Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172023
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 001-31719
molinalogo2016a26.jpg
MOLINA HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware13-4204626
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Delaware13-4204626
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
200 Oceangate, Suite 100
Long Beach, California
90802
Long Beach,California90802
(Address of principal executive offices)(Zip Code)
(562) 435-3666
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par ValueMOHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  ☒Accelerated Filer ☐Non-Accelerated Filer ☐Smaller reporting company ☐Emerging growth company ☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company¨
Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes  ¨ ☐No  ý☒
The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of October 27, 2017,July 21, 2023, was approximately 57,094,000.58,300,000.


Table of Contents
MOLINA HEALTHCARE, INC. FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SeptemberJUNE 30, 20172023


TABLE OF CONTENTS
ITEM NUMBERPage
PART I
1.
3
2.
20
3.
32
4.
32
PART II
1.
32
1A.
32
2.
33
3.Defaults Upon Senior SecuritiesNot Applicable.
4.Mine Safety DisclosuresNot Applicable.
5.
33
6.
34
35


Page
Financial Statements
3
Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
Controls and Procedures
63
Legal Proceedings
65
Risk Factors
65
Unregistered Sales of Equity Securities and Use of Proceeds
65
Exhibits
66
Signatures
67

CROSS-REFERENCE INDEX
Table of Contents
ITEM NUMBERPage
   
PART I - Financial Information 
   
1.
Financial Statements
3
   
2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
   
3.
Quantitative and Qualitative Disclosures About Market Risk
57

   
4.
Controls and Procedures
63
   
Part II - Other Information
 
   
1.
Legal Proceedings
65
   
1A.
Risk Factors
65
   
2.
Unregistered Sales of Equity Securities and Use of Proceeds
65
   
3.Defaults Upon Senior SecuritiesNot Applicable.
   
4.Mine Safety DisclosuresNot Applicable.
   
5.Other InformationNot Applicable.
   
6.
Exhibits
66
   
 
Signatures
67
   
   



FINANCIAL STATEMENTS
MOLINA HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
INCOME
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 
(In millions, except per-share data)
(Unaudited)
Revenue:       
Premium revenue$4,777
 $4,191
 $14,165
 $12,215
Service revenue130
 133
 390
 408
Premium tax revenue106
 127
 331
 345
Health insurer fee revenue—
 85
 —
 251
Investment income and other revenue18
 10
 48
 29
Total revenue5,031
 4,546
 14,934
 13,248
Operating expenses:       
Medical care costs4,220
 3,748
 12,822
 10,930
Cost of service revenue123
 119
 369
 362
General and administrative expenses383
 343
 1,227
 1,034
Premium tax expenses106
 127
 331
 345
Health insurer fee expenses—
 55
 —
 163
Depreciation and amortization33
 36
 109
 102
Impairment losses129
 —
 201
 —
Restructuring and separation costs118
 —
 161
 —
Total operating expenses5,112
 4,428
 15,220
 12,936
Operating (loss) income(81) 118
 (286) 312
Other expenses, net:       
Interest expense32
 26
 85
 76
Other income, net—
 —
 (75) —
Total other expenses, net32
 26
 10
 76
(Loss) income before income tax (benefit) expense(113) 92
 (296) 236
Income tax (benefit) expense(16) 50
 (46) 137
Net (loss) income$(97) $42
 $(250) $99
        
Net (loss) income per share:       
Basic$(1.70) $0.77
 $(4.44) $1.79
Diluted$(1.70) $0.76
 $(4.44) $1.77
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(Dollars in millions, except per-share amounts)
(Unaudited)
Revenue:
Premium revenue$8,042 $7,799 $15,927 $15,330 
Premium tax revenue169 215 341 423 
Investment income97 22 168 33 
Other revenue19 18 40 38 
Total revenue8,327 8,054 16,476 15,824 
Operating expenses:
Medical care costs7,038 6,872 13,909 13,435 
General and administrative expenses618 551 1,209 1,122 
Premium tax expenses169 215 341 423 
Depreciation and amortization42 44 86 84 
Other17 11 33 27 
Total operating expenses7,884 7,693 15,578 15,091 
Operating income443 361 898 733 
Other expenses, net:
Interest expense27 27 55 55 
Total other expenses, net27 27 55 55 
Income before income tax expense416 334 843 678 
Income tax expense107 86 213 172 
Net income$309 $248 $630 $506 
Net income per share - Basic$5.37 $4.29 $10.95 $8.74 
Net income per share - Diluted$5.35 $4.25 $10.87 $8.63 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 
(Amounts in millions)
(Unaudited)
Net (loss) income$(97) $42
 $(250) $99
Other comprehensive income:       
Unrealized investment gain (loss)1
 (3) 2
 10
Less: effect of income taxes1
 (2) 1
 3
Other comprehensive (loss) income, net of tax—
 (1) 1
 7
Comprehensive (loss) income$(97) $41
 $(249) $106
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In millions)
(Unaudited)
Net income$309 $248 $630 $506 
Other comprehensive (loss) gain:
Unrealized investment (loss) gain(29)(62)17 (162)
Less: effect of income taxes(8)(15)3 (39)
Other comprehensive (loss) gain, net of tax(21)(47)14 (123)
Comprehensive income$288 $201 $644 $383 
See accompanying notes.

Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 3
MOLINA HEALTHCARE, INC.
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CONSOLIDATED BALANCE SHEETS
June 30,
2023		December 31,
2022
September 30,
2017		 December 31,
2016
(Amounts in millions,
except per-share data)
(Dollars in millions,
except per-share amounts)
(Unaudited)  (Unaudited)
ASSETSASSETSASSETS
Current assets:   Current assets:
Cash and cash equivalents$3,934
 $2,819
Cash and cash equivalents$4,910 $4,006 
Investments1,787
 1,758
Investments3,886 3,499 
Restricted investments326
 —
Receivables1,002
 974
Receivables2,385 2,302 
Income taxes refundable60
 39
Prepaid expenses and other current assets174
 131
Prepaid expenses and other current assets260 277 
Derivative asset425
 267
Total current assets7,708
 5,988
Total current assets11,441 10,084 
Property, equipment, and capitalized software, net397
 454
Property, equipment, and capitalized software, net285 259 
Deferred contract costs97
 86
Intangible assets, net101
 140
Goodwill430
 620
Goodwill, and intangible assets, netGoodwill, and intangible assets, net1,348 1,390 
Restricted investments117
 110
Restricted investments249 238 
Deferred income taxes62
 10
Deferred income taxes220 220 
Other assets42
 41
Other assets118 123 
$8,954
 $7,449
Total assetsTotal assets$13,661 $12,314 
   
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Medical claims and benefits payable$2,478
 $1,929
Medical claims and benefits payable$3,677 $3,528 
Amounts due government agencies1,324
 1,202
Amounts due government agencies2,589 2,079 
Accounts payable and accrued liabilities485
 385
Accounts payable, accrued liabilities and otherAccounts payable, accrued liabilities and other857 889 
Deferred revenue468
 315
Deferred revenue414 359 
Current portion of long-term debt782
 472
Derivative liability425
 267
Total current liabilities5,962
 4,570
Total current liabilities7,537 6,855 
Long-term debt1,317
 975
Long-term debt2,178 2,176 
Lease financing obligations198
 198
Deferred income taxes—
 15
Finance lease liabilitiesFinance lease liabilities203 215 
Other long-term liabilities48
 42
Other long-term liabilities122 104 
Total liabilities7,525
 5,800
Total liabilities10,040 9,350 
   
Stockholders’ equity:   Stockholders’ equity:
Common stock, $0.001 par value; 150 shares authorized; outstanding: 57 shares at September 30, 2017 and at December 31, 2016—
 —
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding—
 —
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at June 30, 2023 and December 31, 2022Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at June 30, 2023 and December 31, 2022— — 
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstandingPreferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding— — 
Additional paid-in capital870
 841
Additional paid-in capital341 328 
Accumulated other comprehensive loss(1) (2)Accumulated other comprehensive loss(146)(160)
Retained earnings560
 810
Retained earnings3,426 2,796 
Total stockholders’ equity1,429
 1,649
Total stockholders’ equity3,621 2,964 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$13,661 $12,314 
$8,954
 $7,449
See accompanying notes.

Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 4
MOLINA HEALTHCARE, INC.
Table of Contents
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive (Loss) Income		Retained
Earnings		Total
OutstandingAmount
(In millions)
(Unaudited)
Balance at December 31, 202258 $— $328 $(160)$2,796 $2,964 
Net income— — — — 321 321 
Other comprehensive income, net— — — 35 — 35 
Share-based compensation— — (32)— — (32)
Balance at March 31, 202358 — 296 (125)3,117 3,288 
Net income— — — — 309 309 
Other comprehensive loss, net— — — (21)— (21)
Share-based compensation— — 45 — — 45 
Balance at June 30, 202358 $— $341 $(146)$3,426 $3,621 

Common StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
OutstandingAmount
(In millions)
(Unaudited)
Balance at December 31, 202158 $— $236 $(5)$2,399 $2,630 
Net income— — — — 258 258 
Other comprehensive loss, net— — — (76)— (76)
Share-based compensation1 — (18)— — (18)
Balance at March 31, 202259 — 218 (81)2,657 2,794 
Net income— — — — 248 248 
Common stock purchases(1)— (2)— (198)(200)
Other comprehensive loss, net— — — (47)— (47)
Share-based compensation— — 35 — — 35 
Balance at June 30, 202258 $— $251 $(128)$2,707 $2,830 
See accompanying notes.
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 5
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
 20232022
(In millions)
(Unaudited)
Operating activities:
Net income$630 $506 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization86 84 
Deferred income taxes(4)3 
Share-based compensation55 57 
Other, net5 (6)
Changes in operating assets and liabilities:
Receivables(83)(43)
Prepaid expenses and other current assets6 (64)
Medical claims and benefits payable149 405 
Amounts due government agencies510 247 
Accounts payable, accrued liabilities and other(208)(147)
Deferred revenue55 (357)
Income taxes202 46 
Net cash provided by operating activities1,403 731 
Investing activities:
Purchases of investments(924)(1,413)
Proceeds from sales and maturities of investments546 879 
Purchases of property, equipment and capitalized software(63)(50)
Other, net2 (7)
Net cash used in investing activities(439)(591)
Financing activities:
Common stock withheld to settle employee tax obligations(59)(53)
Common stock purchases— (200)
Contingent consideration liabilities settled— (20)
Other, net4 5 
Net cash used in financing activities(55)(268)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents909 (128)
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period4,048 4,506 
Cash, cash equivalents, and restricted cash and cash equivalents at end of period$4,957 $4,378 

Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 6
 Nine Months Ended September 30,
 2017 2016
 (Amounts in millions)
(Unaudited)
Operating activities:   
Net (loss) income$(250) $99
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Depreciation and amortization139
 135
Impairment losses201
 —
Deferred income taxes(68) 20
Share-based compensation, including accelerated share-based compensation38
 24
Non-cash restructuring charges49
 —
Amortization of convertible senior notes and lease financing obligations24
 23
Other, net13
 14
Changes in operating assets and liabilities:   
Receivables(28) (427)
Prepaid expenses and other assets(53) (116)
Medical claims and benefits payable549
 168
Amounts due government agencies122
 503
Accounts payable and accrued liabilities90
 1
Deferred revenue153
 157
Income taxes(22) 32
Net cash provided by operating activities957
 633
Investing activities:   
Purchases of investments(1,896) (1,444)
Proceeds from sales and maturities of investments1,538
 1,512
Purchases of property, equipment and capitalized software(85) (143)
(Increase) decrease in restricted investments held-to-maturity(10) 4
Net cash paid in business combinations—
 (48)
Other, net(21) (12)
Net cash used in investing activities(474) (131)
Financing activities:   
Proceeds from senior notes offering, net of issuance costs325
 —
Proceeds from borrowings under credit facility300
 —
Proceeds from employee stock plans11
 10
Other, net(4) 1
Net cash provided by financing activities632
 11
Net increase in cash and cash equivalents1,115
 513
Cash and cash equivalents at beginning of period2,819
 2,329
Cash and cash equivalents at end of period$3,934
 $2,842

MOLINA HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Table of Contents
 Nine Months Ended September 30,
 2017 2016
 (Amounts in millions)
(Unaudited)
Supplemental cash flow information:   
    
Schedule of non-cash investing and financing activities:   
Common stock used for share-based compensation$(21) $(8)
    
Details of change in fair value of derivatives, net:   
 Gain (loss) on 1.125% Call Option$158
 $(60)
(Loss) gain on 1.125% Conversion Option(158) 60
Change in fair value of derivatives, net$—
 $—
    
Details of business combinations:   
Fair value of assets acquired$—
 $(186)
Fair value of liabilities assumed—
 28
Purchase price amounts accrued/received—
 8
Reversal of amounts advanced to sellers in prior year—
 102
Net cash paid in business combinations$—
 $(48)
See accompanying notes.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20172023


1. Organization and Basis of Presentation
Organization and Operations
Molina Healthcare, Inc. provides quality managed health care to people receiving government assistance. We offer cost-effective Medicaid-related solutions to meet the health care needs of low-income families and individuals, and to assist government agencies in their administration ofhealthcare services under the Medicaid program.and Medicare programs, and through the state insurance marketplaces (the “Marketplace”). We currently have threefour reportable segments. These segments consist of our Health Plans segment, which constitutesconsisting of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other. Our reportable segments are consistent with how we currently manage the vast majority of our operations; our Molina Medicaid Solutions segment;business and our Other segment.view the markets we serve.
The Health Plans segment consists of health plans operating in 12 states and the Commonwealth of Puerto Rico. As of SeptemberJune 30, 2017, these health plans2023, we served approximately 4.55.2 million members eligible for Medicaid, Medicare, and other government-sponsored health carehealthcare programs, for low-income families and individuals. This membership includes Affordable Care Act Marketplace (Marketplace) members, most of whom receive government premium subsidies. The health plans are operated by our respective wholly owned subsidiaries in those states, each of which is licensed as a health maintenance organization (HMO).located across 19 states.
Our health plans’ state Medicaid contracts generallytypically have terms of three to four years. These contracts typicallyfive years, contain renewal options exercisable by the state Medicaid agency, and allow either the state or the health plan to terminate the contract with or without cause. Our health plan subsidiaries have generally been successful in retaining their contracts, but suchSuch contracts are subject to risk of loss when a state issues a new requestin states that issue requests for proposal (RFP)(“RFPs”) open to competitive bidding by other health plans. If one of our health plans is not a successful responsive bidder to a state RFP, its contract may not be subject to non-renewal.renewed.
In addition to contract renewal, our state Medicaid contracts may be periodically amended to include or exclude certain health benefits (such as pharmacy services, behavioral health services, or long-term care services); and populations such as the aged, blind or disabled (ABD)(“ABD”); and regions or service areas.
The MolinaIn Medicare, we enter into Medicare Advantage-Part D contracts with the Centers for Medicare and Medicaid Solutions segment provides support to state government agenciesServices (“CMS”) annually, and for dual-eligible plans, we enter into contracts with CMS, in the administrationpartnership with each state’s department of their Medicaid programs, including business processing, information technology development and administrative services.
The Other segment includes primarily our Pathways behavioral health and social services provider,human services. Such contracts typically have terms of one to three years.
In Marketplace, we enter into contracts with CMS, which end on December 31 of each year, and corporate amounts not allocated to other reportable segments.must be renewed annually.
Recent Developments — Health Plans Segment
Illinois Health Plan. In August 2017, Molina Healthcare of Illinois, Inc. was awarded a statewide Medicaid managed careIowa Procurement—Medicaid. Our new contract bywith the IllinoisIowa Department of HealthcareHealth and Family Services.Human Services commenced on July 1, 2023, and offers health coverage to TANF, CHIP, ABD, LTSS and Medicaid Expansion beneficiaries. This Medicaidnew contract further integrates behavioral health and physical health by combining the State’s three current managed care programs into one program. The contract begins January 1, 2018, forhas a term of four years, with optionsa potential for two two-year extensions.
Mississippi Procurement—Medicaid. In August 2022, we announced that our Mississippi health plan had been notified by the Mississippi Division of Medicaid (“DOM”) of its intent to renew annually for up to four additional years.
Mississippi Health Plan. In June 2017, Molina Healthcare of Mississippi, Inc. was awardedaward a Medicaid Coordinated Care Contract for the statewide administration of theits Mississippi Coordinated Access Network (MississippiCAN). The operational start date for the program is currently scheduled for October 1, 2018, pending the completion of a readiness review. The initial term of the contract is through June 2020, with options to renew annually for up to two additional years.
WashingtonProgram and Mississippi Children’s Health Plan. In May 2017, Molina Healthcare of Washington, Inc. was selected by the Washington State Health Care Authority to negotiate and enter into managed care contracts for the North Central region of the state’s Apple Health Integrated Managed Care Program. The start date for the new contract is scheduled for January 1, 2018.
Terminated Medicare Acquisition. In August 2016, we entered into agreements with each of Aetna Inc. and Humana Inc. to acquire certain assets related to their Medicare Advantage business. The transaction was subject to closing

