
|
1,392,774
|
|
|
$
|
1,448,600
|
|
|
$
|
1,477,384
|
|
Service revenue
|
42,205
|
|
|
41,724
|
|
|
48,422
|
|
|
55,359
|
|
||||
Operating income (loss), Health Plans segment
|
27,903
|
|
|
(56,072
|
)
|
|
(5,788
|
)
|
|
51,323
|
|
||||
Operating income, Molina Medicaid Solutions segment
|
8,409
|
|
|
6,642
|
|
|
8,156
|
|
|
520
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
19,894
|
|
|
$
|
(33,057
|
)
|
|
$
|
(165
|
)
|
|
$
|
26,194
|
|
(Loss) income from discontinued operations
|
(1,805
|
)
|
|
(4,249
|
)
|
|
3,529
|
|
|
(551
|
)
|
||||
Net income (loss)
|
$
|
18,089
|
|
|
$
|
(37,306
|
)
|
|
$
|
3,364
|
|
|
$
|
25,643
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share (4):
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.39
|
|
|
$
|
(0.80
|
)
|
|
$
|
0.07
|
|
|
$
|
0.55
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
(0.80
|
)
|
|
$
|
0.07
|
|
|
$
|
0.54
|
|
(1)
|
In connection with the reclassification of Missouri health plan results to discontinued operations, amounts differ from amounts previously reported in our Quarterly Reports on Form 10-Q as follows: premium revenue for the quarters ended March 31, 2013 and 2012 decreased
$0.2 million
and
$56.6 million
, respectively; operating income, Health Plans segment, for the quarters ended March 31, 2013 and 2012 decreased
$0.8 million
and
$2.9 million
, respectively.
|
(2)
|
Prior to the third quarter of 2013, premium tax revenue was included in premium revenue. The presentation change reduced premium revenue for the amount now reported as premium tax revenue. In connection with this presentation change, amounts differ from the amounts previously reported in our Quarterly Reports on Form 10-Q as follows: premium revenue reported for the quarter ended March 31, 2013 and 2012 decreased
$37.0 million
and
$43.4 million
, respectively; premium revenue reported for the quarter ended June 30, 2013 and 2012 decreased
$46.9 million
and
$39.6 million
, respectively.
|
(3)
|
We abandoned our equity interests in the Missouri health plan during the second quarter of 2013, resulting in the recognition of a tax benefit of
$9.5 million
, which is included in (loss) income from discontinued operations.
|
(4)
|
Potentially dilutive shares issuable pursuant to our 1.125% Warrants were not included in the computation of diluted net income per share for all quarters in 2013, because to do so would have been anti-dilutive. Potentially dilutive shares issuable pursuant to our 3.75% Notes were not included in the computation of diluted net income per share for the quarters ended March 31, 2013, June 30, 2013, and all quarters in 2012, because to do so would have been anti-dilutive.
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Management fees and other operating revenue
|
$
|
599,049
|
|
|
$
|
406,981
|
|
|
$
|
308,287
|
|
Investment income
|
2,768
|
|
|
550
|
|
|
81
|
|
|||
Total revenue
|
601,817
|
|
|
407,531
|
|
|
308,368
|
|
|||
Expenses:
|
|
|
|
|
|
|
|||||
Medical care costs
|
37,862
|
|
|
33,102
|
|
|
31,672
|
|
|||
General and administrative expenses
|
503,781
|
|
|
367,606
|
|
|
272,302
|
|
|||
Depreciation and amortization
|
51,562
|
|
|
38,794
|
|
|
31,355
|
|
|||
Total expenses
|
593,205
|
|
|
439,502
|
|
|
335,329
|
|
|||
Operating income (loss)
|
8,612
|
|
|
(31,971
|
)
|
|
(26,961
|
)
|
|||
Interest expense
|
50,508
|
|
|
14,469
|
|
|
14,958
|
|
|||
Other expense
|
3,811
|
|
|
—
|
|
|
—
|
|
|||
Loss before income taxes and equity in net income of subsidiaries
|
(45,707
|
)
|
|
(46,440
|
)
|
|
(41,919
|
)
|
|||
Income tax benefit
|
(15,455
|
)
|
|
(15,779
|
)
|
|
(14,826
|
)
|
|||
Net loss before equity in net income of subsidiaries
|
(30,252
|
)
|
|
(30,661
|
)
|
|
(27,093
|
)
|
|||
Equity in net income of subsidiaries
|
83,181
|
|
|
40,451
|
|
|
47,911
|
|
|||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Net income
|
$
|
52,929
|
|
|
$
|
9,790
|
|
|
$
|
20,818
|
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Gross unrealized investment (loss) gain
|
(1,015
|
)
|
|
1,529
|
|
|
1,167
|
|
|||
Effect of income tax (benefit) expense
|
(386
|
)
|
|
581
|
|
|
380
|
|
|||
Other comprehensive (loss) income, net of tax
|
(629
|
)
|
|
948
|
|
|
787
|
|
|||
Comprehensive income
|
$
|
52,300
|
|
|
$
|
10,738
|
|
|
$
|
21,605
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(In thousands)
|
||||||||||
Operating activities:
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
62,602
|
|
|
$
|
20,611
|
|
|
$
|
28,606
|
|
Investing activities:
|
|
|
|
|
|
|
|||||
Capital contributions to subsidiaries
|
(166,112
|
)
|
|
(100,221
|
)
|
|
(58,412
|
)
|
|||
Dividends received from subsidiaries
|
24,429
|
|
|
101,800
|
|
|
86,284
|
|
|||
Purchases of investments
|
(362,927
|
)
|
|
(1,905
|
)
|
|
(2,020
|
)
|
|||
Sales and maturities of investments
|
97,713
|
|
|
4,067
|
|
|
3,760
|
|
|||
Proceeds from sale of subsidiary, net of cash surrendered
|
—
|
|
|
9,162
|
|
|
—
|
|
|||
Purchases of equipment
|
(76,873
|
)
|
|
(61,813
|
)
|
|
(30,930
|
)
|
|||
Changes in amounts due to/from affiliates
|
(5,888
|
)
|
|
5,187
|
|
|
(50,090
|
)
|
|||
Change in other assets and liabilities
|
(6,175
|
)
|
|
(1,342
|
)
|
|
(20,441
|
)
|
|||
Net cash used in investing activities
|
(495,833
|
)
|
|
(45,065
|
)
|
|
(71,849
|
)
|
|||
Financing activities:
|
|
|
|
|
|
|
|||||
Proceeds from issuance of 1.125% Notes, net of deferred issuance 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 repurchases
|
(52,662
|
)
|
|
(3,000
|
)
|
|
(7,000
|
)
|
|||
Principal payment on term loan of subsidiary
|
(46,963
|
)
|
|
—
|
|
|
—
|
|
|||
Payment of credit facility fees
|
—
|
|
|
—
|
|
|
(1,125
|
)
|
|||
Repayment of amount borrowed under credit facility
|
(40,000
|
)
|
|
(20,000
|
)
|
|
—
|
|
|||
Proceeds from exercise of stock options and employee stock plan purchases
|
9,402
|
|
|
8,205
|
|
|
7,347
|
|
|||
Excess tax benefits from employee stock compensation
|
1,674
|
|
|
3,667
|
|
|
1,651
|
|
|||
Amount borrowed under credit facility
|
—
|
|
|
60,000
|
|
|
—
|
|
|||
Net cash provided by financing activities
|
493,861
|
|
|
48,872
|
|
|
873
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
60,630
|
|
|
24,418
|
|
|
(42,370
|
)
|
|||
Cash and cash equivalents at beginning of year
|
39,068
|
|
|
14,650
|
|
|
57,020
|
|
|||
Cash and cash equivalents at end of year
|
$
|
99,698
|
|
|
$
|
39,068
|
|
|
$
|
14,650
|
|
|
/s/ ERNST & YOUNG LLP
|
Plan Category
|
Number of Securities to be
Issued Upon Exercise of Outstanding Options, Warrants and Rights
(a)
|
|
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
|
Number of Securities
Remaining Available for Future Issuance
Under Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)
|
|
||||
Equity compensation plans approved by security holders
|
379,221
|
|
(1)
|
$
|
24.14
|
|
|
5,308,237
|
|
(2)
|
(1)
|
Options to purchase shares of our common stock issued under the 2002 Equity Incentive Plan. Further grants under the 2002 Equity Incentive Plan have been suspended.
|
(2)
|
Includes shares remaining available to issue under the 2011 Equity Incentive Plan, and the 2011 Employee Stock Purchase Plan.
|
(a)
|
The consolidated financial statements and exhibits listed below are filed as part of this report.
|
(1)
|
The financial statements included in Item 8 of this Form 10-K, Financial Statements and Supplementary Data, above are filed as part of this annual report.
|
(2)
|
Financial Statement Schedules
|
(3)
|
Exhibits
|
|
MOLINA HEALTHCARE, INC.
|
||
|
|
|
|
|
By:
|
|
/s/ Joseph M. Molina
|
|
|
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Joseph M. Molina, M.D. (Dr. J. Mario Molina)
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Chief Executive Officer
(Principal Executive Officer)