conditions including the completion of the proposed acquisition of Humana by Aetna (the Aetna-Humana Merger). In January 2017, the U.S. District Court for the District of Columbia granted the request for relief made by the U.S. Department of Justice in its civil antitrust lawsuit against Aetna and Humana, to prohibit the Aetna-Humana Merger. In February 2017, our agreements with each of Aetna and Humana were terminated by the partiesInsurance Program pursuant to the termsRequest for Qualifications issued by DOM in December 2021. The four-year contract was expected to begin on July 1, 2023, but in the second quarter of 2023, DOM extended the existing contracts by an additional year. We now expect the four-year contract to commence July 1, 2024, and DOM has discretion to extend the new awards for an additional two years. The award enables us to continue serving Medicaid members across the state.
California Acquisition—Medicare. On June 30, 2023, we announced a definitive agreement to acquire 100% of the agreements. Underissued and outstanding capital stock of Brand New Day and Central Health Plan of California, each of which is a wholly owned subsidiary of Bright Health Company of California, Inc. The purchase price for the termination agreements,transaction is approximately $510 million, net of certain tax benefits, which we received an aggregate termination feeintend to fund with available funds including cash on hand. The transaction is subject to federal and state regulatory approvals, the solvency and continued operation as a going concern of $75 million from AetnaBright Health Group throughout the pre-closing period, and Humana inother closing conditions. We currently expect the transaction to close by the first quarter of 2017, which is reported in “Other income, net” in2024.
Indiana Procurement—Medicaid. In March 2023, we announced that the accompanying consolidated statementsIndiana Department of operations.
New York Health Plan. In August 2016,Administration has recommended that contract negotiations begin with our Indiana health plan. Under the proposed contract with the Indiana Family and Social Services Administration (“FSSA”), we closed on our acquisitionare expected to provide risk-based managed care long term services and supports as part of the outstanding equity interestsIndiana Pathways for Aging LTSS program pursuant to the request for proposal issued by FSSA in February 2022. The new contract is expected to have an initial four-year term, with the potential for two, one-year renewal terms.
Wisconsin Acquisition—Medicaid and Medicare. On July 13, 2022, we announced a definitive agreement to acquire substantially all the assets of Today’s Options of New York, Inc., which now operates as Molina Healthcare of New York, Inc.My Choice Wisconsin (“MCW”). The purchase price allocation was completed,for the transaction is approximately $150 million, net of expected tax benefits and required regulatory capital, which we intend to fund
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 7
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with cash on hand. The transaction is subject to receipt of applicable federal and state regulatory approvals, and the final purchase price adjustments were recorded,satisfaction of other customary closing conditions. We currently expect the transaction to close in the firstfourth quarter of 2017. Such adjustments were insignificant, and the final cash purchase price was $38 million.
Impairment Losses
Molina Medicaid Solutions segment. In the third quarter of 2017, we recorded a non-cash goodwill impairment loss of $28 million.See Note 10, “Impairment Losses.”
Other segment. In the third quarter of 2017, we recorded a non-cash goodwill impairment loss of $101 million for our Pathways subsidiary. In the second quarter of 2017, we recorded non-cash goodwill and intangible assets impairment losses of $72 million, primarily for our Pathways subsidiary. See Note 10, “Impairment Losses.”2023.
Consolidation and Interim Financial Information
The consolidated financial statements include the accounts of Molina Healthcare, Inc., and its subsidiaries, and variable interest entities (VIEs) in which Molina Healthcare, Inc. is considered to be the primary beneficiary. Such VIEs are insignificant to our consolidated financial position and results of operations.subsidiaries. In the opinion of management, these financial statements reflect all normal recurring adjustments, which are considered necessary for a fair presentation of the results as of the datedates and for the interim periods presented have been included; such adjustments consist of normal recurring adjustments.presented. All significant intercompany balances and transactions have been eliminated. The consolidated results of operations for the current interim periodsix months ended June 30, 2023 are not necessarily indicative of the results for the entire year ending December 31, 2017.2023.
The unaudited consolidated interim financial statements have been prepared under the assumption that users of the interim financial data have either read or have access to our audited consolidated financial statements for the fiscal year ended December 31, 2016.2022. Accordingly, certain disclosures that would substantially duplicate the disclosures contained in theour December 31, 20162022, audited consolidated financial statements have been omitted. These unaudited
Use of Estimates
The preparation of consolidated interim financial statements should be read in conjunctionconformity with our December 31, 2016 audited consolidated financial statements.U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.


2.Significant Accounting Policies
CertainCash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term, highly liquid investments that are both readily convertible into known amounts of cash and have a maturity of three months or less on the date of purchase. The following table provides a reconciliation of cash and cash equivalents, and restricted cash and cash equivalents reported within the accompanying consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying consolidated statements of cash flows. The restricted cash and cash equivalents presented below are included in “Restricted investments” in the accompanying consolidated balance sheets.
June 30,
 20232022
(In millions)
Cash and cash equivalents$4,910 $4,312 
Restricted cash and cash equivalents47 66 
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows$4,957 $4,378 
Receivables
Receivables consist primarily of premium amounts due from government agencies, which are subject to potential retroactive adjustments. Because substantially all of our significant accounting policiesreceivable amounts are discussed within the notereadily determinable and substantially all of our creditors are governmental authorities, our allowance for credit losses is insignificant. Any amounts determined to which they specifically relate.be uncollectible are charged to expense when such determination is made.
June 30,
2023		December 31,
2022
(In millions)
Government receivables$1,713 $1,702 
Pharmacy rebate receivables277 291 
Other395 309 
Total$2,385 $2,302 
Premium Revenue Recognition – Health Plans Segmentand Amounts Due Government Agencies
Premium revenue is fixedgenerated from our contracts with state and federal agencies, in connection with our participation in the Medicaid, Medicare, and Marketplace programs. Premium revenue is generally received based on per member per month (“PMPM”) rates established in advance of the periods covered and, except as described below, is not generally subject to significant accounting estimates. Premiumcovered. These premium revenues
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are recognized in the month that members are entitled to receive health carehealthcare services, and premiums collected in advance are deferred. CertainState Medicaid programs and the federal Medicare program periodically adjust premium rates, including certain components of premium revenue that are subject to accounting estimates and fall into two broad categories discussedare described below, and in further detail below: 1)our 2022 Annual Report on Form 10-K, Note 2, “Significant Accounting Policies,” under “Contractual Provisions That May Adjust or Limit Revenue or Profit;Profit,” and 2) “Quality Incentives.”
Contractual Provisions That May Adjust or Limit Revenue or Profit
MedicaidMany of our contracts contain provisions that may adjust or limit revenue or profit, as described below. Consequently, we recognize premium revenue as it is earned under such provisions. Liabilities accrued for premiums to be returned under such provisions are reported in the aggregate as “Amounts due government agencies,” in the accompanying consolidated balance sheets. Categorized by program, such amounts due government agencies included the following:
Medical Cost Floors (Minimums),
June 30,
2023		December 31,
2022
(In millions)
Medicaid program:
Minimum MLR, corridors, and profit sharing$1,381 $1,145 
Other premium adjustments682 482 
Medicare program:
Minimum MLR and profit sharing85 84 
Risk adjustment and Part D risk sharing65 76 
Other premium adjustments26 27 
Marketplace program:
Risk adjustment312 230 
Minimum MLR2 2 
Other premium adjustments36 33 
Total amounts due government agencies$2,589 $2,079 
Medicaid Program
Minimum MLR and Medical Cost Corridors: Corridors. A portion of our premium revenue may be returned if certain minimum amounts are not spent on defined medical care costs. Incosts as a percentage of premium revenue, or minimum medical loss ratio (“Minimum MLR”). Under certain medical cost corridor provisions, the aggregate, we recorded a liability under the terms of such contract provisions of $119 million and $272 million at September 30, 2017 and December 31, 2016, respectively, to “Amounts due government agencies.” Approximately $82 million and $244 million of the liability accrued at September 30, 2017 and December 31, 2016, respectively, relates to our participation in Medicaid Expansion programs.

In certain circumstances, our health plans may refund premiums or receive additional premiums, ifdepending on whether amounts spent on medical care costs fall below or exceed a defined maximum threshold. Receivables relatingthresholds. This includes remaining risk corridors that were enacted by various states in 2020 in response to such provisions were insignificant at September 30, 2017 and December 31, 2016.the reduced demand for medical services stemming from COVID-19.
Profit Sharing and Profit Ceiling:Sharing. Our contracts with certain states contain profit-sharing or profit ceilingsharing provisions under which we refund amounts to the states if our health plans generate profit above a certain specified percentage. In some cases, we are limited in the amount of administrative costs that we may deduct in calculating the refund, if any. Liabilities for profits in excess of the amount we are allowed to retain under these provisions were insignificant at September 30, 2017 and December 31, 2016.
RetroactiveOther Premium Adjustments: Adjustments. State Medicaid programs periodically adjust premium ratesrevenues on a retroactive basis.basis for rate changes and changes in membership and eligibility data. In certain states, adjustments are made based on the health status of our members (as measured through a risk score). In these cases, we must adjust our premium revenue in the period in which we learn ofdetermine that the adjustment rather than in the months of service to which the retroactive adjustment applies.
Medicare
Risk Adjustment: Our Medicare premiums are subject to retroactive increase or decrease based on the health status of our Medicare members (measured as a member risk score). We estimate our members’ risk scoresis probable and the related amount of Medicare revenue that will ultimately be realized for the periods presentedreasonably estimable, based on our knowledge of our members’ health status, risk scores and the Centers for Medicare & Medicaid Services (CMS) practices. Consolidated balance sheet amounts related to anticipated Medicare risk adjustment premiums and Medicare Part D settlements were insignificant at September 30, 2017 and December 31, 2016.
Minimum MLR: Additionally, federal regulations have established a minimum annual medical loss ratio (Minimum MLR) of 85% for Medicare. The medical loss ratio represents medical costs as a percentage of premium revenue. Federal regulations define what constitutes medical costs and premium revenue. If the Minimum MLR is not met, we may be required to pay rebates to the federal government. We recognize estimated rebates under the Minimum MLR as an adjustment to premium revenue in our consolidated statements of operations.
Marketplace
Premium Stabilization Programs: The Affordable Care Act (ACA) established Marketplace premium stabilization programs effective January 1, 2014. These programs, commonly referred to as the “3R’s,” include a permanent risk adjustment program, a transitional reinsurance program, and a temporary risk corridor program. We record receivables or payables related to the 3R programs and the Minimum MLR when the amounts are reasonably estimable as described below, and, for receivables, when collection is reasonably assured. Our receivables (payables) for each of these programs, asbest estimate of the dates indicated, were as follows:ultimate premium we expect to realize for the period being adjusted.
Marketplace Program
 September 30, 2017 December 31,
2016
 Current Benefit Year Prior Benefit Years Total 
        
 (In millions)
Risk adjustment$(655) $—
 $(655) $(522)
Reinsurance—
 10
 10
 55
Risk corridor—
 —
 —
 (1)
Minimum MLR(27) —
 (27) (1)
Risk adjustment:Adjustment. Under this permanent program, our health plans’ composite risk scores are compared with the overall average risk score for the relevant state and market pool. Generally, our health plans will make a risk transferadjustment payment into the pool if their composite risk scores are below the average risk score for all plan participants in a state (risk adjustment payable), and will receive a risk transferadjustment payment from the pool if their composite risk scores are above the average risk score.score for all plan participants in a state (risk adjustment receivable). Under CMS rules, the Marketplace risk adjustment pool in each state is budget neutral. We estimate our ultimate premium based on insurance policy year-to-date experience, and the data submitted and expected to be submitted to CMS, and recognize estimated premiums relating to the risk adjustment program as an adjustment to premium revenue in our consolidated statements of operations.income. As of June 30, 2023, Marketplace risk adjustment estimated payables
Reinsurance: This program was designed
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amounted to provide reimbursement$312 million and estimated receivables amounted to insurers$249 million, for high cost members and endeda net payable of $63 million. As of December 31, 2016; we expect2022, Marketplace risk adjustment estimated payables amounted to settle$230 million and estimated receivables amounted to $135 million, for a net payable of $95 million.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, receivables, and restricted investments. Our investments and a portion of our cash equivalents are managed by professional portfolio managers operating under documented investment guidelines. Our portfolio managers must obtain our prior approval before selling investments where the outstandingloss position of those investments exceeds certain levels. Our investments consist primarily of investment-grade debt securities with final maturities of less than 15 years, or less than 15 years average life for structured securities. Restricted investments are invested principally in cash, cash equivalents, U.S. Treasury securities, and corporate debt securities. Concentration of credit risk with respect to accounts receivable balance in 2017.
Risk corridor: This program was intended to limit gains and losses of insurers by comparing allowable costs to a target amount as defined by CMS, and ended December 31, 2016; all outstanding balances were settled as of September 30, 2017.

Additionally, the ACA established a Minimum MLR of 80% for the Marketplace. The medical loss ratio represents medical costs as a percentage of premium revenue. Federal regulations define what constitutes medical costs and premium revenue. If the Minimum MLR is not met, we may be required to pay rebates tolimited because our Marketplace policyholders. Eachpayors consist principally of the 3R programs is taken into consideration when computing the Minimum MLR. We recognize estimated rebates under the Minimum MLR as an adjustment to premium revenuefederal government, and governments of each state in our consolidated statements of operations.
Quality Incentives
At several ofwhich our health plans, revenue ranging from approximately 1% to 3% of certain health plan premiums is earned only if certain performance measures are met.
The following table quantifies the quality incentive premium revenue recognized for the periods presented, including the amounts earned in the periods presented and prior periods. Although the reasonably possible effects of a change in estimate related to quality incentive premium revenue as of September 30, 2017 are not known, we have no reason to believe that the adjustments to prior years noted below are not indicative of the potential future changes in our estimates as of September 30, 2017.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (Dollars in millions)
Maximum available quality incentive premium - current period$36
 $33
 $113
 $114
Quality incentive premium revenue recognized in current period:       
Earned current period$24
 $26
 $72
 $80
Earned prior periods3
 —
 9
 54
Total$27
 $26
 $81
 134
        
Quality incentive premium revenue recognized as a percentage of total premium revenue0.6% 0.6% 0.6% 1.1%
subsidiaries operate.
Income Taxes
The provision for income taxes is determined using an estimated annual effective tax rate, which generally differs from the U.S. federal statutory rate primarily because of foreign and state taxes, and nondeductible expenses such as the Health Insurer Fee (HIF), goodwill impairment, certain compensation and other general and administrative expenses. The effective tax rate was not impacted by HIF in 2017 given the 2017 HIF moratorium.
The effective tax rate may be subject to fluctuations during the year particularly as a result of the level of pretax earnings, and also as new information is obtained. Such information may affect the assumptions used to estimate the annual effective tax rate, including factors such asprojected pretax earnings, the mix of pretax earnings in the various tax jurisdictions in which we operate, valuation allowances against deferred tax assets, the recognition or the reversal of the recognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities, along with net operating loss and tax credit carryovers.
Premium Deficiency Reserves on Loss Contracts
We assess the profitability of our medical care policies to identify groups of contracts where current operating results or forecasts indicate probable future losses. If anticipated future variable costs exceed anticipated future premiums and investment income, a premium deficiency reserve is recognized. We assume a full-year CSR reconciliation (see further information below) in the premium deficiency reserve calculation for the Marketplace program. We recorded a premium deficiency reserve to “Medical claims and benefits payable” on our accompanying consolidated balance sheets relating to our Marketplace program of $30 million as of December 31, 2016, which increased to $100 million as of June 30, 2017, and then decreased to $70 million as of September 30, 2017. If a nine-month CSR reconciliation had been included in the computation rather than a full year, the premium deficiency reserve would have increased by $55 million, to $125 million as of September 30, 2017. The theoretical $55 million increase to the premium deficiency reserve is less than the potential fourth quarter 2017 impact described below, or $85 million, because such adjustment only recognizes the potential CSR impact to the extent it would have created a deficiency in premiums at September 30, 2017.

Marketplace Cost Share Reduction (CSR) Update
Our third quarter results do not include any potential impact from the October 12, 2017, direction to Centers for Medicare and Medicaid Services (CMS) from Acting Department of Health and Human Services Secretary Hargan to cease payment of Marketplace CSR subsidies. At September 30, 2017, we had a total of approximately $220 million in excess CSR subsidies, recorded as a payable to CMS. This payable represents the extent to which payments received by us from CMS exceeded our estimate of the actual cost of member subsidies incurred by us through September 30, 2017.
We expect to incur approximately $85 million in unreimbursed expense associated with the cessation of CSR subsidies in the fourth quarter of 2017. It has been the practice of CMS to perform a reconciliation on an annual basis of CSR subsidies paid to all health plans against the actual costs incurred by the health plans. Were such a reconciliation to be performed for the full calendar year of 2017—consistent with past practice—we would be able to offset nearly all of the $85 million expense incurred in the fourth quarter against the excess amounts received prior to September 30, 2017. However, should CMS transition to a nine month reconciliation period ending September 30, 2017—the last month for which CSR subsidies have been paid—the absence of CSR subsidy reimbursement would reduce income before income tax expense by approximately $85 million in the fourth quarter of 2017.
Recent Accounting Pronouncements
Goodwill Impairment. In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment loss. Instead, an impairment loss is measured as the excess of the carrying amount of the reporting unit, including goodwill, over the fair value of the reporting unit. ASU 2017-04 is effective beginning January 1, 2020; we early adopted ASU 2017-04 as of June 30, 2017, in connection with the interim assessment of our Pathways subsidiary. See further discussion at Note 10, “Impairment Losses.”
Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which will require us to include in our consolidated statements of cash flows the balances of cash, cash equivalents, restricted cash and restricted cash equivalents. When these items are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. Transfers between cash and cash equivalents and restricted cash and restricted cash equivalents will no longer be presented in the statement of cash flows. ASU 2016-18 is effective beginning January 1, 2018; early adoption is permitted. We are currently evaluating the changes that will be required in our consolidated statements of cash flows.
Stock Compensation. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. ASU 2016-09 simplifies several aspects of accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax and classification in the statement of cash flows. We adopted ASU 2016-09 in the first quarter of 2017; such adoption did not significantly impact our consolidated financial statements. In addition, the prior period presentation in the statement of cash flows was not adjusted because such adjustments were insignificant.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as modified by ASU 2017-03, Transition and Open Effective Date Information. Under ASU 2016-02, an entity will be required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases. For leases with a term of 12 months or less, an entity can elect to not recognize lease assets and lease liabilities and expense the lease over a straight-line basis for the term of the lease. ASU 2016-02 will require new disclosures that depict the amount, timing, and uncertainty of cash flows pertaining to an entity’s leases. ASU 2016-02 is effective for us beginning January 1, 2019, and must be adopted using a modified retrospective approach for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. Under this guidance, we will record assets and liabilities relating primarily to our long-term office leases. We are evaluating the effect to our consolidated financial statements.
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). We intend to adopt this standard and the related modifications on January 1, 2018, using the modified retrospective approach. Under this approach, the cumulative effect of initially applying the guidance will be reflected as an adjustment to beginning retained earnings.

We have determined that the insurance contracts of our Health Plans segment, which segment constitutes the vast majority of our operations, are excluded from the scope of Topic 606 because the recognition of revenue under these contracts is dictated by other accounting standards governing insurance contracts. 
For our Molina Medicaid Solutions segment, we have reevaluated our earlier assessment and determined that revenue for contracts that include design, development and implementation of Medicaid managed care systems shall be deferred until the system ‘go-live’ date, and then generally recognized on a straight-line basis over the hosting period. This approach is consistent with the FASB/IASB Joint Transition Resource Group for Revenue Recognition view for entities that provide software as a service solution, and similar to our historical revenue recognition methodology. We are continuing to evaluate the existence of customers’ rights with regard to renewal options and whether such rights may constitute separate performance obligations. We expect that cost of service revenue will generally be recognized in a manner consistent with the corresponding revenue recognition.
We believe the cumulative adjustment to retained earnings associated with the adoption of Topic 606 effective January 1, 2018, will be insignificant for both our Molina Medicaid Solutions and Other segments.
Other recentRecent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (SEC)(“SEC”) did not have, or are not believed bynor does management expect such pronouncements to have, a significant impact on our present or future consolidated financial statements.


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3. Net (Loss) Income perPer Share
The following table sets forth the calculation of basic and diluted net (loss) income per share:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (In millions, except net income per share)
Numerator:       
Net (loss) income$(97) $42
 $(250) $99
Denominator:       
Denominator for basic net (loss) income per share57
 56
 56
 55
Effect of dilutive securities:       
1.125% Warrants (1)
—
 —
 —
 1
Denominator for diluted net (loss) income per share57
 56
 56
 56
        
Net (loss) income per share: (2)
       
Basic$(1.70) $0.77
 $(4.44) $1.79
Diluted$(1.70) $0.76
 $(4.44) $1.77
        
Potentially dilutive common shares excluded from calculations:       
1.125% Warrants (1)
2
 —
 2
 —
1.625% Notes (1)
1
 —
 —
 —
Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 (In millions, except net income per share)
Numerator:
Net income$309 $248 $630 $506 
Denominator:
Shares outstanding at the beginning of the period57.7 58.1 57.4 57.9 
Weighted-average number of shares issued:
Stock-based compensation— — 0.2 0.2 
Stock purchases— (0.3)— (0.2)
Denominator for basic net income per share57.7 57.8 57.6 57.9 
Effect of dilutive securities: (1)
Stock-based compensation0.2 0.6 0.4 0.7 
Denominator for diluted net income per share57.9 58.4 58.0 58.6 
Net income per share - Basic (2)
$5.37 $4.29 $10.95 $8.74 
Net income per share - Diluted (2)
$5.35 $4.25 $10.87 $8.63 

(1)    The dilutive effect of all potentially dilutive common shares is calculated using the treasury stock method.
(1)For more information regarding the 1.125% Warrants, refer to Note 9, “Stockholders' Equity.” For more information regarding the 1.625% Notes, refer to Note 7, “Debt.” The dilutive effect of all potentially dilutive common shares is calculated using the treasury stock method. Potentially dilutive common shares were not included in the computation of diluted net loss per share in the three and nine months ended September 30, 2017, because to do so would have been anti-dilutive.
(2)Source data for calculations in thousands.
(2)    Source data for calculations in thousands.
4. Fair Value Measurements
We consider the carrying amounts of cash, cash equivalents and other current assets and current liabilities (not including derivatives and the current portion of long-term debt) to approximate their fair values because of the

relatively short period of time between the origination of these instruments and their expected realization or payment. For our financial instruments measured at fair value on a recurring basis, we prioritize the inputs used in measuring fair value according to the three-tier fair value hierarchy. For a description of the methods and assumptions that we use toused to: a) estimate the fair value; and b) determine the classification according to the fair value hierarchy for each financial instrument, seerefer to our 2022 Annual Report on Form 10-K, Note 5, “Fair Value Measurements,Measurements.” in our 2016 Annual Report on Form 10-K.
Derivative financial instruments include the 1.125% Call Option derivative asset and the 1.125% Conversion Option derivative liability. These derivatives are not actively traded and are valued based on an option pricing model that uses observable and unobservable market data for inputs. Significant market data inputs used to determine fair value as of September 30, 2017, included the price of our common stock, the time to maturity of the derivative instruments, the risk-free interest rate, and the implied volatility of our common stock. As described further in Note 8, “Derivatives,” the 1.125% Call Option asset and the 1.125% Conversion Option liability were designed such that changes in their fair values would offset, with minimal impact to the consolidated statements of operations. Therefore, the sensitivity of changes in the unobservable inputs to the option pricing model for such instruments is mitigated.
The net changes in fair value of Level 3 financial instruments were insignificant to our results of operations for the nine months ended September 30, 2017.
Our financial instruments measured at fair value on a recurring basis at SeptemberJune 30, 2017,2023, were as follows:
Observable InputsDirectly or Indirectly Observable InputsUnobservable Inputs
Total(Level 1) (Level 2) (Level 3)
 (In millions)
Corporate debt securities$2,454 $— $2,454 $— 
Mortgage-backed securities855 — 855 — 
Asset-backed securities321 — 321 — 
Municipal securities152 — 152 — 
U.S. Treasury notes72 — 72 — 
Other32 — 32 — 
Total assets$3,886 $— $3,886 $— 
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 Total Quoted Market Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
 (In millions)
Corporate debt securities$1,162
 $—
 $1,162
 $—
Government-sponsored enterprise securities (GSEs)220
 220
 —
 —
Municipal securities131
 —
 131
 —
Asset-backed securities125
 —
 125
 —
U.S. treasury notes121
 121
 —
 —
Certificates of deposit28
 —
 28
 —
  Subtotal - current investments1,787
 341
 1,446
 —
Corporate debt securities229
 —
 229
 —
U.S. treasury notes97
 97
 —
 —
     Subtotal - current restricted investments326
 97
 229
 —
1.125% Call Option derivative asset425
 —
 —
 425
Total assets$2,538
 $438
 $1,675
 $425
        
1.125% Conversion Option derivative liability$425
 $—
 $—
 $425
Total liabilities$425
 $—
 $—
 $425

Our financial instruments measured at fair value on a recurring basis at December 31, 2016,2022, were as follows:
 Total Quoted Market Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
 (In millions)
Corporate debt securities$1,179
 $—
 $1,179
 $—
GSEs231
 231
 —
 —
Municipal securities142
 —
 142
 —
Asset-backed securities69
 —
 69
 —
U.S. treasury notes84
 84
 —
 —
Certificates of deposit53
 —
 53
 —
  Subtotal - current investments1,758
 315
 1,443
 —
1.125% Call Option derivative asset267
 —
 —
 267
Total assets$2,025
 $315
 $1,443
 $267
        
1.125% Conversion Option derivative liability$267
 $—
 $—
 $267
Total liabilities$267
 $—
 $—
 $267
Observable InputsDirectly or Indirectly Observable InputsUnobservable Inputs
Total(Level 1)(Level 2)(Level 3)
 (In millions)
Corporate debt securities$2,184 $— $2,184 $— 
Mortgage-backed securities731 — 731 — 
Asset-backed securities288 — 288 — 
Municipal securities149 — 149 — 
U.S. Treasury notes105 — 105 — 
Other42 — 42 — 
Total assets$3,499 $— $3,499 $— 
Contingent consideration liabilities$8 $— $— $8 
Total liabilities$8 $— $— $8 
There were no current restricted investments asContingent Consideration Liabilities
In the six months ended June 30, 2023, we paid $8 million in connection with our 2020 acquisition of December 31, 2016.certain assets of Passport Health Plan, Inc., which represented the final payment of the consideration due relating to an operating income guarantee. The amount paid in the six months ended June 30, 2023, has been presented in “Operating activities” in the accompanying consolidated statements of cash flows.
Fair Value Measurements – Disclosure Only
The carrying amounts and estimated fair values of our senior notes payable are classified as Level 2 financial instruments. Fair value for these securities is determined using a market approach based on quoted market prices for similar securities in active markets or quoted prices for identical securities in inactive markets. The carrying amount and estimated fair value
 June 30, 2023December 31, 2022
 Carrying
Amount		Fair ValueCarrying
Amount		Fair Value
 (In millions)
4.375% Notes due 2028$793 $735 $792 $729 
3.875% Notes due 2030643 558 643 554 
3.875% Notes due 2032742 625 741 629 
Total$2,178 $1,918 $2,176 $1,912 

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Table of the amount due under our Credit Facility is classified as a Level 3 financial instrument, because certain inputs used to determine its fair value are not observable. As of September 30, 2017, the carrying value of the amount due under the Credit Facility approximates it fair value because of the recency of this borrowing during the third quarter of 2017.
Contents
 September 30, 2017 December 31, 2016
 
Carrying
Value
 

Fair Value
 
Carrying
Value
 

Fair Value
 (In millions)
5.375% Notes$692
 $726
 $691
 $714
1.125% Convertible Notes489
 927
 471
 792
4.875% Notes325
 324
 —
 —
Credit Facility300
 300
 —
 —
1.625% Convertible Notes292
 373
 284
 344
 $2,098
 $2,650
 $1,446
 $1,850

5. Investments
Available-for-Sale Investments
We consider all of our investments classified as current assets (including restricted investments) to be available-for-sale. Certain of our senior notes, as further discussed in Note 7, “Debt,” contain a limitation on the use of proceeds which required us to deposit the net proceeds from their issuance into a segregated deposit account, a current asset reported as “Restricted investments” in the accompanying consolidated balance sheets. Such proceeds, while restricted as to their use and held in a segregated deposit account, are available-for-sale based upon our contractual liquidity requirements.