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Signature
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Title
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Date
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/s/ Joseph M. Molina
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Chairman of the Board, Chief Executive Officer, and President
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February 26, 2014
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Joseph M. Molina, M.D.
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(Principal Executive Officer)
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/s/ John C. Molina
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Director, Chief Financial Officer, and Treasurer
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February 26, 2014
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John C. Molina, J.D.
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(Principal Financial Officer)
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/s/ Joseph W. White
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Chief Accounting Officer
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February 26, 2014
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Joseph W. White, CPA, MBA
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(Principal Accounting Officer)
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/s/ Garrey E. Carruthers
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Director
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February 26, 2014
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Garrey E. Carruthers, Ph.D.
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/s/ Daniel Cooperman
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Director
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February 26, 2014
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Daniel Cooperman
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/s/ Charles Z. Fedak
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Director
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February 26, 2014
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Charles Z. Fedak, CPA, MBA
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/s/ Steven James
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Director
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February 26, 2014
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Steven James, CPA
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/s/ Frank E. Murray
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Director
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February 26, 2014
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Frank E. Murray, M.D.
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/s/ Steven Orlando
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Director
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February 26, 2014
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Steven Orlando, CPA (inactive)
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/s/ Ronna Romney
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Director
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February 26, 2014
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Ronna Romney
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/s/ John P. Szabo, Jr.
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Director
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February 26, 2014
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John P. Szabo, Jr.
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/s/ Dale Wolf
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Director
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February 26, 2014
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Dale Wolf
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Number
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Description
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Method of Filing
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1.1
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Purchase Agreement, dated as of February 11, 2013, among Molina Healthcare, Inc. and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Representatives of the Initial Purchasers
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Filed as Exhibit 1.1 to registrant's Form 8-K filed February 15, 2013.
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2.1
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Asset Purchase Agreement between Molina Healthcare, Inc. and Unisys Corporation dated as of January 18, 2010
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Filed as Exhibit 2.1 to registrant's Form 8-K filed January 19, 2010.
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3.1
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Certificate of Incorporation
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Filed as Exhibit 3.2 to registrant's Registration Statement on Form S-1 filed December 30, 2002.
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3.2
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Certificate of Amendment to Certificate of Incorporation
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Filed as Exhibit 3.1 to registrant’s Form 8-K filed July 24, 2013.
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3.3
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Second Amended and Restated Bylaws of Molina Healthcare, Inc.
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Filed as Exhibit 3.1 to registrant's Form 8-K filed July 24, 2013.
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4.1
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Indenture dated as of October 11, 2008
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Filed as Exhibit 4.1 to registrant's Form 8-K filed October 5, 2007.
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4.2
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First Supplemental Indenture dated as of October 11, 2008
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Filed as Exhibit 4.2 to registrant's Form 8-K filed October 5, 2007.
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4.3
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Global Form of 3.75% Convertible Senior Note due 2014
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Filed as Exhibit 4.3 to registrant's Form 8-K filed October 5, 2007.
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4.4
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Indenture, dated as of February 15, 2013, by and between Molina Healthcare, Inc. and U.S. Bank, National Association
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Filed as Exhibit 4.1 to registrant's Form 8-K filed February 15, 2013.
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4.5
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Form of 1.125% Cash Convertible Senior Note due 2020
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Included in Exhibit 4.1 to registrant's Form 8-K filed February 15, 2013.
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10.1
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2000 Omnibus Stock and Incentive Plan
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Filed as Exhibit 10.12 to registrant's Form S-1 filed December 30, 2002.
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10.2
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2002 Equity Incentive Plan
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Filed as Exhibit 10.13 to registrant's Form S-1 filed December 30, 2002.
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10.3
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2002 Employee Stock Purchase Plan
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Filed as Exhibit 10.14 to registrant's Form S-1 filed December 30, 2002.
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10.4
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2005 Molina Deferred Compensation Plan adopted November 6, 2006
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Filed as Exhibit 10.4 to registrant's Form 10-Q filed November 9, 2006.
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10.5
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Molina Healthcare, Inc. Amended and Restated Deferred Compensation Plan (2013)
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Filed herewith.
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10.6
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Amendment No.1 to the Molina Healthcare, Inc.
Amended and Restated Deferred Compensation
Plan (2013)
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Filed herewith.
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10.7
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2005 Incentive Compensation Plan
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Filed as Appendix A to registrant's Proxy Statement filed March 28, 2005.
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10.8
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2011 Equity Incentive Plan
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Filed herewith.
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10.9
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2011 Employee Stock Purchase Plan
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Filed herewith.
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Number
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Description
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Method of Filing
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10.10
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Form of Restricted Stock Award Agreement (Executive Officer) under Molina Healthcare, Inc. Equity Incentive Plan
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Filed as Exhibit 10.1 to registrant's Form 10-Q filed August 9, 2005.
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10.11
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Form of Restricted Stock Award Agreement (Outside Director) under Molina Healthcare, Inc. Equity Incentive Plan
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Filed as Exhibit 10.1 to registrant's Form 10-Q filed August 9, 2005.
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10.12
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Form of Restricted Stock Award Agreement (Employee) under Molina Healthcare, Inc. Equity Incentive Plan
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Filed as Exhibit 10.1 to registrant's Form 10-Q filed August 9, 2005.
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10.13
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Form of Stock Option Agreement under Equity Incentive Plan
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Filed as Exhibit 10.3 to registrant's Form 10-K filed March 14, 2007.
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10.14
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Amended and Restated Employment Agreement with J. Mario Molina, M.D. dated as of December 31, 2009
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Filed as Exhibit 10.1 to registrant's Form 8-K filed January 7, 2010.
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10.15
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Amended and Restated Employment Agreement with John C. Molina dated as of December 31, 2009
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Filed as Exhibit 10.2 to registrant's Form 8-K filed January 7, 2010.
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10.16
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Employment Agreement with Terry Bayer dated June 14, 2013
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Filed as Exhibit 10.1 to registrant’s Form 8-K filed June 14, 2013.
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10.17
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Employment Agreement with Joseph White dated June 14, 2013
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Filed as Exhibit 10.2 to registrant’s Form 8-K filed June 14, 2013.
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10.18
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Employment Agreement with Jeff Barlow, dated June 14, 2013
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Filed as Exhibit 10.3 to registrant’s Form 8-K filed June 14, 2013.
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10.19
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Amended and Restated Change in Control Agreement with Terry Bayer, dated as of December 31, 2009
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Filed as Exhibit 10.4 to registrant's Form 8-K filed January 7, 2010.
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10.20
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Amended and Restated Change in Control Agreement with Joseph W. White, dated as of December 31, 2009
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Filed as Exhibit 10.6 to registrant's Form 8-K filed January 7, 2010.
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10.21
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Change in Control Agreement with Jeff D. Barlow, dated as of September 18, 2012
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Filed as Exhibit 10.16 to registrant’s Form 10-K filed February 28, 2013.
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10.22
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Form of Indemnification Agreement
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Filed as Exhibit 10.14 to registrant's Form 10-K filed March 14, 2007.
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10.23
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Base Call Option Transaction Confirmation, dated as of February 11, 2013, between Molina Healthcare, Inc. and JPMorgan Chase Bank, National Association, London Branch
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Filed as Exhibit 10.1 to registrant's Form 8-K filed February 15, 2013.
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10.24
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Base Call Option Transaction Confirmation, dated as of February 11, 2013, between Molina Healthcare, Inc. and Bank of America, N.A.
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Filed as Exhibit 10.2 to registrant's Form 8-K filed February 15, 2013.
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10.25
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Base Warrants Confirmation, dated as of February 11, 2013, between Molina Healthcare, Inc. and JPMorgan Chase Bank, National Association, London Branch
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Filed as Exhibit 10.3 to registrant's Form 8-K filed February 15, 2013.
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10.26
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Base Warrants Confirmation, dated as of February 11, 2013, between Molina Healthcare, Inc. and Bank of America, N.A.
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Filed as Exhibit 10.4 to registrant's Form 8-K filed February 15, 2013.
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10.27
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Amendment to Base Call Option Transaction Confirmation, dated as of February 13, 2013, between Molina Healthcare, Inc. and JPMorgan Chase Bank, National Association, London Branch
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Filed as Exhibit 10.5 to registrant's Form 8-K filed February 15, 2013.
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10.28
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Amendment to Base Call Option Transaction Confirmation, dated as of February 13, 2013, between Molina Healthcare, Inc. and Bank of America, N.A.
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Filed as Exhibit 10.6 to registrant's Form 8-K filed February 15, 2013.
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10.29
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Additional Base Warrants Confirmation, dated as of February 13, 2013, between Molina Healthcare, Inc. and JPMorgan Chase Bank, National Association, London Branch
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Filed as Exhibit 10.7 to registrant's Form 8-K filed February 15, 2013.
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10.30
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Additional Base Warrants Confirmation, dated as of February 13, 2013, between Molina Healthcare, Inc. and Bank of America, N.A.
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Filed as Exhibit 10.8 to registrant's Form 8-K filed February 15, 2013.
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10.31
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Amended and Restated Base Warrants Confirmation, dated as of April 22, 2013, between Molina Healthcare, Inc. and JPMorgan Chase Bank, National Association, London Branch
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Filed as Exhibit 10.1 to registrant's Form 10-Q filed May 3, 2013.
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Number
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Description
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Method of Filing
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10.32
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Amended and Restated Base Warrants Confirmation, dated as of April 22, 2013, between Molina Healthcare, Inc. and Bank of America, N.A.
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Filed as Exhibit 10.2 to registrant's Form 10-Q filed May 3, 2013.
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10.33
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Additional Amended and Restated Base Warrants Confirmation, dated as of April 22, 2013, between Molina Healthcare, Inc. and JPMorgan Chase Bank, National Association, London Branch
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Filed as Exhibit 10.3 to registrant's Form 10-Q filed May 3, 2013.
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10.34
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Additional Amended and Restated Base Warrants Confirmation, dated as of April 22, 2013, between Molina Healthcare, Inc. and Bank of America, N.A.