The following tables summarize our current investments as of the dates indicated:
 September 30, 2017
 Amortized 
Gross
Unrealized
 
Estimated
Fair
 Cost Gains Losses Value
 (In millions)
Corporate debt securities$1,162
 $1
 $1
 $1,162
GSEs221
 —
 1
 220
Municipal securities132
 —
 1
 131
Asset-backed securities125
 —
 —
 125
U.S. treasury notes121
 —
 —
 121
Certificates of deposit28
 —
 —
 28
Subtotal - current investments1,789
 1
 3
 1,787
Corporate debt securities229
 —
 —
 229
U.S. treasury notes97
 —
 —
 97
Subtotal - current restricted investments326
 —
 —
 326
 $2,115
 $1
 $3
 $2,113
 June 30, 2023
Amortized CostGross UnrealizedEstimated Fair Value
 GainsLosses
 (In millions)
Corporate debt securities$2,563 $2 $111 $2,454 
Mortgage-backed securities911 — 56 855 
Asset-backed securities338 — 17 321 
Municipal securities161 — 9 152 
U.S. Treasury notes72 — — 72 
Other34 — 2 32 
Total$4,079 $2 $195 $3,886 
 December 31, 2022
 Amortized CostGross UnrealizedEstimated Fair Value
 GainsLosses
 (In millions)
Corporate debt securities$2,303 $2 $121 $2,184 
Mortgage-backed securities787 — 56 731 
Asset-backed securities308 — 20 288 
Municipal securities160 — 11 149 
U.S. Treasury notes106 — 1 105 
Other45 — 3 42 
Total$3,709 $2 $212 $3,499 
 December 31, 2016
 Amortized 
Gross
Unrealized
 
Estimated
Fair
 Cost Gains Losses Value
 (In millions)
Corporate debt securities$1,180
 $1
 $2
 $1,179
GSEs232
 —
 1
 231
Municipal securities143
 —
 1
 142
Asset-backed securities69
 —
 —
 69
U.S. treasury notes84
 —
 —
 84
Certificates of deposit53
 —
 —
 53
 $1,761
 $1
 $4
 $1,758
There were no current restricted investments as of December 31, 2016.
The contractual maturities of our available-for-salecurrent investments as of SeptemberJune 30, 20172023 are summarized below:
Amortized CostEstimated
Fair Value
Amortized Cost 
Estimated
Fair Value
(In millions) (In millions)
Due in one year or less$1,154
 $1,153
Due in one year or less$313 $307 
Due after one year through five years944
 943
Due after one year through five years2,421 2,311 
Due after five years through ten years17
 17
Due after five years through ten years428 415 
Due after ten yearsDue after ten years917 853 
TotalTotal$4,079 $3,886 
$2,115
 $2,113
Gross realized gains and losses from sales of available-for-sale securities are calculated under the specific identification method and are included in investment income. Gross realized investment gains and losseswere insignificant for the three and ninesix months ended SeptemberJune 30, 20172023, and 20162022. Gross realized investment losses amounted to $10 million in the six months ended June 30, 2023, and were insignificant.reclassified into earnings from other comprehensive income on a net-of-tax basis. Gross realized investment losses were insignificant in the six months ended June 30, 2022.
We have determined that unrealized losses at SeptemberJune 30, 20172023, and December 31, 2016, are temporary in nature, because the change in market value for these securities has2022, primarily resulted from fluctuating interest rates, rather than a deterioration of the creditworthiness of the issuers. Therefore, we determined that an allowance for credit losses was not necessary. So long as we maintain the intent and ability to hold these securities to maturity, we are unlikely to experience losses. In the event that we dispose of these securities before maturity, we expect that realized losses, if any, will be insignificant.

Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 13
Table of Contents
The following table segregates those available-for-sale investments that have been in a continuous loss position for less than 12 months, and those that have been in a continuous loss position for 12 months or more as of SeptemberJune 30, 2017:2023:
In a Continuous Loss Position
for Less than 12 Months		In a Continuous Loss Position
for 12 Months or More
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 PositionsEstimated
Fair
Value		Unrealized
Losses		Total Number of Positions
Estimated
Fair
Value
 
Unrealized
Losses
 
Total
Number of
Positions
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Total
Number of
Positions
(Dollars in millions) (Dollars in millions)
Corporate debt securities$783
 $1
 314
 $—
 $—
 —
Corporate debt securities$992 $21 561 $1,234 $90 627 
GSEs—
 —
 —
 58
 1
 20
Mortgage-backed securitiesMortgage-backed securities275 8 193 541 48 256 
Asset-backed securitiesAsset-backed securities144 2 88 164 15 86 
Municipal securities97
 1
 116
 —
 —
 —
Municipal securities55 1 29 82 8 103 
$880
 $2
 430
 $58
 $1
 20
OtherOther18 1 19 10 1 8 
TotalTotal$1,484 $33 890 $2,031 $162 1,080 
The following table segregates those available-for-sale investments that have been in a continuous loss position for less than 12 months, and those that have been in a continuous loss position for 12 months or more as of December 31, 2016:2022:
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 PositionsEstimated
Fair
Value		Unrealized
Losses		Total Number of Positions
 (Dollars in millions)
Corporate debt securities$1,124 $45 683 $887 $76 371 
Mortgage-backed securities395 20 220 319 36 131 
Asset-backed securities161 6 108 118 14 59 
Municipal securities75 4 83 57 7 57 
U.S. Treasury notes88 1 6 — — — 
Other15 1 16 17 2 6 
Total$1,858 $77 1,116 $1,398 $135 624 

 
In a Continuous Loss Position
for Less than 12 Months
 
In a Continuous Loss Position
for 12 Months or More
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Total
Number of
Positions
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Total
Number of
Positions
 (Dollars in millions)
Corporate debt securities$542
 $2
 378
 $—
 $—
 —
GSEs198
 1
 73
 —
 —
 —
Municipal securities101
 1
 129
 —
 —
 —
 $841
 $4
 580
 $—
 $—
 —
Restricted Investments Held-to-Maturity Investments
Pursuant to the regulations governing our Health Plans segmentstate health plan subsidiaries, we maintain statutory deposits and deposits required by government authorities primarily in certificates of depositcash, cash equivalents, U.S. Treasury securities, and U.S. treasurycorporate debt securities. We also maintain restricted investments as protection against the insolvency of certain capitated providers. The use of these funds is limited as required by regulationregulations in the various states in which we operate, or as needed in the event of insolvency of capitated providers. Therefore, such investments are reported as non-current “Restricted investments” in the accompanying consolidated balance sheets.
We have the ability to hold these restricted investments until maturity and, as a result, we would not expect the value of these investments to decline significantly due to a sudden change in market interest rates.
The contractual maturities of our Our held-to-maturity restricted investments which are carried at amortized cost, which approximates fair value, asvalue. Such investments amounted to $249 million at June 30, 2023, of Septemberwhich $112 million will mature in one year or less, $131 million will mature in one through five years, and $6 million will mature after five years.

Molina Healthcare, Inc. June 30, 2017 are summarized below:
2023 Form 10-Q | 14
 
Amortized
Cost
 
Estimated
Fair Value
 (In millions)
Due in one year or less$100
 $100
Due after one year through five years17
 17
 $117
 $117
Table of Contents

6.Medical Claims and Benefits Payable
The following table provides the details of our medical claims and benefits payable (including amounts payable for the provision of long-term services and supports, or LTSS) as of the dates indicated:

June 30,
2023		December 31,
2022
 (In millions)
Claims incurred but not paid (“IBNP”)$2,612 $2,597 
Pharmacy payable208 206 
Capitation payable130 94 
Other727 631 
Total$3,677 $3,528 
 September 30,
2017		 December 31,
2016
 (In millions)
Fee-for-service claims incurred but not paid (IBNP)$1,681
 $1,352
Pharmacy payable125
 112
Capitation payable57
 37
Other615
 428
 $2,478
 $1,929

“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various government agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of operations.income. Non-risk provider payables amounted to $403$277 million and $225$228 million as of SeptemberJune 30, 20172023, and December 31, 2016,2022, respectively.
Reinsurance recoverables of $16 million and $72 million as of September 30, 2017 and 2016, respectively, are included in “Receivables” in the accompanying consolidated balance sheets.
The following table presentstables present the components of the change in our medical claims and benefits payable for the periods indicated. The amounts presented for “Components of medical care costs related to: Prior periods”years” represent the amountsamount by which our original estimate of medical claims and benefits payable at the beginning of the period were less (more) thanyear varied from the actual amount of the liabilityliabilities, based on information (principally the payment of claims) developed since that liability wasthose liabilities were first reported.
Six Months Ended June 30, 2023
MedicaidMedicareMarketplaceConsolidated
 (In millions)
Medical claims and benefits payable, beginning balance$2,815 $452 $261 $3,528 
Components of medical care costs related to:
Current year11,585 1,857 738 14,180 
Prior years(241)(6)(24)(271)
Total medical care costs11,344 1,851 714 13,909 
Payments for medical care costs related to:
Current year9,184 1,430 552 11,166 
Prior years2,041 406 203 2,650 
Total paid11,225 1,836 755 13,816 
Change in non-risk and other provider payables58 (2)— 56 
Medical claims and benefits payable, ending balance$2,992 $465 $220 $3,677 
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 15
Table of Contents
 Nine Months Ended September 30,
 2017 2016
 (Dollars in millions)
Medical claims and benefits payable, beginning balance$1,929
 $1,685
Components of medical care costs related to:   
Current period12,813
 11,120
Prior periods9
 (190)
Total medical care costs12,822
 10,930
    
Change in non-risk provider payables172
 70
    
Payments for medical care costs related to:   
Current period10,944
 9,536
Prior periods1,501
 1,278
Total paid12,445
 10,814
Medical claims and benefits payable, ending balance$2,478
 $1,871
Benefit from prior period as a percentage of:   
Balance at beginning of period(0.5)% 11.3%
Premium revenue, trailing twelve months— % 1.2%
Medical care costs, trailing twelve months(0.1)% 1.3%
Six Months Ended June 30, 2022
MedicaidMedicareMarketplaceConsolidated
 (In millions)
Medical claims and benefits payable, beginning balance$2,580 $404 $379 $3,363 
Components of medical care costs related to:
Current year11,059 1,681 1,006 13,746 
Prior years(243)(33)(35)(311)
Total medical care costs10,816 1,648 971 13,435 
Payments for medical care costs related to:
Current year8,532 1,270 820 10,622 
Prior years1,801 330 280 2,411 
Total paid10,333 1,600 1,100 13,033 
Acquired balances, net of post-acquisition adjustments7 — — 7 
Change in non-risk and other provider payables3 — — 3 
Medical claims and benefits payable, ending balance$3,073 $452 $250 $3,775 
Assuming that our initial estimate
Our estimates of IBNP is accurate, we believe that amounts ultimately paid would generally be between 8%medical claims and 10% less than the IBNP liabilitybenefits payable recorded at December 31, 2022, and 2021 developed favorably by approximately $271 million and $311 million as of June 30, 2023, and 2022, respectively.
The favorable prior year development recognized in the end of the period as a result of the inclusion in that liability of the provision for adverse claims deviation and the accrued cost of settling those claims. Because the amount of our initial liability is merely an estimate (and therefore not perfectly accurate), we will always experience variability in that estimate as new information becomes available with the passage of time. Therefore, there can be no assurance that amounts ultimately paid out will fall within the range of 8%six months ended June 30, 2023 was primarily due to 10% lower than expected utilization of medical services by our members and improved operating performance. Consequently, the liability that was initially recorded. Furthermore, because our initial estimate of IBNP is derived from many factors, some of which are qualitativeultimate costs recognized in nature rather2023, as claims payments were processed, were lower than quantitative, we are seldom able to assign specific values to the reasons for a change in estimate—we only know when the circumstances for any one or more factors are out of the ordinary.
The differences between our original estimates and the amounts ultimately paid out (or now expected to be ultimately paid out) for the most part related to IBNP. While many related factors working in conjunction with one another serve to determine the accuracy of our estimates we are seldom able to quantify the impact that any singlein 2022.


factor has on a change in estimate. In addition, given the variability inherent in the reserving process, we will only be able to identify specific factors if they represent a significant departure from expectations. As a result, we do not expect to be able to fully quantify the impact of individual factors on changes in estimates.
Prior period development of our estimate as of December 31, 2016, through September 30, 2017, was unfavorable by $9 million, which is substantially less than the favorable prior period development of $190 million we recognized for the same period in the prior year. Further, the unfavorable development through September 30, 2017, was less than the 8% to 10% favorable development we typically expect.
We believe that the most significant uncertainties surrounding our IBNP estimates at September 30, 2017 are as follows:
At our Florida health plan, the inventory of unpaid claims increased significantly during the first two quarters of 2017, and then dropped in the third quarter. For this reason, the timing between the dates of service and the dates claims are paid will be impacted, making our liability estimates subject to more than the usual amount of uncertainty.
At our Illinois health plan, in 2017 we paid a large number of claims that had previously been denied and were subsequently disputed by providers. We have also established a liability for additional expected claims resulting from provider disputes. This has created some distortion in the claims payment patterns, making our liability estimates subject to more than the usual amount of uncertainty.
At our California health plan, we adjusted our inpatient authorization process. As a result, due to the expected increase in authorized inpatient stays, our liability estimates are subject to more than the usual amount of uncertainty.
At our Illinois and New York health plans, we implemented a new process for increased quality review of claims payments. While we do not anticipate this new process will impact the percentage of claims paid within the timely turnaround requirements, we believe it will have a minor impact on the timing of some paid claims. For this reason, our liability estimates in these two health plans are subject to more than the usual amount of uncertainty.
At our Puerto Rico health plan, Hurricane Maria had a significant impact on both utilization of services and our ability to process claims payments in Puerto Rico. For these reasons, we believe our liability estimates are subject to more than the usual amount of uncertainty.


7. Debt
Substantially all of our debt is held at the parent, which is reported in the Other segment. The following table summarizes our outstanding debt obligations, and their classification in the accompanying consolidated balance sheets (in millions):
 September 30,
2017		 December 31,
2016
Current portion of long-term debt:   
1.125% Convertible Notes, net of unamortized discount$494
 $477
1.625% Convertible Notes, net of unamortized premium and discount293
 —
Lease financing obligations1
 1
Debt issuance costs(6) (6)
 782
 472
Non-current portion of long-term debt:   
5.375% Notes700
 700
4.875% Notes330
 —
Credit Facility300
 —
1.625% Convertible Notes, net of unamortized premium and discount—
 286
Debt issuance costs(13) (11)
 1,317
 975
Lease financing obligations198
 198
 $2,297
 $1,645
4.875% Notes due 2025
On June 6, 2017, we completed the private offeringall of $330 million aggregate principal amount of senior notes (4.875% Notes) due June 15, 2025, unless earlier redeemed. Interest on the 4.875% Notes is payable semiannually in arrears on June 15 and December 15. According to their terms, the guarantees under the 4.875% Notes mirror thosewhich are non-current as of the dates reported below:
June 30,
2023		December 31,
2022
(In millions)
Non-current long-term debt:
4.375% Notes due 2028$800 $800 
3.875% Notes due 2030650 650 
3.875% Notes due 2032750 750 
Deferred debt issuance costs(22)(24)
Total$2,178 $2,176 
Credit Facility, defined and described below. See Note 16, “Supplemental Condensed Consolidating Financial Information,” for more information on the guarantors. The 4.875% Notes contain customary non-financial covenants and change of control provisions.
The 4.875% Notes contain a limitation on the use of proceeds which required us to deposit the net proceeds from their issuance into a segregated deposit account, a current asset reported as “Restricted investments” in our consolidated balance sheets. These funds may be used by us as follows:
On or prior to August 20, 2018, to:
◦
Redeem, repurchase, repay, tender for, or acquire for value all or any portion of our 1.625% Convertible Notes, defined and discussed further below, or to satisfy the cash portion of any consideration due upon any conversion of the 1.625% Convertible Notes; and/or
◦
Pay any interest due on all or any portion of the 4.875% Notes.
On or after August 20, 2018, to repurchase all or any portion of the 1.625% Convertible Notes that we are obligated to repurchase; and
Subsequent to August 20, 2018 (or such earlier date in the event that there are no longer any 1.625% Convertible Notes outstanding), in any other manner not otherwise prohibited in the indenture governing the 4.875% Notes.
5.375% Notes due 2022Agreement
We have outstanding $700 million aggregate principal amount of senior notes (5.375% Notes) due November 15, 2022, unless earlier redeemed. Accordingare party to their terms, the guarantees under the 5.375% Notes mirror those of the Credit Facility, defined and described below. See Note 16, “Supplemental Condensed Consolidating Financial Information,” for more information on the guarantors.