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Filed as Exhibit 10.4 to registrant's Form 10-Q filed May 3, 2013.
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10.35
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Lease Agreement, dated as of February 27, 2013, by and between 6th & Pine Development, LLC and Molina Healthcare, Inc.
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Filed as Exhibit 10.32 to registrant’s Form 10-K filed February 28, 2013.
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10.36
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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.
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Filed as Exhibit 10.1 to registrant's Form 10-Q filed October 30, 2013.
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10.37
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Agreement of Purchase and Sale, dated as of June 12, 2013, by and between Molina Healthcare, Inc. and Molina Center, LLC, and AG Net Lease Acquisition Corp.
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Filed as Exhibit 10.1 to registrant's Form 10-Q filed July 25, 2013.
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10.38
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Lease Agreement, dated as of June 13, 2013, by and between AGNL Clinic, L.P., and Molina Healthcare, Inc.
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Filed as Exhibit 10.2 to registrant's Form 10-Q filed July 25, 2013.
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12.1
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Computation of Ratio of Earnings to Fixed Charges
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Filed herewith.
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21.1
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List of subsidiaries
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Filed herewith.
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23.1
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Consent of Independent Registered Public Accounting Firm
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Filed herewith.
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31.1
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Section 302 Certification of Chief Executive Officer
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Filed herewith.
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31.2
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Section 302 Certification of Chief Financial Officer
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Filed herewith.
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32.1
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Certificate 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
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Filed herewith.
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32.2
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Certificate 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
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Filed herewith.
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101.INS
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XBRL Taxonomy Instance Document
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Filed herewith.
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101.SCH
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XBRL Taxonomy Extension Schema Document
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Filed herewith.
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith.
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith.
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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Filed herewith.
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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Filed herewith.
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1.
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Definitions. Whenever used in this Plan, the following words and phrases shall have the meaning set forth below, unless a different meaning is expressly provided or plainly required by the context in which the words or phrases are used:
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1.1.
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Beneficiary means a person designated by a Participant to receive Plan benefits in the event of the Participant’s death.
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1.2.
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Board means the Board of Directors of the Company and its successors.
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1.3.
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Change in Control means, a Change in Ownership, a Change in the Effective Control, a Change in Assets or a termination of the Plan and distribution of compensation deferred hereunder within twelve (12) months after any of the foregoing events. For purposes of this Section, “Company” shall include (i) the company for which a Participant is performing services at the time of the Change in Control, (ii) the company liable for the payment of the deferred compensation (or all companies liable if more than one company is liable), or a company that is a majority shareholder of a company identified in (i) or (ii), or any company in a chain of companies in which each company is a majority shareholder of another company in the chain, ending in a company identified in (i) or (ii). The events described in this section will not be considered to occur, with respect to an employee of a participating entity, if a participating entity is sold and the employee of the participating entity continues employment with the Employer subsequent to the sale. The events described in this section have the following meanings:
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a.
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Change in Ownership means the acquisition of stock by any one person or persons acting in concert (a “group”) of the Company, that when added to the stock of the person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. The acquisition of additional stock by any person or group who are already considered to own more than 50% of the stock of the Company shall not constitute a change in ownership of the Company. An increase in the percentage of stock owned by any person or group, as result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this section.
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b.
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Change in the Effective Control means the occurrence of any of the following events, despite the fact that the Company has not undergone a Change in Ownership as described above:
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i.
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The acquisition by any person or group (or acquisition during the 12-month period ending on the date of the most recent acquisition by such person or persons) of ownership of stock of the Company possessing 35% or more of the total voting power of the stock, except if such acquisition is the result of a change in “record ownership” and not a change in “beneficial ownership;”
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ii.
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The replacement of a majority of the Company’s board of directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the
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iii.
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A transaction between the Company and another company resulting in a Change in Control. Provided that this section shall not apply to the acquisition of additional control of the Company by any person or group, if that person or group is considered to effectively control the Company prior to the acquisition.
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iv.
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Provided that this section shall not apply to the acquisition of additional control of the Company by any person or group, if that person or group is considered to effectively control the Company prior to the acquisition.
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c.
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Change in Assets means the acquisition by any person or group (or acquisition during the 12-month period ending on the date of the most recent acquisition by such person or persons) of assets from the Company, that have a total gross fair market value equal to, or more than, 40% of the total gross fair market value of all the assets of the Company immediately prior to such acquisition or acquisitions. A transfer of assets by the Company will not be treated as a Change in Assets if the assets are transferred to any of the following (determined immediately after the transfer):
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i.
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A shareholder of the Company (as determined, immediately before the asset transfer) in exchange for or with respect to its stock;
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ii.
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An entity, 50% or more of the total value or voting power of which is owned directly or indirectly by the Company;
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iii.
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A person or group that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or
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iv.
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An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in (iii).
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1.4.
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Company means MOLINA HEALTHCARE, INC., a Delaware corporation.
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1.5.
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Company Stock means shares of stock issued by the Company.
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1.6.
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Disability means with respect to a Participant (i) the inability to engage in any substantial gainful activity by reason of any medically determinable physical or
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1.7.
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The original Effective Date of this Plan means January 1, 2005. The Effective Date of this Restatement shall mean October 1, 2013.
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1.8.
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Key Employee means an employee of the Company or a Subsidiary, who is (A) a member of a select group of management or highly compensated employees within the meaning of §2520.104-23 of the Department of Labor ERISA Regulations, (B) projected to receive Plan Year Compensation (base pay plus bonus), including amounts deferred to any 401(k) Plan, Deferred Compensation Plan, or Cafeteria Plan maintained by the Company, of $125,000 or more and (C) designated by the Plan Committee as a Key Employee.
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1.9.
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Participant means (A) a Key Employee who timely files a Written Election pursuant to Section 2.3, below, and (B) a former Employee who, at the time of his termination from employment, retirement, death, or occurrence of Disability, retains, or whose beneficiary retains, benefits earned under the Plan in accordance with its terms. A Participant is considered an Active Participant in the Plan until the earlier of the following: (A) the Participant separates from service under the terms of this Plan; or (B) the Participant is no longer a Key Employee.
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1.10.
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Plan means the Molina Healthcare, Inc. Amended and Restated Deferred Compensation Plan (2013) evidenced by this document and the Trust Agreement previously established in connection herewith.
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1.11.
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Plan Committee means the individuals appointed by the Board from time to time to administer the Plan as provided herein.