Credit Facility
In January 2017, weentered into an amended unsecured $500 milliona credit agreement (the “Credit Agreement”) which includes a revolving credit facility (Credit Facility), referred to as the First Amendment.(“Credit Facility”) of $1.0 billion, among other provisions. The Credit FacilityAgreement has a term of five years, and all amounts outstanding will be due and payable on January 31, 2022. As of September 30, 2017, $300 million was outstandingJune 8, 2025. Borrowings under the Credit Facility,Agreement bear interest based, at our election, on a base rate or other defined rate, plus in each case, the applicable margin. In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Credit Agreement, we are required to pay a quarterly commitment fee.
Effective April 26, 2023, we amended the Credit Agreement to transition from the use of the London Interbank Offered Rate, or LIBOR, to the Secured Overnight Financing Rate, or SOFR, as a benchmark interest rate used in the Credit Agreement.
We have other relationships, including financial advisory and banking, with some parties to the Credit Agreement.
The Credit Agreement contains customary non-financial and financial covenants. As of June 30, 2023, we were in compliance with all financial and non-financial covenants under the Credit Facility. Also asAgreement. As of SeptemberJune 30, 2017,2023, no amounts were outstanding letters of credit amounting to $6 million reduced our remaining borrowing capacity under the Credit FacilityFacility.
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 16
Table of Contents
Senior Notes
Our senior notes are described below. Each of these notes are senior unsecured obligations of the parent corporation, Molina Healthcare, Inc., and rank equally in right of payment with all existing and future senior debt, and senior to $194 million.
all existing and future subordinated debt of Molina Healthcare, Inc. In addition, to increasing amounts available to borrow under the Credit Facility and extending its term, the First Amendment provided that all guarantors immediately prior to January 3, 2017, other than Molina Information Systems, LLC, d/b/a Molina Medicaid Solutions, Molina Pathways, LLC, and Pathways Health and Community Support LLC, were automatically and unconditionally released from their obligations as guarantorseach of the Credit Facilityindentures governing the senior notes contain customary non-financial covenants and change of control provisions. As of June 30, 2023, we were in compliance with all non-financial covenants in the 5.375% Notes.indentures governing the senior notes.
The Credit Facility contains customary non-financial and financial covenants, including a net leverage ratio and an interest coverage ratio. In February 2017, we entered into a second amendment toindentures governing the Credit Facility (the Second Amendment) which modified the Credit Facility’s definitionsenior notes contain cross-default provisions that are triggered upon default by us or any of our subsidiaries on any indebtedness in excess of the earnings measure usedamount specified in the financial covenant computations to a) allow us to receive credit for risk corridor payments owed to, but not received or accrued by us during 2016; and b) account for the difference between the amount of actual risk transfer payments made or accrued by us during 2016, and the amount of risk transfer payments that would have beenapplicable indenture.
4.375% Notes due under the federal government’s proposed 2018 risk adjustment payment transfer formula.
In May 2017, we entered into a third amendment to the Credit Facility (the Third Amendment) which modified the Credit Facility’s definition of specified cash, to permit cash that is either subject to customary escrow arrangements or held in a segregated account to be netted from the Credit Facility’s consolidated net leverage ratio if the use of the cash is limited to the repayment of other indebtedness. The Third Amendment also adds a carve-out to the Credit Facility’s negative pledge covenant to allow for the escrow arrangements and segregated accounts.
In August 2017, we entered into a fourth amendment to the Credit Facility (the Fourth Amendment). The Fourth Amendment modified the definition of consolidated adjusted EBITDA to permit the add-back of certain restructuring charges and cost savings subject to certain limitations, and modified the definition of the consolidated interest coverage ratio to include, when calculating such ratio, consolidated interest expense “paid in cash” only.
Convertible Senior Notes
2028.We have outstanding $550had $800 million aggregate principal amount of 1.125% cash convertible senior notes (the “4.375% Notes”) outstanding as of June 30, 2023, which are due JanuaryJune 15, 2020 (1.125% Convertible Notes),2028, unless earlier repurchased or converted. redeemed. Interest, at a rate of 4.375% per annum, is payable semiannually in arrears on June 15 and December 15.
3.875% Notes due 2030. We also have outstanding $302had $650 million aggregate principal amount of 1.625% convertible senior notes (the “3.875% Notes due August 14, 2044 (1.625% Convertible Notes),2030”) outstanding as of June 30, 2023, which are due November 15, 2030, unless earlier repurchased, redeemed, or converted. The 1.125% Convertible Notes are convertible entirely into cash, and the 1.625% Convertible Notes are convertible partially into cash, each prior to their respective maturity dates under certain circumstances, oneredeemed. Interest, at a rate of which relates to the closing price of our common stock over a specified period. We refer to this conversion trigger as the stock price trigger.
The stock price trigger for the 1.125% Convertible Notes3.875% per annum, is $53.00 per share. The 1.125% Convertible Notes met this triggerpayable semiannually in the quarter ended September 30, 2017; therefore, they are convertible into cash and are reported in current portion of long-term debt as of September 30, 2017.
The stock price trigger for the 1.625% Convertible Notes is $75.51 per share. The 1.625% Convertible Notes did not meet this stock price trigger in the quarter ended September 30, 2017. However,arrears on contractually specified dates beginning in 2018, holders of the 1.625% Convertible Notes may require us to repurchase some or all of such notes. In addition, beginning May 15 2018 until August 19, 2018, holders may convert some or all of the 1.625% Convertible Notes. Because of these put and conversion features, the 1.625% ConvertibleNovember 15.
3.875% Notes are reported in current portion of long-term debt as of September 30, 2017. As noted above, because the proceeds from the 4.875% Notes are initially restricted to payments upon conversion or redemption of the 1.625% Convertible Notes, such restricted investments are also classified as current in the accompanying consolidated balance sheets.
Cross-Default Provisions
The terms of our 4.875% Notes, 5.375% Notes and each of the 1.125% and 1.625% Convertible Notes contain cross-default provisions with the Credit Facility that are triggered upon an event of default under the Credit Facility, and when borrowings under the Credit Facility equal or exceed certain amounts as defined in the related indentures.

Debt Commitment Letter
In connection with the terminated Medicare Acquisition, we entered into a debt commitment letter with Barclays Bank PLC (Barclays) in August 2016. Under this debt commitment letter, Barclays agreed to lend us up to $400due 2032. We had $750 million subject to satisfaction of certain conditions, including consummation of the terminated Medicare Acquisition. The debt commitment letter automatically terminated in February 2017 as a result of the termination of this transaction. The costs associated with the debt commitment letter and its termination were reimbursed as described in Note 1, “Basis of Presentation–Health Plans Segment Recent Developments.”

8. Derivatives
The following table summarizes the fair values and the presentation of our derivative financial instruments (defined and discussed individually below) in the accompanying consolidated balance sheets:
 Balance Sheet Location September 30,
2017		 December 31,
2016
   (In millions)
Derivative asset:     
1.125% Call OptionCurrent assets: Derivative asset $425
 $267
Derivative liability:     
1.125% Conversion OptionCurrent liabilities: Derivative liability $425
 $267
Our derivative financial instruments do not qualify for hedge treatment; therefore, the change in fair value of these instruments is recognized immediately in our consolidated statements of operations, and reported in “Other income, net.” Gains and losses for our derivative financial instruments are presented individually in the accompanying consolidated statements of cash flows, “Supplemental cash flow information.”
1.125% Notes Call Spread Overlay.Concurrent with the issuance of the 1.125% Convertible Notes in 2013, we entered into privately negotiated hedge transactions (collectively, the 1.125% Call Option) and warrant transactions (collectively, the 1.125% Warrants), with certain of the initial purchasers of the 1.125% Convertible Notes (the Counterparties). We refer to these transactions collectively as the Call Spread Overlay. Under the Call Spread Overlay, the cost of the 1.125% Call Option we purchased to cover the cash outlay upon conversion of the 1.125% Convertible Notes was reduced by proceeds from the sale of the 1.125% Warrants. Assuming full performance by the Counterparties (and 1.125% Warrants strike prices in excess of the conversion price of the 1.125% Convertible Notes), these transactions are intended to offset cash payments in excess of theaggregate principal amount of the 1.125% Convertiblesenior notes (the “3.875% Notes due upon any conversion2032”) outstanding as of such notes.
1.125% Call Option.The 1.125% Call Option,June 30, 2023, which is indexed to our common stock, isare due May 15, 2032, unless earlier redeemed. Interest, at a derivative asset that requires mark-to-market accounting treatment due to cash settlement features until the 1.125% Call Option settles or expires. For further discussion of the inputs used to determine the fair value of the 1.125% Call Option, refer to Note 4, “Fair Value Measurements.”
1.125% Conversion Option. The embedded cash conversion option within the 1.125% Convertible Notes is accounted for separately as a derivative liability, with changes in fair value reported in our consolidated statements of operations until the cash conversion option settles or expires. For further discussion of the inputs used to determine the fair value of the 1.125% Conversion Option, refer to Note 4, “Fair Value Measurements.”
As of September 30, 2017, the 1.125% Call Option and the 1.125% Conversion Option were classified as a current asset and current liability, respectively, because the 1.125% Convertible Notes may be converted within twelve months of September 30, 2017, as described in Note 7, “Debt.”

9. Stockholders' Equity
Stockholders’ equity decreased $220 million during the nine months ended September 30, 2017 compared with stockholders’ equity at December 31, 2016. The decrease was due primarily to the net loss of $250 million, partially offset by $29 million related to employee stock transactions in the nine months ended September 30, 2017.

1.125% Warrants
In connection with the Call Spread Overlay transaction described in Note 8, “Derivatives,” in 2013, we issued 13,490,236 warrants with a strike price of $53.8475 per share. Under certain circumstances, beginning in April 2020, when the price of our common stock exceeds the strike price of the 1.125% Warrants, we will be obligated to issue shares of our common stock subject to a share delivery cap. The 1.125% Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the 1.125% Warrants. Refer to Note 3, “Net (Loss) Income per Share,” for dilution information for the periods presented. We will not receive any additional proceeds if the 1.125% Warrants are exercised.
Stock Incentive Plans
In connection with our equity incentive plans and employee stock purchase plan, approximately 702,000 shares of common stock vested or were purchased, net of shares used to settle employees’ income tax obligations, during the nine months ended September 30, 2017.
Except as noted below, we record share-based compensation as “General and administrative expenses” in the accompanying consolidated statements of operations. Restricted stock awards (RSAs), performance stock awards (PSAs) and performance stock units (PSUs) activity for the nine months ended September 30, 2017 is summarized below:
 Restricted Stock Awards Performance Stock Awards Performance Stock Units Total 
Weighted
Average
Grant Date
Fair Value
Unvested balance, December 31, 2016577,244
 345,656
 —
 922,900
 $58.15
Granted386,273
 —
 231,100
 617,373
 57.16
Vested(391,680) (260,894) (139,272) (791,846) 57.78
Forfeited(69,346) —
 —
 (69,346) 54.37
Unvested balance, September 30, 2017502,491
 84,762
 91,828
 679,081
 57.61
The total fair value of RSAs granted during the nine months ended September 30, 2017 and 2016 was $19 million and $18 million, respectively. The total fair value of RSAs which vested during the nine months ended September 30, 2017 and 2016 was $21 million and $22 million, respectively.
No PSAs were granted during the nine months ended September 30, 2017. The total fair value of PSAs granted during the nine months ended September 30, 2016 was $15 million. The total fair value of PSAs which vested during the nine months ended September 30, 2017 was $15 million. No PSAs vested during the nine months ended September 30, 2016.
The total fair value of PSUs granted during the nine months ended September 30, 2017 was $16 million. The total fair value of PSUs which vested during the nine months ended September 30, 2017 was $9 million. There were no PSUs granted or vested in 2016.
During the nine months ended September 30, 2017, the vesting of 133,957 RSAs, 153,574 PSAs and 139,272 PSUs was accelerated in connection with the termination of our former Chief Executive Officer (CEO) and former Chief Financial Officer (CFO) in May 2017. Share-based compensation expense of $38 million was recorded during the nine months ended September 30, 2017, of which $23 million was recorded to “Restructuring and separation costs” in the accompanying consolidated statements of operations. See Note 11, “Restructuring and Separation Costs” for further discussion. We recorded share-based compensation expense of $24 million in the nine months ended September 30, 2016.
As of September 30, 2017, there was $27 million of total unrecognized compensation expense related to unvested RSAs, PSAs, and PSUs, which we expect to recognize over a remaining weighted-average period of 2.2 years and 1.9 years, respectively. This unrecognized compensation cost assumes an estimated forfeiture rate of 4.5% for non-executive employees as of September 30, 2017.3.875% per annum, is payable semiannually in arrears on May 15 and November 15.



10. Impairment Losses
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations. Goodwill is not amortized, but is subject to an annual impairment test.We are required to test at least annually for impairment, or more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. When testing goodwill for impairment, we may first assess qualitative factors, such as industry and market factors, cost factors, and changes in overall performance, to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform additional quantitative analysis. We may also elect to skip the qualitative testing and proceed directly to the quantitative testing.
An impairment loss is measured as the excess of the carrying amount of the reporting unit, including goodwill, over the fair value of the reporting unit. We estimate the fair values of our reporting units using discounted cash flows. We apply our weighted average cost of capital (WACC) as the best estimate to discount future estimated cash flows to present value. The WACC is based on externally available data considering market participants’ cost of equity and debt, and capital structure. In addition, we apply a terminal growth rate that corresponds to the reporting unit’s long-term growth prospects.
In the discounted cash flow analyses, we must make assumptions about a wide variety of internal and external factors, and consider the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants at the measurement date. Significant assumptions include financial projections of free cash flow (including significant assumptions about operations, capital requirements and income taxes), long-term growth rates for determining terminal value beyond the discretely forecasted periods, and discount rates.
Molina Medicaid Solutions Segment
As described in Note 11, “Restructuring and Separation Costs,” in the third quarter of 2017 we wrote off certain costs capitalized at our Molina Medicaid Solutions segment that supported our Health Plans segment provider information management processes to be re-designed. Although the intercompany revenues recorded by Molina Medicaid Solutions under this arrangement were insignificant on a consolidated basis, the termination of such revenue resulted in a triggering event for an interim goodwill impairment analysis of this segment in the third quarter of 2017. In the Molina Medicaid Solutions’ discounted cash flow model, we incorporated significant estimates and assumptions related to future periods, such as intercompany business support opportunities and prospects for new Medicaid management information systems contracts. Because management has determined that Molina Medicaid Solutions will provide fewer future benefits for its support of the Health Plans segment, the test resulted in a fair value less than Molina Medicaid Solutions’ carrying amount; therefore, we recorded a goodwill impairment loss for the difference, or $28 million, in the third quarter of 2017.
Other Segment
In the course of developing the Restructuring Plan in the second quarter of 2017, we determined that future benefits to be derived from our Pathways subsidiary, including the integration of its operations with our Health Plans segment, would be less than previously anticipated. In addition, poorer than expected year-to-date operating results, as well as lower projections of operating results for periods in the near term at our Pathways subsidiary, led us to conclude that a triggering event for an interim impairment analysis had occurred in the second quarter of 2017.
In the third quarter of 2017, management determined that Pathways will not provide future benefits relating to the integration of its operations with the Health Plans segment to the extent previously expected. Therefore, we conducted an additional interim impairment analysis.
Intangible assets. In the second quarter of 2017, we evaluated Pathways’ finite-lived intangible assets (customer relationships and contract licenses) for impairment, using undiscounted cash flows expected over the longest remaining useful life of the assets tested. Because the undiscounted cash flows over the remaining useful life were less than Pathways’ carrying amount, the intangible assets were impaired. We recorded an impairment loss for the carrying amount of the intangible assets, or $11 million, in the second quarter of 2017.
Goodwill. As noted above, we estimated Pathways’ fair value using discounted cash flows, incorporating significant estimates and assumptions related to future periods. Such estimates included anticipated client census which drives service revenue; the likelihood of future benefits to be derived from Pathways (including integration with our health plans); current prospects relating to the behavioral services labor market which drives cost of service revenue; and anticipated capital expenditures. The tests in each of the three months ended June 30, 2017, and September 30, 2017, resulted in a fair value less than Pathways’ carrying amount; therefore, we recorded an

impairment loss for the difference. The Pathways goodwill impairment losses amounted to $101 million in the third quarter of 2017, and $59 million in the second quarter of 2017. In the second quarter of 2017, we also recorded a goodwill impairment loss of $2 million for a separate subsidiary in the Other segment that did not pass its impairment test.
There were no impairments of intangible assets or goodwill during 2016.
The goodwill impairment losses are recorded to the segments as indicated in following table, and reported as “Impairment losses” in the accompanying consolidated statements of operations.
 Health Plans Molina Medicaid Solutions Other Total
 (In millions)
Historical goodwill$445
 $71
 $162
 $678
Accumulated impairment losses at December 31, 2016(58) —
 —
 (58)
Balance, December 31, 2016387
 71
 162
 620
Impairment losses, three months ended June 30, 2017—
 —
 (61) (61)
Impairment losses, three months ended September 30, 2017—
 (28) (101) (129)
Balance, September 30, 2017$387
 $43
 $—
 $430
Accumulated impairment losses at September 30, 2017$58
 $28
 $162
 $248