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1.12.
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Plan Year means the calendar year.
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1.13.
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Plan Year Compensation means the total taxable income (other than Share Awards) paid to an Active Participant by the Company or a Subsidiary during any Plan Year, or portion thereof in which he is a Participant in this Plan, as reflected on a Key Employee’s form W-2.
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1.14.
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Separation from Service. A separation from service with the Company, provided such separation constitutes a separation from service under Treasury Regulation Section 1.409A-1(h).
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1.15.
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Share Awards means shares of Company Stock which are awarded to a Participant as an employee by the Company.
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1.16.
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Specified Employee means a “key employee” of the Company, as defined in section 416(i) of the Code without regard to paragraph five (5) thereof.
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1.17.
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Subsidiary means any entity in which the Company owns not less than 80% of the outstanding voting interests.
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1.18.
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Trust Agreement means the grantor trust established in connection with this Plan between the Company as grantor and the Trustee.
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1.19.
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Trustee means Union Bank of California and any successor institutional trustee named to succeed such Trustee under the terms of the Trust Agreement established in connection with this Plan.
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1.20.
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Unforeseeable Financial Emergency means: (i) an illness or accident of the Participant or beneficiary, the Participant’s or beneficiary’s spouse, or the Participant’s or beneficiary’s dependent; (ii) the loss of the Participant’s or beneficiary’s property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or beneficiary. Determination of whether a Participant has incurred an Unforeseeable Financial Emergency shall be made by the Plan Committee, in accordance with the requirements of Section 409A of the Code and any guidance issued thereunder.
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2.
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Participation.
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2.1.
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Eligibility. An employee of the Company or a Subsidiary is eligible to participate in this Plan upon meeting the criteria for Key Employee specified in Section 1.7. Any Key Employee who was a Participant in the Original Plan and who continued in the employ of the Company on the Effective Date will continue to be a Participant in this Plan, subject to the right of the Company’s Chief Executive to no longer designate such employee as a Key Employee thereafter.
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2.2.
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Entry Date. An employee of the Company or a Subsidiary who met the eligibility requirement specified in Section 2.1 as of the Effective Date of this Plan Restatement is a Participant in the Plan as of the Effective Date. Newly eligible employees of the Company who have met the enrollment requirements under Section 2.3 of the Plan shall commence participation in the Plan within thirty (30) days of their date of hire. An employee of the Company or a Subsidiary who meets the eligibility requirements specified in Section 2.1 but fails to meet the requirements in accordance with Section 2.3 within the period required, shall become a Participant in this Plan on the first day of the next Plan year following submission of a Written Election form as specified in Section 2.3.
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2.3.
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Written Election by Participant. As a condition to participation in the Plan, each newly eligible Employee shall complete, sign and return to the Plan Committee a Written Election within thirty (30) days after the date the Participant becomes eligible to participate in the Plan. Annual enrollment shall be in December each year for the following Plan Year. Each Participant shall submit a Written Election prior to the first day of the Plan Year in which he or she will be a Participant.
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a.
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Such Written Election shall be made on the form presented to the Participant by the Plan Committee and shall set forth:
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v.
|
his election to participate in this Plan under the terms hereof;
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vi.
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the amount of Plan Year Compensation the Participant has determined to defer under the Plan for the Plan Year, pursuant to Section 3.1 below;
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vii.
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the investment vehicles into which the Participant desires to have his Account attributable to deferral of Plan Year Compensation invested, as provided in Section 3.5 below, and the percentage of such Account allocated to each elected investment vehicle;
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viii.
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the date on which his benefit is to be distributed which is the earliest of: (a) the date specified for an In-Service Withdrawal; (b) an Unforeseeable Financial Emergency; (c) the later of (i) when he separates from service with the Company for any reason or (ii) a date subsequent to his termination of employment specified by the Participant;
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ix.
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the form in which his benefit is to be distributed upon separation from service or retirement.
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b.
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A Participant’s most recently submitted Written Election shall remain in effect for subsequent Plan Years until the Participant changes it in accordance with the following:
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v.
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A Participant may change the amount of Plan Year Compensation he/she will defer under the Plan for future Plan Years by submitting a new Written Election to the Company. Such new election must be submitted to the Company on or before the seventh (7th) day immediately preceding the Plan Year for which the new election is to be effective. Any election of the amount of Plan Year Compensation to defer for a given Plan Year shall be irrevocable on and after the first day of the Plan Year for which the election was made.
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vi.
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A Participant may change the investment vehicle(s) in which he desires to have that portion of his Account attributable to Plan Year
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vii.
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Notwithstanding the foregoing, the Trustee shall, at the direction of the Plan Committee, have the duty and authority to invest the trust assets and funds in accordance with the terms of the Trust Agreement, and all rights associated with the trust assets shall be exercised by the Trustee as designated by the Plan Committee and shall in no event be exercisable by or be settled upon Participants or their Beneficiaries.
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viii.
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A Participant may change the date or form of distribution by submitting a new Written Election to the Company, provided that the following conditions are met:
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(1)
|
That such election may not take effect until at least twelve (12) months after the date on which the election is made;
|
(2)
|
In the case of an election related to a payment other than a payment on account of death, disability or the occurrence of an financial hardship, such payment must be deferred for a period of not less than five (5) years from the date such payment would have otherwise been made, and
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(3)
|
Any election related to a payment at a specified time or pursuant to a fixed schedule may not be made less than twelve (12) months prior to the date of the first scheduled payment.
|
2.4.
|
Duration of Participation. Any Key Employee who has become a Participant at any time shall remain a Participant, even though he is no longer an Active Participant, until his entire benefit under the terms of the Plan has been paid to him (or to his Beneficiary in the event of his death), at which time he ceases to be a Participant.