11. Restructuring and Separation Costs
Following a management-initiated, broad operational assessment in early 2017, designed to improve our profitability and expand our core Medicaid business, in June 2017, we accelerated the implementation of a comprehensive restructuring and profitability improvement plan (the Restructuring Plan). Under the Restructuring Plan, we are taking the following actions:
1.We have streamlined our organizational structure, including the elimination of redundant layers of management, the consolidation of regional support services, and other reductions to our workforce, to improve efficiency as well as the speed and quality of our decision-making.
2.We are re-designing core operating processes such as provider payment, utilization management, quality monitoring and improvement, and information technology to achieve more effective and cost efficient outcomes.
3.We are remediating high cost provider contracts and building around high quality, cost-effective networks.
4.We are restructuring our existing direct delivery operations.
5.We are reviewing our vendor base to ensure that we are partnering with the lowest-cost, most-effective vendors.
6.Throughout this process, we are taking precautions to ensure that our actions do not impede our ability to continue to deliver quality health care, retain existing managed care contracts, and to secure new managed care contracts.
In addition to costs incurred under the Restructuring Plan, we have recorded costs associated with the separation of our former CEO and former CFO, described in further detail below.
Expected Costs
We estimate that total pre-tax costs associated with the restructuring plan will be approximately $70 million to $90 million in the fourth quarter of 2017, with an additional $20 million to $40 million to be incurred in 2018. Since the initiation of our Restructuring Plan in the second quarter of 2017, the range of total estimated costs have increased by approximately $50 million due primarily to non-cash write-offs of certain capitalized software in connection with the re-design of core processes. Such write-offs were not included in our initial total cost estimates, but as our evaluation of core operating processes proceeded in the third quarter, we determined that certain projects were inconsistent with our future operating goals and were therefore written off.
In addition, in the second quarter of 2017, we reported that we expected restructuring costs to relate only to the Health Plans and Other segments. In the third quarter of 2017, however, we wrote off certain costs capitalized at our Molina Medicaid Solutions segment that supported our Health Plans segment provider information management

processes to be re-designed. In addition, we now expect to incur consulting fees in connection with the review of Molina Medicaid Solutions’ core operating processes.
The following table illustrates our estimates of the total costs, by segment and major type of cost, that we expect to incur under the Restructuring Plan, and includes costs incurred through September 30, 2017. We expect the Restructuring Plan to be completed by the end of 2018.
Estimated Costs Expected to be Incurred by Reportable SegmentHealth PlansMolina Medicaid SolutionsOtherTotal
(In millions)
Termination benefits$30 to $35—
$30 to $35$60 to $70
Other restructuring costs$40 to $45$10$110 to $115$160 to $170
$70 to $80$10$140 to $150$220 to $240
Costs Incurred
Restructuring Plan
Restructuring costs incurred to date consist primarily of termination benefits, write-offs of capitalized software due to the re-design of our core operating processes, restructuring of our direct delivery operations, and consulting fees.
Separation Costs
On May 2, 2017, we terminated the employment of our former CEO and CFO without cause. Under their amended and restated employment agreements, they were each entitled to receive 400% of their base salary, a prorated termination bonus (150% of base salary for the former CEO and 125% of base salary for the former CFO), full vesting of equity compensation, and a cash payment for health and welfare benefits. We recorded separation costs of $35 million primarily related to these former executives under FASB ASC Topic 712, Nonretirement and Postemployment Benefits. Of this total, $23 million related to the acceleration of their share-based compensation, as further discussed in Note 9, “Stockholders' Equity.” Employee separation costs were insignificant in 2016.
Restructuring and separation costs are reported in “Restructuring and separation costs” in the accompanying consolidated statements of operations. The following tables present the major types of such costs by segment. Long-lived assets include capitalized software, intangible assets and furniture, fixtures and equipment.
 Three Months Ended September 30, 2017
 Separation Costs - Former Executives One-Time Termination Benefits Other Restructuring Costs Total
   Write-offs of Long-lived Assets Consulting Fees Contract Termination Costs 
 (In millions)
Health Plans$—
 $27
 $6
 $—
 $—
 $33
Molina Medicaid Solutions—
 —
 8
 —
 —
 8
Other—
 23
 35
 16
 3
 77
 $—
 $50
 $49
 $16
 $3
 $118
 Nine Months Ended September 30, 2017
 Separation Costs - Former Executives One-Time Termination Benefits Other Restructuring Costs Total
   Write-offs of Long-lived Assets Consulting Fees Contract Termination Costs 
 (In millions)
Health Plans$—
 $27
 $6
 $—
 $—
 $33
Molina Medicaid Solutions—
 —
 8
 —
 —
 8
Other35
 23
 35
 24
 3
 120
 $35
 $50
 $49
 $24
 $3
 $161

Reconciliation of Liability
For those restructuring and separation costs that require cash settlement (primarily separation costs, termination benefits and consulting fees), the following table presents a roll-forward of the accrued liability, which is reported in “Accounts payable and accrued liabilities” in the accompanying consolidated balance sheets:
 Separation Costs - Former Executives One-Time Termination Benefits Other Restructuring Costs Total
 (In millions)
Accrued as of December 31, 2016$—
 $—
 $—
 $—
Charges12
 50
 27
 89
Cash payments(1) (9) (14) (24)
Accrued as of September 30, 2017$11
 $41
 $13
 $65

12. Segment Information8. Segments
We currently have threefour reportable segments. These segments consist of our Health Plans segment, which constitutes the vast majority of our operations; our Molina Medicaid Solutions segment;consisting of: 1) Medicaid; 2) Medicare; 3) Marketplace; and our Other segment.4) Other. Our reportable segments are consistent with how we currently manage the business and view the markets we serve.
GrossThe Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which we offer managed healthcare services. The Other segment, which is insignificant to our consolidated results of operations, includes long-term services and supports consultative services in Wisconsin.
The key metrics used to assess the performance of our Medicaid, Medicare, and Marketplace segments are premium revenue, medical margin is the appropriate earnings measure for our reportable segments, based on how our chief operating decision maker currently reviews results, assesses performance, and allocates resources.
Gross margin for our Health Plans segment is referred to as “Medical margin,” and for our Molina Medicaid Solutions and Other segments, as “Service margin.” Medical marginmedical care ratio (“MCR”). MCR represents the amount earned by the Health Plans segment after medical costs are deducted from premium revenue. The medical care ratio representsof medical care costs as a percentage of premium revenue, and is one of the key metrics used to assess the performance of the Health Plans segment.revenue. Therefore, the underlying medical margin, isor the amount earned by the Medicaid, Medicare, and Marketplace segments after medical costs are deducted from premium revenue, represents the most important measure of earnings reviewed by management, and is used by our chief executive officer to review results, assess performance, and allocate resources. The key metric used to assess the chief operating decision maker.performance of our Other segment is service margin. The service margin is equal to service revenue minus cost of service revenue. We do not report total assets by segment because this is not a metric used to assess segment performance or allocate resources.

The following table presents total revenue by segment. Inter-segment revenue was insignificant for all periods presented.
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In millions)
Total revenue:
Medicaid$6,728 $6,524 $13,306 $12,711 
Medicare1,055 963 2,111 1,912 
Marketplace524 549 1,021 1,165 
Other20 18 38 36 
Total$8,327 $8,054 $16,476 $15,824 
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 17
Table of Contents
  Health Plans Molina Medicaid Solutions Other Consolidated
     
  (In millions)
Three Months Ended September 30, 2017        
Total revenue (1)
 $4,899
 $47
 $85
 $5,031
Gross margin 557
 5
 2
 564
Impairment losses —
 (28) (101) (129)
Restructuring and separation costs (33) (8) (77) (118)
         
Nine Months Ended September 30, 2017        
Total revenue (1)
 $14,538
 $140
 $256
 $14,934
Gross margin 1,343
 13
 8
 1,364
Impairment losses —
 (28) (173) (201)
Restructuring and separation costs (33) (8) (120) (161)
         
Three Months Ended September 30, 2016        
Total revenue (1)
 $4,412
 $48
 $86
 $4,546
Gross margin 443
 6
 8
 457
Impairment losses —
 —
 —
 —
Restructuring and separation costs —
 —
 —
 —
         
Nine Months Ended September 30, 2016        
Total revenue (1)
 $12,835
 $146
 $267
 $13,248
Gross margin 1,285
 17
 29
 1,331
Impairment losses —
 —
 —
 —
Restructuring and separation costs —
 —
 —
 —
         
Total assets        
September 30, 2017 $7,031
 $233
 $1,690
 $8,954
December 31, 2016 5,897
 267
 1,285
 7,449
         
Goodwill and intangible assets, net        
September 30, 2017 $488
 $43
 $—
 $531
December 31, 2016 513
 72
 175
 760
______________________
(1)Total revenue consists primarily of premium revenue, premium tax revenue and health insurer fee revenue for the Health Plans segment, and service revenue for the Molina Medicaid Solutions and Other segments. Inter-segment revenue is insignificant for all periods presented.

The following table reconciles gross margin by segment to consolidated income before income tax expense:
taxes.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (In millions)
Gross margin:       
Health Plans$557
 $443
 $1,343
 $1,285
Molina Medicaid Solutions5
 6
 13
 17
Other2
 8
 8
 29
Total gross margin564
 457
 1,364
 1,331
Add: other operating revenues (1)
124
 222
 379
 625
Less: other operating expenses (2)
(769) (561) (2,029) (1,644)
Operating (loss) income(81) 118
 (286) 312
Other expenses, net32
 26
 10
 76
(Loss) income before income taxes$(113) $92
 $(296) $236
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In millions)
Margin:
Medicaid$756 $755 $1,490 $1,465 
Medicare113 124 239 252 
Marketplace135 48 289 178 
Other3 3 5 6 
Total margin1,007 930 2,023 1,901 
Add: other operating revenues (1)
265 237 511 458 
Less: other operating expenses (2)
(829)(806)(1,636)(1,626)
Operating income443 361 898 733 
Other expenses, net27 27 55 55 
Income before income tax expense$416 $334 $843 $678 
______________________
(1)Other operating revenues include premium tax revenue, health insurer fee revenue, investment income and other revenue.
(2)Other operating expenses include general and administrative expenses, premium tax expenses, health insurer fee expenses, depreciation and amortization, impairment losses, and restructuring and separation costs.

(1)Other operating revenues include premium tax revenue, investment income, and certain other revenue.
(2)Other operating expenses include general and administrative expenses, premium tax expenses, depreciation and amortization, and certain other operating expenses.
13.
9. Commitments and Contingencies
Regulatory Capital Requirements and Dividend Restrictions
Our health plans, which are operated by our wholly owned subsidiaries in the states in which our health plans operate, are subject to state laws and regulations that, among other things, require the maintenance of minimum levels of statutory capital, as defined by each state. Regulators in some states may also attempt to enforce capital requirements that require the retention of net worth in excess of amounts formally required by statute or regulation. Such statutes, regulations and informal capital requirements also restrict the timing, payment, and amount of dividends and other distributions that may be paid to us as the sole stockholder. To the extent our subsidiaries must comply with these regulations, they may not have the financial flexibility to transfer funds to us. Based on current statutes and regulations, the net assets in these subsidiaries (after intercompany eliminations) which may not be transferable to us in the form of loans, advances, or cash dividends was approximately $1,696 million at September 30, 2017, and $1,492 million at December 31, 2016. Because of the statutory restrictions that inhibit the ability of our health plans to transfer net assets to us, the amount of retained earnings readily available to pay dividends to our stockholders is generally limited to cash, cash equivalents and investments (excluding restricted investments) held by the parent company – Molina Healthcare, Inc. Such cash, cash equivalents and investments (excluding restricted investments) amounted to $391 million and $264 million as of September 30, 2017 and December 31, 2016, respectively.Overview
The National Association of Insurance Commissioners (NAIC) adopted rules effective December 31, 1998, which, if implemented by the states, set minimum capitalization requirements for insurance companies, HMOs, and other entities bearing risk for health care coverage. The requirements take the form of risk-based capital (RBC) rules which may vary from state to state. All of the states in which our health plans operate, except California, Florida and New York, have adopted these rules. Such requirements, if adopted by California, Florida and New York, may increase the minimum capital required for those states.
As of September 30, 2017, our health plans had aggregate statutory capital and surplus of approximately $1,828 million compared with the required minimum aggregate statutory capital and surplus of approximately $1,113 million. All of our health plans were in compliance with the minimum capital requirements at September 30, 2017. We have the ability, and have committed to provide, additional capital to each of our health plans as necessary to ensure compliance with statutory capital and surplus requirements.
Legal Proceedings
The health care and Medicaid-related business process outsourcing industries arehealthcare industry is subject to numerous laws and regulations of federal, state, and local governments.governments, as well as various contractual provisions, governing our operations. Compliance with these laws, regulations, and regulationscontractual provisions can be subject to government audit, review, and interpretation, as well as regulatory actions unknown and unasserted at this time.actions. Penalties