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2.5.
|
Maintenance of Records. The annual Designation of Participants by the Plan Committee shall be maintained in the corporate minute book. The Written Elections by Participants shall be maintained in the corporate records with all other files pertaining to this Plan by the Plan Committee.
|
3.
|
Contributions and Allocation.
|
3.1.
|
Participant Contributions. A Participant may elect to defer a portion, up to 100%, of his Plan Year Compensation. For a Participant’s initial Plan Year of participation, the minimum deferral for base pay and bonus pay, combined, must be at least $5,000. For succeeding years of participation, a Participant may not defer an amount less than the minimum established from year to year by the Plan Committee. A written election must be submitted, pursuant to the terms of Section 2.3, specifying the dollar amount or percentage of Plan Year Compensation the Participant has chosen to defer. A separate written election must be submitted, pursuant to the terms of Section 2.3, specifying the dollar amount or percentage of bonus pay the employee has chosen to defer. Once a Participant’s contributions for a Plan Year reach his elected dollar amount or percentage, such Participant shall not be allowed to defer additional portions of his Plan Year Compensation for the remainder of the Plan Year. Any amounts in excess of his elected dollar amount or percentage inadvertently deferred shall be refunded to the Participant as soon as practicable.
|
3.2.
|
Company Contributions. The Company may, subject to the sole discretion of its Board of Directors, make contributions for the Participants, reserving the right to discriminate among the Participants in the amount or percentage of contributions made in any Plan Year.
|
3.3.
|
Allocation of Participant Contributions. All amounts which a Participant elects to defer under the terms of this Plan shall be allocated to his Account as of the last business day of each month. Each such Participant Deferral Account shall be credited with earnings as provided in Section 3.5 below.
|
3.4.
|
Allocation of Company Contributions. Any amounts contributed by the Company on behalf of a Participant under Section 3.2 above shall be allocated to the Company Contribution Account of each Participant. Each such Company Contribution Account shall be credited with earnings as provided in Section 3.5 below.
|
3.5.
|
Credited Earnings. The Account of each Participant (which includes his Participant Deferral Account established under Section 3.1 and his Company Contribution Account established under Section 3.2) shall be credited as of the last business day of each month with the actual monthly earnings on the investments allocated to his Account.
|
3.6.
|
Funding. The assets of the Plan shall be held under the Trust Agreement (a “grantor trust”) designated in Article I above. As such, the Plan is intended to be an unfunded plan for purposes of the requirements of ERISA and the Code.
|
4.
|
Vesting of Accounts. The Participant Deferral Accounts and the Company Contribution Account of each Participant shall be 100% vested in such Participant at all times.
|
5.
|
Types of Benefits.
|
5.1.
|
Separation from Service Benefit. A Participant’s Separation for Service Benefit is the unpaid balance of his Accounts which equals the total of all contributions made by the Participant and the Company allocated to his Account and all earnings credited to his Account in accordance with the terms of the Plan and the Trust Agreement, less any distributions already paid.
|
5.2.
|
Disability Benefit. If a Participant becomes Disabled as defined in Section 1.5 above, the Company will pay his Retirement Benefit, calculated under Section 5.1, in the applicable form elected by the Participant in his Written Election.
|
5.3.
|
Death Benefit.
|
(1)
|
If a Participant dies after a distribution has commenced or if the Company has not purchased a life insurance contract in connection with the Participant’s Retirement Benefit, the Company will continue the payments of such distribution otherwise due to the Participant to his designated Beneficiary, in the applicable form elected by the Participant in his Written Election.
|
(2)
|
If a Participant dies while still employed by the Company and the Company has purchased a life insurance contract in connection with such Participant’s Retirement Benefit, the Company will pay the Participant’s designated Beneficiary the greater of his Retirement Benefit as determined under Section 5.1 above or his Projected Retirement Benefit (as defined below), in the applicable form elected by the Participant in his Written Election. “Projected Retirement Benefit” means the amount determined by projecting the average of the Participant’s contributions for all years of participation hereunder, at an earnings rate periodically set by the Plan Committee, to retirement at age 60.
|
5.4.
|
In-Service Withdrawal. A Participant may designate a date in the future for receipt of an In-Service Withdrawal with respect to the Participant’s contribution for a given Plan Year. Such withdrawal may be paid while the Participant remains employed with the Company, but shall be paid without Credited Earnings attributable to such Participant Contribution (which Credited Earnings shall be distributed upon termination of employment or retirement) in four (4) equal yearly installments commencing no earlier three (3) years after such Participant’s commencement of participation in the Plan; provided, however, that a Participant may elect to defer commencement of an In-Service Withdrawal subject to the following requirements:
|
i.
|
the Participant must deliver to the Company of a written election not later than twelve (12) months prior to the date the payment is scheduled to be paid;
|
ii.
|
the payments that are subject to the election must be delayed at least five (5) years from the date the payments would have otherwise been made; and
|
iii.
|
the election will not take effect until at least twelve (12) months after the election is made.
|
5.5.
|
Unforeseeable Financial Emergency Benefit. A Participant may request a portion of his Retirement Benefit as an Unforeseeable Financial Emergency Benefit at any time by providing the Plan Committee, to its satisfaction, with a written request, proof of an Unforeseeable Financial Emergency, and proof that all other financial resources have been explored and utilized to: (i) receive a partial or full payout from the Plan and/or (ii) suspend any deferrals required to be made by a Participant. The amount of a Unforeseeable Financial Emergency Benefit shall be limited to the lesser of the amount needed for the financial hardship or such Participant’s Retirement Benefit. If a Participant receives a distribution as a result of an Unforeseeable Financial Emergency, such Participant may not participate in the Plan during the Plan Year following the year of the hardship distribution.
|
6.
|
Distributions.
|
6.1.
|
Form of Benefits. The Company shall pay benefits in the form associated with Type of Benefit elected by the Participant, and, to the extent a Type of Benefit may be distributed in various forms, the Company shall pay benefits in the form elected by the Participant. The forms of benefits associated with the Types of Benefits are the following:
|
a.
|
Separation from Service Benefit, Disability Benefit, and Death Benefit shall be paid in (i) one lump sum; (ii) 5 yearly installments; (iii) 10 yearly installments; or (iv) 15 yearly installments;
|
b.
|
In-Service Withdrawal shall be paid as provided in Section 5.5 above; and
|
c.
|
Unforeseeable Financial Emergency Benefit shall be paid in one lump sum.
|
6.2.
|
Commencement of Payments. The Company will pay, or begin to pay, the Types of Benefits under this Plan to the Participant in accordance with the following:
|
b.
|
Separation from Service Benefit, Disability Benefit, and Death Benefit payments shall commence no later than 65 days following the date on which the Participant retires, terminates service, becomes disabled, or dies;
|
c.
|
In-Service Withdrawal payments shall commence on the date designated by the Participant on his Written Election pursuant to Section 2.3, provided that such payments are from Participant Contributions that have been in such Participant’s Deferral Account for at least two years;
|
d.
|
Unforeseeable Financial Emergency Benefit payments shall commence no later than sixty-five (65) days after a request for a Unforeseeable Financial Emergency Benefit is approved by the Plan Committee.