associated with violations of these laws, regulations, and regulationscontractual provisions can include significant fines and penalties, temporary or permanent exclusion from participating in publicly funded programs, anda limitation on our ability to market or sell products, the repayment of previously billed and collected revenues.revenues, and reputational damage.
Legal Proceedings
We are involved in legal actions in the ordinary course of business someincluding, but not limited to, various employment claims, vendor disputes and provider claims. Some of whichthese legal actions seek monetary damages, including claims for punitive damages, which aremay not be covered by insurance. We review legal matters and update our estimates of reasonably possible losses and related disclosures, as necessary. We have accrued liabilities for certainlegal matters for which we deem the loss to be both probable and reasonably estimable, but the outcome of legal actions is inherently uncertain and ourestimable. These liability estimates of such losses could change as a result of further developments of thesethe matters. For certain pending matters, accruals have not been established because such matters have not progressed sufficiently through discovery, and/or developmentThe outcome of important factual information and legal issuesactions is insufficient to enable us to estimate a range of possible loss, if any.inherently uncertain. An adverse determination in one or more of these pending matters could have a materialan adverse effect on our consolidated financial position, results of operations, or cash flows.
Marketplace Risk Corridor Program.Kentucky RFP. On January 19, 2017, we filed suitSeptember 4, 2020, Anthem Kentucky Managed Care Plan, Inc. brought an action in Franklin County Circuit Court against the United StatesKentucky Finance and Administration Cabinet, the Kentucky Cabinet for Health and Family Services, and all of America in the United Statesfive winning bidder health plans, including our Kentucky health plan. On September 9, 2022, the Kentucky Court of Federal Claims, Case Number 1:55-cv-01000-UNJ, on behalf of our health plans seeking recovery from the federal government of approximately $52 million in Marketplace risk corridor payments for calendar year 2015. Based upon current estimates, we believe our health plans are also owed approximately $76 million in Marketplace risk corridor payments from the federal government for calendar year 2016. We have not recognized revenue, nor have we recorded a receivable, for any amount due from the federal government for unpaid Marketplace risk corridor payments as of September 30, 2017. We have fully recognized all liabilities dueAppeals ruled that, with regard to the federal government thatearlier Circuit Court ruling granting Anthem relief, the Circuit Court should not have invalidated the 2020 procurement and thus should not have awarded a contract to Anthem. Anthem sought discretionary review by the Kentucky Supreme Court of the ruling by the Court of Appeals. On April 19, 2023, the Kentucky Supreme Court granted Anthem’s request for discretionary review and ordered legal briefing, which we have incurredexpect to be completed by early September 2023. Pending further Court order, our Kentucky health plan will continue to operate for the foreseeable future under the Marketplace risk corridor program, and have paid all amounts due to the federal government as required.its current Medicaid contract.
Rodriguez v. Providence Community Corrections. Puerto Rico.On October 1, 2015, seven individuals, on behalfAugust 13, 2021, Molina Healthcare of themselves and all others similarly situated,Puerto Rico, Inc. (“MHPR”) filed a complaint in the District Court for the Middle District of Tennessee, Nashville Division, Case No. 3:15-cv-01048 (the Rodriquez Litigation), against Providence Community Corrections, Inc. (now known as Pathways Community Corrections, Inc., or PCC). Rutherford County, Tennessee formerly contracted with PCC for the administration of misdemeanor probation, which involved the collection of court costs and fees from probationers. The complaint alleges, among other things, that PCC illegally assessed fees and surcharges against probationers and made improper threats of arrest and probation revocation if the probationers did not pay such amounts. The plaintiffs in the Rodriguez Litigation seek alleged compensatory, treble, and punitive damages, plus attorneys’ fees, for alleged federal and state constitutional violations, as well as alleged violations of the Racketeer Influenced and Corrupt Organization Act. PCC’s agreement with Rutherford County terminated effective March 31, 2016. On November 1, 2015, one month after the Rodriguez Litigation commenced, we acquired PCC from The Providence Service Corporation (Providence) pursuant to a membership interest purchase agreement. In September 2016, the parties to the Rodriguez Litigation accepted a mediation proposal for settlement pursuant to which PCC and Rutherford County would pay the plaintiffs $14 million and $3 million, respectively. The parties are in the process of finalizing the settlement agreement. We expect to recover the full amount of the settlement under the indemnification provisions of the membership interest purchase agreement with Providence.
United States of America, ex rel., Anita Silingo v. Mobile Medical Examination Services, Inc., et al. On or around October 14, 2014, Molina Healthcare of California, Molina Healthcare of California Partner Plan, Inc., Mobile Medical Examination Services, Inc. (MedXM), and other health plan defendants were served with a complaint previously filed under seal in the Central District Court of California by Relator, Anita Silingo, Case No. SACV13-1348-FMO(SHx). The complaint alleges that MedXM improperly modified medical records and otherwise took inappropriate steps to increase members’ risk adjustment scores, and that the defendants, including Molina Healthcare of California and Molina Healthcare of California Partner Plan, Inc., purportedly turned a “blind eye” to these unlawful practices. On October 22, 2015, the Relator filed a third amended complaint, seeking general and compensatory damages, treble damages, civil penalties, plus interest and attorneys’ fees. On July 11, 2016, the District Court dismissed with prejudice the third amended complaint, without leave to amend. On September 23, 2016, the plaintiff filed an appeal with the Ninth Circuit Court of Appeals. The appeal has been fully briefed by the parties and we are awaiting the Court’s decision.
States’ Budgets
From time to time, the states in which our health plans operate may experience financial difficulties, which could lead to delays in premium payments. Until July 4, 2017, the state of Illinois operated without a budget for its current fiscal year. As of September 30, 2017, our Illinois health plan served approximately 163,000 members, and recognized premium revenue of approximately $447 million in the nine months ended September 30, 2017. As of September 30, 2017, the state of Illinois owed us approximately $220 million for certain March through September 2017 premiums.

On May 3, 2017, Puerto Rico’s financial oversight board filed for a form of bankruptcy in the U.S. District Court in Puerto Rico under Title III of PROMESA. The Title III provision allows for a court debt restructuring process similar to U.S. bankruptcy protection. To the extent such bankruptcy results in our failure to receive payment of amounts due under our Medicaid contract with the Commonwealth or the inability of the Commonwealth to extend our MedicaidPuerto Rico, Court of First Instance, San Juan (State Court) asserting, among other claims, breach of contract at the end of its current term, such bankruptcy could have a material adverse effect on our business, financial condition, cash flows, or results of operations. As ofagainst Puerto Rico Health Insurance Administration (“ASES”). On September 30, 2017, the plan served approximately 306,000 members and recorded premium revenue of approximately $553 million in the nine months ended September 30, 2017. As of October 27, 2017, the Commonwealth was current with its premium payments.13, 2021, ASES

14. Related Party Transactions
Our California health plan has entered into a provider agreement with Pacific Healthcare IPA (Pacific), which is 50% owned by the brother-in-law of Dr. J. Mario Molina and John C. Molina, who are members of our board of directors. Under the terms of this provider agreement, the California health plan pays Pacific for medical care Pacific provides to health plan members. For the three and nine months ended September 30, 2017 and 2016, the amounts paid to Pacific were insignificant.
Refer to Note 15, “Variable Interest Entities (VIEs),” for a discussion of theJoseph M. Molina, M.D. Professional Corporations.

15. Variable Interest Entities (VIEs)
TheJoseph M. Molina, M.D. Professional Corporations (JMMPC) were created to further advance our direct delivery business. Effective September 30, 2017, we terminated our relationship with JMMPC in Florida, Michigan, Washington, and Utah. Therefore, the agreements described below, for all of our health plans other than those in California and New Mexico, were terminated effective September 30, 2017.
JMMPC’s primary shareholder is Dr. J. Mario Molina, who is a member of our board of directors. Dr. Molina is paid no salary and receives no dividends in connection with his work for, or ownership of, JMMPC. JMMPC provides primary care medical services through its employed physicians and other medical professionals. JMMPC also provides certain specialty referral services to our California health plan members through a contracted provider network. The health plans had entered into primary care services agreements with JMMPC, under which the health plans paid $29 million and $31 million to JMMPC for health care services provided in the three months ended September 30, 2017 and 2016, respectively, and $89 million and $92 million for the nine months ended September 30, 2017 and 2016, respectively. JMMPC does not have agreements to provide professional medical services with any other entities.
Our wholly owned subsidiary, Molina Medical Management, Inc. (MMM), had also entered into services agreements with JMMPC to provide clinic facilities, clinic administrative support staff, patient scheduling services and medical supplies to JMMPC. For the three months ended September 30, 2017 and 2016, JMMPC paid $12 million and $13 million to MMM for clinic administrative services, respectively. For the nine months ended September 30, 2017 and 2016, JMMPC paid $38 million and $40 million, respectively, to MMM for clinic administrative services.
As of September 30, 2017, we determined that JMMPC is a VIE, and that we are its primary beneficiary. We reached this conclusion under the power and benefits criterion model according to GAAP. Specifically, we had the power to direct the activities (excluding clinical decisions) that most significantly affected JMMPC’s economic performance, and the obligation to absorb losses or right to receive benefits that were potentially significant to the VIE, under the agreements described above. Because we were its primary beneficiary, we consolidated JMMPC. JMMPC’s assets may be used to settle only JMMPC’s obligations, and JMMPC’s creditors have no recourse to the general credit of Molina Healthcare, Inc. AsJune 30, 2023 Form 10-Q | 18
Table of September 30, 2017, JMMPC had total assets of $20 million,Contents
filed a counterclaim and total liabilities of $24 million. As of December 31, 2016, JMMPC had total assets of $18 million,a third-party complaint against MHPR and total liabilities of $18 million.
Our maximum exposurethe Company. This matter remains subject to losssignificant additional proceedings, and no prediction can be made as a result of our involvement with JMMPC is generally limited to the amounts needed to fund JMMPC’s ongoing payroll, employee benefits and medical care costs associated with JMMPC’s specialty referral activities.outcome.


16. Supplemental Condensed Consolidating Financial Information
The 5.375% Notes described in Note 7, “Debt,” are fully and unconditionally guaranteed by certain of our 100% owned subsidiaries on a joint and several basis, with certain exceptions considered customary for such guarantees. The 5.375% Notes and the guarantees are effectively subordinated to all of our and our guarantors’ existing and future secured debt to the extent of the assets securing such debt. In addition, the 5.375% Notes and the guarantees are structurally subordinated to all indebtedness and other liabilities and preferred stock, if any, of our subsidiaries that do not guarantee the 5.375% Notes.
As discussed in Note 7, “Debt,” the First Amendment to the Credit Facility provided that all guarantors immediately prior to January 3, 2017, other than Molina Information Systems, LLC, d/b/a Molina Medicaid Solutions, Molina Pathways, LLC, and Pathways Health and Community Support LLC, were automatically and unconditionally released from their obligations as guarantors under the Credit Facility and the 5.375% Notes.
The following condensed consolidating financial statements present Molina Healthcare, Inc. (as parent guarantor), the subsidiary guarantors, the subsidiary non-guarantors and eliminations, according to the guarantor structure as assessed at the most recent balance sheet date, SeptemberJune 30, 2017.2023 Form 10-Q | 19

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 Three Months Ended September 30, 2017
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Revenue:         
Total revenue$380
 $47
 $4,983
 $(379) $5,031
Expenses:         
Medical care costs3
 —
 4,217
 —
 4,220
Cost of service revenue—
 42
 81
 —
 123
General and administrative expenses244
 (1) 519
 (379) 383
Premium tax expenses—
 —
 106
 —
 106
Depreciation and amortization23
 1
 9
 —
 33
Impairment losses—
 28
 101
 —
 129
Restructuring and separation costs77
 8
 33
 —
 118
Total operating expenses347
 78
 5,066
 (379) 5,112
Operating income (loss)33
 (31) (83) —
 (81)
Interest expense32
 —
 —
 —
 32
Income (loss) before income taxes1
 (31) (83) —
 (113)
Income tax expense (benefit)9
 (10) (15) —
 (16)
Net loss before equity in net losses of subsidiaries(8) (21) (68) —
 (97)
Equity in net losses of subsidiaries(89) (77) —
 166
 —
Net loss$(97) $(98) $(68) $166
 $(97)

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE LOSS
Table of Contents
 Three Months Ended September 30, 2017
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Net loss$(97) $(98) $(68) $166
 $(97)
Other comprehensive loss, net of tax—
 —
 —
 —
 —
Comprehensive loss$(97) $(98) $(68) $166
 $(97)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
 Three Months Ended September 30, 2016
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Revenue:         
Total revenue$274
 $48
 $4,498
 $(274) $4,546
Expenses:         
Medical care costs19
 —
 3,730
 (1) 3,748
Cost of service revenue—
 42
 77
 —
 119
General and administrative expenses223
 (4) 397
 (273) 343
Premium tax expenses—
 —
 127
 —
 127
Health insurer fee expenses—
 —
 55
 —
 55
Depreciation and amortization25
 2
 9
 —
 36
Total operating expenses267
 40
 4,395
 (274) 4,428
Operating income7
 8
 103
 —
 118
Interest expense26
 —
 —
 —
 26
(Loss) income before income taxes(19) 8
 103
 —
 92
Income tax expense4
 —
 46
 —
 50
Net (loss) income before equity in net earnings of subsidiaries(23) 8
 57
 —
 42
Equity in net earnings of subsidiaries65
 —
 —
 (65) —
Net income$42
 $8
 $57
 $(65) $42

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended September 30, 2016
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
          
 (In millions)
Net income$42
 $8
 $57
 $(65) $42
Other comprehensive loss, net of tax(1) —
 (1) 1
 (1)
Comprehensive income$41
 $8
 $56
 $(64) $41

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 Nine Months Ended September 30, 2017
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Revenue:         
Total revenue$1,010
 $146
 $14,792
 $(1,014) $14,934
Expenses:         
Medical care costs10
 —
 12,812
 —
 12,822
Cost of service revenue—
 127
 242
 —
 369
General and administrative expenses799
 13
 1,429
 (1,014) 1,227
Premium tax expenses—
 —
 331
 —
 331
Depreciation and amortization75
 1
 33
 —
 109
Impairment losses—
 28
 173
 —
 201
Restructuring and separation costs120
 8
 33
 —
 161
Total operating expenses1,004
 177
 15,053
 (1,014) 15,220
Operating income (loss)6
 (31) (261) —
 (286)
Interest expense85
 —
 —
 —
 85
Other income, net(75) —
 —
 —
 (75)
Loss before income taxes(4) (31) (261) —
 (296)
Income tax expense (benefit)26
 (10) (62) —
 (46)
Net loss before equity in net losses of subsidiaries(30) (21) (199) —
 (250)
Equity in net losses of subsidiaries(220) (143) —
 363
 —
Net loss$(250) $(164) $(199) $363
 $(250)

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE LOSS
 Nine Months Ended September 30, 2017
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Net loss$(250) $(164) $(199) $363
 $(250)
Other comprehensive income, net of tax1
 —
 1
 (1) 1
Comprehensive loss$(249) $(164) $(198) $362
 $(249)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
 Nine Months Ended September 30, 2016
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Revenue:         
Total revenue$786
 $147
 $13,099
 $(784) $13,248
Expenses:         
Medical care costs50
 —
 10,881
 (1) 10,930
Cost of service revenue—
 130
 232
 —
 362
General and administrative expenses659
 5
 1,153
 (783) 1,034
Premium tax expenses—
 —
 345
 —
 345
Health insurer fee expenses—
 —
 163
 —
 163
Depreciation and amortization70
 5
 27
 —
 102
Total operating expenses779
 140
 12,801
 (784) 12,936
Operating income7
 7
 298
 —
 312
Interest expense76
 —
 —
 —
 76
(Loss) income before income taxes(69) 7
 298
 —
 236
Income tax (benefit) expense(24) (1) 162
 —
 137
Net (loss) income before equity in earnings of subsidiaries(45) 8
 136
 —
 99
Equity in net earnings of subsidiaries144
 3
 —
 (147) —
Net income$99
 $11
 $136
 $(147) $99

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
 Nine Months Ended September 30, 2016
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Net income$99
 $11
 $136
 $(147) $99
Other comprehensive income, net of tax7
 —
 6
 (6) 7
Comprehensive income$106
 $11
 $142
 $(153) $106


CONDENSED CONSOLIDATING BALANCE SHEETS
 September 30, 2017
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
ASSETS
Current assets:         
Cash and cash equivalents$356
 $58
 $3,520
 $—
 $3,934
Investments35
 —
 1,752
 —
 1,787
Restricted investments326
 —
 —
 —
 326
Receivables2
 25
 975
 —
 1,002
Income taxes refundable2
 —
 58
 —
 60
Due from (to) affiliates203
 (5) (198) —
 —
Prepaid expenses and other current assets65
 20
 89
 —
 174
Derivative asset425
 —
 —
 —
 425
Total current assets1,414
 98
 6,196
 —
 7,708
Property, equipment, and capitalized software, net261
 37
 99
 —
 397
Deferred contract costs—
 97
 —
 —
 97
Goodwill and intangible assets, net55
 43
 433
 —
 531
Restricted investments—
 —
 117
 —
 117
Investment in subsidiaries, net2,625
 95
 —
 (2,720) —
Deferred income taxes10
 —
 96
 (44) 62
Other assets50
 2
 6
 (16) 42
 $4,415
 $372
 $6,947
 $(2,780) $8,954
          