|
6.3.
|
Domestic Relations Order. In the event the Plan Committee receives a Domestic Relations Order from a potential Alternate Payee, the Plan Committee shall notify the Participant whose benefit is the subject of such order and provide him/her with information concerning the Plan’s procedures for administering Qualified Domestic Relations Orders (“QDROs”). Unless and until the order is set aside, the following provisions shall apply:
|
b.
|
The Plan Committee shall within a reasonable time determine whether the order is a QDRO and shall notify the Participant whose benefit is the subject of the order, of its determination. The Plan Committee may designate a representative to carry out its duties under this provision.
|
c.
|
Nothing in this Section shall be deemed to allow payment under a QDRO to an Alternate Payee of any benefit which would violate Section 409A of the Code and the regulations thereunder.
|
d.
|
QDRO definitions. For purposes of Section 6.3 the following definitions and rules shall apply:
|
i.
|
Alternate Payee means any spouse, former spouse, child or other dependent of a Participant who is recognized by a QDRO as having a right to receive all, or a portion of, the benefits payable under this Plan with respect to the Participant.
|
ii.
|
Domestic Relations Order means any judgment, decree, or order (including approval of a property settlement agreement) which:
|
(4)
|
relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a Participant; and
|
(5)
|
is made pursuant to a state domestic relations law (including a community property law).
|
iii.
|
Qualified Domestic Relations Order means any Domestic Relations Order meeting the requirements for a Qualified Domestic Relations Order under Code section 414(p), which satisfies any additional criteria under policies established by the Plan Committee.
|
7.
|
Amendment, Termination of Plan, Change in Control.
|
7.1.
|
Amendment. The Company reserves the right to amend the Plan at any time by resolution of the Plan Committee. The Plan Committee will determine the effective date of any such amendment. The amendment may not deprive any Participant or Beneficiary of any portion of a benefit under the terms of this Plan at the time of the amendment.
|
7.2.
|
Termination of Plan. The Company reserves the right to terminate the Plan under the following circumstances:
|
e.
|
The Plan Committee may resolve to terminate the Plan provided that:
|
i.
|
all arrangements of the same type (account balance plans, nonaccount balance plans, separation pay plans or other arrangements) are terminated with respect to all participants;
|
ii.
|
no payments other than those otherwise payable under the terms of the plan absent a termination of the plan are made within twelve (12) months of the termination of the arrangement;
|
iii.
|
all payments are made within twenty-four (24) moths of the termination of the arrangement; and
|
iv.
|
the Company does not adopt a new arrangement that would be aggregated with any terminated arrangement under the plan aggregation rules at any time for a period of five years following the date of termination of the arrangement.
|
f.
|
The Plan Committee may terminate the Plan and make payments to the participants at any time during the twelve (12) months following a change in control of the corporation;
|
g.
|
A corporate dissolution taxed under section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the plan are included in the participants’ gross incomes by the latest of:
|
i.
|
the calendar year in which the plan termination occurs,
|
ii.
|
the calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or
|
iii.
|
the first calendar year in which the payment is administratively practicable.
|
7.3.
|
Change in Control. In the event of a Change in Control, the Company shall, as soon as possible, but in no event later than ten days after the Change in Control, notify the Trustee, and the Trustee or its agent shall immediately calculate the Retirement Benefit of each Participant and distribute such amounts to the Participant or Beneficiary in a lump sum within thirty (30) days of the notification. If the Company fails to notify the Trustee as specified in this section, the Trustee may act upon notification of the “Change of Control” obtained in an alternate manner. The Trustee shall incur no liability to any person for any action taken pursuant to such notification and in conformity with the terms of the Plan.
|
8.
|
Benefits Not Funded. Participants and Beneficiaries have the status of unsecured creditors of the Company, and the Plan constitutes a mere promise by the Company to make benefit payments in the future. A Participant’s or Beneficiary’s interest in the Plan is an unsecured claim against the general assets of the Company, and neither the Participant nor a Beneficiary has any right against the account until the Plan has distributed the benefit. All amounts credited to an account are the general assets of the Company and may be disposed of or used by the Company in such manner as it determines.
|
9.
|
Administration.
|
9.1.
|
Plan Committee. The Plan shall be administered by the Plan Committee. The Plan Committee shall have full authority and power to administer and construe the Plan, subject to applicable requirements of law. Without limiting the generality of the foregoing, the Plan Committee shall have the powers indicated in the foregoing Sections of the Plan and the following additional powers and duties:
|
a.
|
To make and enforce such rules and regulations as it deems necessary or proper for the administration of the Plan;
|
b.
|
To interpret the Plan and to decide all questions concerning the Plan;
|
c.
|
To determine the amount and the recipient of any payments to be made under the Plan;
|
d.
|
To designate and value any investments deemed held in the Accounts; and
|
e.
|
To make all other determinations and to take all other steps necessary or advisable for the administration of the Plan.
|
9.2.
|
Delegation of Duties. The Plan Committee may delegate such of its duties and may engage such experts and other persons as it deems appropriate in connection with administering the Plan. The Plan Committee shall be fully protected in any action taken, in good faith, in reliance upon any opinions or reports furnished them by any such experts or other persons.
|
9.3.
|
Indemnification of Committee. The Company agrees to indemnify and to defend to the fullest extent permitted by law any person serving as a member of the Plan Committee, and each employee of the Company or any of its affiliates appointed by the Plan Committee to carry out duties under this Plan, against all liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith.
|
9.4.
|
Liability. To the extent permitted by law, neither the Plan Committee nor any other person shall incur any liability for any acts or for any failure to act except for liability arising out of such person’s own willful misconduct or willful breach of the Plan.
|
9.5.
|
Claims Review Procedure.
|
a.
|
A claim for benefits may be filed, in writing, with the Plan Committee. A written disposition of a claim shall be furnished to the claimant within a reasonable time after the claim for benefits is filed. In the event a claim for benefits is denied, the Plan Committee shall provide the claimant with the reasons for denial.
|
b.
|
A claimant whose claim for benefits was denied may file for a review of such denial, with the Plan Committee, no later than 60 days after he has received written notification of the denial.
|
c.
|
The Plan Committee shall give a request for review a full and fair review. If the claim for benefits is denied upon completion of a full and fair review, notice of such denial shall be provided to the claimant within 60 days after the Plan Committee’s receipt of such written claim for review. This 60-day period may be extended in the event of special circumstances. Such special circumstances shall be communicated to the claimant in writing within the 60-day period. If there is an extension, a decision shall be made as soon as possible, but not later than 120 days after receipt by the Plan Committee of such claim for review.
|
d.
|
If benefits are provided or administered by an insurance company, insurance service, or other similar organization which is subject to regulation under the insurance laws of a state, the claims procedure relating to these benefits may provide for review. If so, that company, service, or organization will be the entity to which claims are addressed.
|
10.
|
General Provisions
|
10.1.
|
Designation of Beneficiary. Each Participant shall designate, in writing, prior to the date he first becomes a Participant in the Plan, one or more beneficiaries to receive his benefit under the provisions of Section 5.4. The Participant shall file the written designation with the Plan Committee. The Participant may revoke a previous beneficiary designation by filing a new written beneficiary designation with the Plan Committee.
|
10.2.
|
Benefits Not Assignable. The rights of each Participant are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or any Beneficiary. Neither the Participant nor Beneficiary may assign, transfer or pledge the benefits under this Plan. Any attempt to assign, transfer or pledge a Participant’s benefits under this Plan is void.
|
10.3.
|
Benefit. This Plan constitutes an agreement between the Company and each of the Participants which is binding upon and inures to the Company, its successors and assigns and upon the Participant and his heirs and legal representatives.
|
10.4.
|
Headings. The headings of the Articles and Sections of this Plan are included for purposes of convenience only, and shall not affect the construction or interpretation of any of it provisions.
|
10.5.
|
Notices. All notices, requests, demands, and other communications under this Plan shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified (return receipt requested), postage prepaid, and properly addressed to the last known address to each party as set forth on the first page thereof. Any party may change its address for purposes of this Section by giving the other parties written notice of the new address in the manner set forth above.
|
10.6.
|
No Loans. The Plan does not permit any loans to be made to any Participant or Beneficiary.
|
10.7.
|
Gender Usage. The use of the masculine gender includes the feminine gender for all purposes of this Plan.
|
10.8.
|
Expenses. Costs of administration of the Plan shall be paid by the Company.
|
2.
|
DEFINITIONS AND CONSTRUCTION
.
|
3.
|
ADMINISTRATION
.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
(Dollars in Thousands)
|
||||||||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes, continuing operations
|
$
|
81,146
|
|
|
$
|
23,379
|
|
|
$
|
120,302
|
|
|
$
|
81,128
|
|
|
$
|
25,152
|
|
Add fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, including amortization of debt discount and expense
|
52,071
|
|
|
16,769
|
|
|
15,519
|
|
|
15,509
|
|
|
13,777
|
|
|||||
Estimated interest portion of rental expense
|
3,922
|
|
|
2,865
|
|
|
2,542
|
|
|
4,522
|
|
|
5,181
|
|
|||||
Total fixed charges
|
55,993
|
|
|
19,634
|
|
|
18,061
|
|
|
20,031
|
|
|
18,958
|
|
|||||
Total earnings available for fixed charges
|
$
|
137,139
|
|
|
$
|
43,013
|
|
|
$
|
138,363
|
|
|
$
|
101,159
|
|
|
$
|
44,110
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges from above:
|
$
|
55,993
|
|
|
$
|
19,634
|
|
|
$
|
18,061
|
|
|
$
|
20,031
|
|
|
$
|
18,958
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of Earnings to Fixed Charges
|
2.4
|
|
|
2.2
|
|
|
7.7
|
|
|
5.1
|
|
|
2.3
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total rent expense
|
$
|
24,510
|
|
|
$
|
20,462
|
|
|
$
|
23,110
|
|
|
$
|
25,124
|
|
|
$
|
20,723
|
|
Interest factor
|
16
|
%
|
|
14
|
%
|
|
11
|
%
|
|
18
|
%
|
|
25
|
%
|
|||||
Interest component of rental expense
|
$
|
3,922
|
|
|
$
|
2,865
|
|
|
$
|
2,542
|
|
|
$
|
4,522
|
|
|
$
|
5,181
|
|
Name
|
Jurisdiction of Incorporation
|
American Family Care, Inc.
|
California
|
American Family Care Hospital Management, Inc.
|
California
|
Molina Healthcare Data Center, Inc.
|
New Mexico
|
Molina Healthcare of Arizona, Inc.*
|
Arizona
|
Molina Healthcare of California
|
California
|
Molina Healthcare of California Partner Plan, Inc.
|
California
|
Molina Healthcare of Florida, Inc.
|
Florida
|
Molina Healthcare of Georgia, Inc.*
|
Georgia
|
Molina Healthcare of Illinois, Inc.
|
Illinois
|
Molina Healthcare of Maryland, Inc.*
|
Maryland
|
Molina Healthcare of Michigan, Inc.
|
Michigan
|
Molina Healthcare of Mississippi, Inc.*
|
Mississippi
|
Molina Healthcare of New Mexico, Inc.
|
New Mexico
|
Molina Healthcare of North Carolina, Inc.*
|
North Carolina
|
Molina Healthcare of Ohio, Inc.
|
Ohio
|
Molina Healthcare of South Carolina, Inc.
|
South Carolina
|
Molina Healthcare of Texas, Inc.
|
Texas
|
Molina Healthcare of Texas Insurance Company^
|
Texas
|
Molina Healthcare of Utah, Inc.
|
Utah
|
Molina Healthcare of Virginia, Inc.
|
Virginia
|
Molina Healthcare of Washington, Inc.
|
Washington
|
Molina Healthcare of Wisconsin, Inc.
|
Wisconsin
|
Molina Information Systems, LLC, dba Molina Medicaid Solutions
|
California
|
Molina Pathways, LLC*
|
Delaware
|
*
|
Non-operational entity
|
^
|
Wholly owned subsidiary of Molina Healthcare of Texas, Inc.
|
|
|
|
|
|
|
|
/s/ Joseph M. Molina
|
|
|
|
Joseph M. Molina
|
|
|
|
Chief Executive Officer and President
|
|
|
|
|
|
|
|
/s/ John C. Molina
|
|
|
|
John C. Molina, J.D.
|
|
|
|
Chief Financial Officer and Treasurer
|
|
/s/ Joseph M. Molina
|
Joseph M. Molina, M.D.
|
Chief Executive Officer and President
|
|
|
|
|
|
|
|
/s/ John C. Molina
|
|
|
|
John C. Molina, J.D.
|
|
|
|
Chief Financial Officer and Treasurer
|