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:         
Medical claims and benefits payable$—
 $—
 $2,478
 $—
 $2,478
Amounts due government agencies—
 —
 1,324
 —
 1,324
Accounts payable and accrued liabilities227
 40
 218
 —
 485
Deferred revenue—
 52
 416
 —
 468
Current portion of long-term debt782
 —
 —
 —
 782
Derivative liability425
 —
 —
 —
 425
Total current liabilities1,434
 92
 4,436
 —
 5,962
Long-term debt1,515
 —
 16
 (16) 1,515
Deferred income taxes12
 32
 —
 (44) —
Other long-term liabilities25
 1
 22
 —
 48
Total liabilities2,986
 125
 4,474
 (60) 7,525
Total stockholders’ equity1,429
 247
 2,473
 (2,720) 1,429
 $4,415
 $372
 $6,947
 $(2,780) $8,954


CONDENSED CONSOLIDATING BALANCE SHEETS
 December 31, 2016
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
ASSETS
Current assets:         
Cash and cash equivalents$86
 $6
 $2,727
 $—
 $2,819
Investments178
 —
 1,580
 —
 1,758
Receivables2
 34
 938
 —
 974
Income tax refundable17
 4
 18
 —
 39
Due from (to) affiliates104
 (5) (99) —
 —
Prepaid expenses and other current assets58
 30
 43
 —
 131
Derivative asset267
 —
 —
 —
 267
Total current assets712
 69
 5,207
 —
 5,988
Property, equipment, and capitalized software, net301
 46
 107
 —
 454
Deferred contract costs—
 86
 —
 —
 86
Goodwill and intangible assets, net58
 73
 629
 —
 760
Restricted investments—
 —
 110
 —
 110
Investment in subsidiaries, net2,609
 246
 —
 (2,855) —
Deferred income taxes10
 —
 —
 —
 10
Other assets48
 3
 6
 (16) 41
 $3,738
 $523
 $6,059
 $(2,871) $7,449
          
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:         
Medical claims and benefits payable$1
 $—
 $1,928
 $—
 $1,929
Amounts due government agencies—
 —
 1,202
 —
 1,202
Accounts payable and accrued liabilities146
 34
 205
 —
 385
Deferred revenue—
 40
 275
 —
 315
Current portion of long-term debt472
 —
 —
 —
 472
Derivative liability267
 —
 —
 —
 267
Total current liabilities886
 74
 3,610
 —
 4,570
Long-term debt1,173
 —
 16
 (16) 1,173
Deferred income taxes11
 39
 (35) —
 15
Other long-term liabilities19
 1
 22
 —
 42
Total liabilities2,089
 114
 3,613
 (16) 5,800
Total stockholders’ equity1,649
 409
 2,446
 (2,855) 1,649
 $3,738
 $523
 $6,059
 $(2,871) $7,449


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30, 2017
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Operating activities:         
Net cash provided by operating activities$215
 $81
 $661
 $—
 $957
Investing activities:         
Purchases of investments(333) —
 (1,563) —
 (1,896)
Proceeds from sales and maturities of investments150
 —
 1,388
 —
 1,538
Purchases of property, equipment and capitalized software(67) (10) (8) —
 (85)
Increase in restricted investments held-to-maturity—
 —
 (10) —
 (10)
Capital contributions to/from subsidiaries(363) 2
 361
 —
 —
Dividends to/from subsidiaries136
 —
 (136) —
 —
Change in amounts due to/from affiliates(100) —
 100
 —
 —
Other, net—
 (21) —
 —
 (21)
Net cash (used in) provided by investing activities(577) (29) 132
 —
 (474)
Financing activities:         
Proceeds from senior notes offering, net of issuance costs325
 —
 —
 —
 325
Proceeds from borrowings under credit facility300
 —
 —
 —
 300
Proceeds from employee stock plans11
 —
 —
 —
 11
Other, net(4) —
 —
 —
 (4)
Net cash provided by financing activities632
 —
 —
 —
 632
Net increase in cash and cash equivalents270
 52
 793
 —
 1,115
Cash and cash equivalents at beginning of period86
 6
 2,727
 —
 2,819
Cash and cash equivalents at end of period$356
 $58
 $3,520
 $—
 $3,934



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS


 Nine Months Ended September 30, 2016
 Parent Guarantor Other Guarantors Non-Guarantors Eliminations Consolidated
 (In millions)
Operating activities:         
Net cash provided by operating activities$43
 $34
 $556
 $—
 $633
Investing activities:         
Purchases of investments(114) —
 (1,330) —
 (1,444)
Proceeds from sales and maturities of investments103
 —
 1,409
 —
 1,512
Purchases of property, equipment and capitalized software(102) (23) (18) —
 (143)
Decrease in restricted investments held-to-maturity—
 —
 4
 —
 4
Net cash paid in business combinations—
 (5) (43) —
 (48)
Capital contributions to/from subsidiaries(221) 7
 214
 —
 —
Dividends to/from subsidiaries50
 —
 (50) —
 —
Change in amounts due to/from affiliates(12) 4
 8
 —
 —
Other, net6
 (19) 1
 —
 (12)
Net cash (used in) provided by investing activities(290) (36) 195
 —
 (131)
Financing activities:   ��     
Proceeds from employee stock plans

10
 —
 —
 —
 10
Other, net2
 —
 (1) —
 1
Net cash provided by (used in) financing activities12
 —
 (1) —
 11
Net (decrease) increase in cash and cash equivalents(235) (2) 750
 —
 513
Cash and cash equivalents at beginning of period360
 13
 1,956
 —
 2,329
Cash and cash equivalents at end of period$125
 $11
 $2,706
 $—
 $2,842

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)(“MD&A”)
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, and results of operations within the meaning of Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Securities Exchange Act. We intend suchMany of the forward-looking statements are located under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be coveredidentified by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe harbor provisions. All statements, other than statements of historical facts, included in this quarterly report may be deemed to be forward-looking statements for purposes of the Securities Act and the Securities Exchange Act. Without limiting the foregoing, we use the words “anticipate(s),such as “guidance,” “believe(s),“future,” “estimate(s),“anticipates,” “expect(s),“believes,” “intend(s),“embedded,” “may,“estimates,” “plan(s),“expects,” “project(s),“growth,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “should”“can,” “may,” and similar expressionsterms. Readers are cautioned not to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and, accordingly, you should not place undue reliance on our forward-looking statements. We caution you that we do not undertake any obligation to update forward-looking statements, made by us. Forward-lookingas forward-looking statements involveare not guarantees of future performance and the Company’s actual results may differ significantly due to numerous known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected, estimated, expected, or contemplated.uncertainties. Those known risks and uncertainties include, but are not limited to, the following:risk factors identified in the section titled “Risk Factors” in our 2022 Annual Report on Form 10-K, including without limitation risks related to the following matters:
•the successimpact of Medicaid redeterminations across the country following the ending of the Public Health Emergency (“PHE”) for the COVID-19 pandemic, including the accuracy of our previously announced restructuring plan, includingprojections regarding the timingnumber of members we expect to retain, their health acuity levels, and amountsthe scale of the benefits realized;
the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare,” including any potential repeal and replacementtransition of members out of the law, amendmentMedicaid program and the actuarially sound adjustment of rates with regard to the remaining population;
•budget pressures on state governments following the ending of the law,PHE and reduced federal matching funds, and states’ efforts to reduce rates or move to state block grants for Medicaid;
limit rate increases;
•the constantly evolving market dynamics surrounding the ACAAffordable Care Act (“ACA”) Marketplaces, including but not limited to uncertainties associated withissues impacting enrollment, special enrollment periods, member choice, risk transfer requirements,adjustment estimates and results, Marketplace plan insolvencies or receiverships, and the potential for disproportionate enrollment of higher acuity members, members;
•the discontinuationsuccess of premium tax credits,our efforts to retain existing or awarded government contracts, the adequacysuccess of agreed rates,our bid submissions in response to requests for proposal, and potential disruption associatedour ability to identify merger and acquisition targets to support our continued growth over time;
•the success of the scaling up of our operations in California, Nebraska, and Indiana in connection with market withdrawalour recent request for proposal (“RFP”) wins, and the satisfaction of all readiness review requirements under the new Medicaid contracts;
•our ability to close, integrate, and realize benefits from Utah,acquisitions, including the acquisitions of AgeWell New York, My Choice Wisconsin, or other states;
Brand New Day and Central Health Plan of California;
•subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment/risk transfer, risk corridors, and reinsurance;
adjustment;
•effective management of our medical costs;
•our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with seasonal flu patternsrates;
•cyber-attacks, ransomware attacks, or other newly emergent diseases;
significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases,privacy or to maintain existing benefit packagesdata security incidents involving either ourselves or membership eligibility thresholds or criteria, including the paymentour contracted vendors that result in an inadvertent unauthorized disclosure of all amounts due to our Illinois health plan following the resolution of the Illinois budget impasse;
the success of our efforts to retain existing managed care contracts, including those in Florida, New Mexico, Puerto Rico, and Texas, and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states;
any adverse impact resulting from the significant changes to our executive leadership teamprotected information, and the rightsizing ofextent to which our workforce;working in a remote work environment heightens our exposure to these risks;
•the impact of our decision to exit the Utah and Wisconsin ACA Marketplace markets effective December 31, 2017;
our ability to manage our operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives;
•the impact of our abilitytransition to consummate and realize benefits from acquisitionsa permanent remote work environment, including any associated impairment charges or divestitures;
contract termination costs;
•our receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;

•our ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
•the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharingprofit-sharing arrangements, and risk adjustment provisions;provisions and requirements;
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 20
Table of Contents
•our estimates of amounts owed for such cost expenditure floors,minimum annual medical loss ratio (“Minimum MLR”), administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions;
provisions and requirements;
•the Medicaid expansion medical cost corridors in California, New Mexico, and Washington,corridor, and any other retroactive adjustment to revenue where methodologies and procedures are subject to interpretation or dependent upon information about the health status of participants other than Molina members;
•the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;
cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
the success of our health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under our Medicaid contract, the effect of the PROMESA law, the impact of Hurricane Maria and our efforts to better manage the health care costs of our Puerto Rico health plan;
•the success and renewalcontinuance of our duals demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
Texas serving those dually eligible for both Medicaid and Medicare;
•the increasing integration of Medicare and Medicaid programmatic and compliance requirements, and the extension or incorporation of federal Medicare requirements developed by CMS into state-administered Medicaid programs;
•the accurate estimation of incurred but not reported or paid medical costs across our health plans;
•efforts by states to recoup previously paid and recognized premium amounts;
•changes in our annual effective tax rate, due to federal and/or state legislation, or changes in our mix of earnings and other factors;
•the efficient and effective operations of the vendors on whom our business relies;
•complications, member confusion, eligibility redeterminations, or enrollment backlogs related to the annual renewal of Medicaid coverage;
•fraud, waste and abuse matters, government audits andor reviews, comment letters, or potential investigations, and any fine, sanction, enrollment freeze, corrective action plan, monitoring program, or premium recovery that may result therefrom,therefrom;
•the success of our providers, including any potential demand bydelegated providers, the stateadequacy of New Mexico to recover purportedly underpaid premium taxes;
changes with respect to our provider contractsnetworks, the successful maintenance of relations with our providers, and the potential loss of providers;
•approval by state regulators of dividends and distributions by our health plan subsidiaries;
•changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
•high dollar claims related to catastrophic illness;
•the favorable resolution of litigation, arbitration, or administrative proceedings;
•the relatively small numbergreater scale and revenues of statesour health plans in which we operate health plans;
California, New York, Ohio, Texas, and Washington, and risks related to the concentration of our business in those states;
•the failure to comply with the financial or other covenants in our credit agreement or the indentures governing our outstanding senior notes;
•the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity, and meet our general liquidity needs, including the interest expense and other costs associated with such financing;
needs;
our failure to comply with the financial or other covenants in our credit agreement or the indentures governing our outstanding notes;
the sufficiency of our funds on hand to pay the amounts due upon conversion or maturity of our outstanding notes;
•the failure of a state in which we operate to renew its federal Medicaid waiver;
•changes generally affecting the managed care industry, including any new federal or Medicaid management information systems industries;
state legislation that impacts the business space in which we operate;
•increases in government surcharges, taxes, and assessments, including but not limited to assessments;
•the deductibilityimpact of certain compensation costs;
inflation on our medical costs and the cost of refinancing our outstanding indebtedness;
newly emergent viruses•the unexpected loss of the leadership of one or widespread epidemics, public catastrophes or terrorist attacks,more of our senior executives; and associated public alarm; and
•increasing competition and consolidation in the Medicaid industry;industry.
Each of the terms “Molina Healthcare, Inc.” “Molina Healthcare,” “Company,” “we,” “our,” and “us,” as used herein, refers collectively to Molina Healthcare, Inc. and its wholly owned subsidiaries, unless otherwise stated. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Readers should refer to the section entitled “Risk Factors” in each of our 2022 Annual Report on Form 10-K, for the year ended December 31, 2016, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017, and this Quarterly Report on Form 10-Q, for a discussion of certain risk factors that could materially affect our business, financial condition, cash flows, or results of operations. Given these risks and uncertainties, we can give no assurance that any results or events projected or contemplated by our forward-looking statements will in fact occur.
This quarterly reportQuarterly Report on Form 10-Q and the following discussion of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the notes to those statements appearing elsewhere in this report, and the audited financial statements and Management’s Discussion and Analysis appearing in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.10-K.

Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 21

Table of Contents
ABOUT MOLINA HEALTHCARE
OUR MISSION IS TO PROVIDE QUALITY HEALTHCARE TO PEOPLE RECEIVING GOVERNMENT ASSISTANCE.OVERVIEW
Molina Healthcare, Inc., a FORTUNE 500 company (currently ranked 126), provides quality managed health care to people receiving government assistance. We offer cost-effective Medicaid-related solutions to meet the health care needs of low-income families and individuals, and to assist government agencies in their administration ofhealthcare services under the Medicaid program.and Medicare programs, and through the state insurance marketplaces (the “Marketplace”). We have three reportable segments. These segments consistserved approximately 5.2 million members as of our Health Plans segment, which constitutes the vast majority of our operations; our Molina Medicaid Solutions segment; and our Other segment.June 30, 2023, located across 19 states.
KEY PERFORMANCE INDICATORS
Non-GAAP Financial MeasuresSECOND QUARTER 2023 HIGHLIGHTS
We use non-GAAP financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performancereported net income of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for$309 million, or superior to, GAAP measures.
See further information regarding non-GAAP measures in the “Supplemental Information” section of this MD&A, including the reconciliations to U.S. GAAP. Non-GAAP financial measures referred to in this report are designated with an asterisk (*).
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (Dollar amounts in millions, except per-share amounts)
Net (loss) income$(97) $42
 $(250) $99
Net (loss) income per diluted share$(1.70) $0.76
 $(4.44) $1.77
MCR (1)
88.3 % 89.4% 90.5 % 89.5%
G&A ratio (2)
7.6 % 7.6% 8.2 % 7.8%
Premium tax ratio (1)
2.2 % 2.9% 2.3 % 2.7%
Effective tax rate14.6 % 54.0% 15.5 % 58.0%
Net profit margin (2)
(1.9)% 0.9% (1.7)% 0.7%
EBITDA*$(42) $160
 $(82) $430
Adjusted net (loss) income*$(93) $47
 $(235) $114
Adjusted net (loss) income per diluted share*$(1.62) $0.85
 $(4.17) $2.03
________________________
(1)MCR represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue.
(2)G&A ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net income as a percentage of total revenue.

CONSOLIDATED RESULTS
Three Months Ended September 30, 2017 Compared with Three Months Ended September 30, 2016
Net loss$5.35 per diluted share, was $1.70 for the thirdsecond quarter of 20172023, which reflected the following:
•Membership increased 58,000, or 1%, compared with net income per diluted shareJune 30, 2022, and decreased sequentially by 90,000 compared to March 31, 2023 as expected, due to redetermination impacts;
•Premium revenue of $0.76 reported$8.0 billion increased 3% compared with the second quarter of 2022, reflecting the increased membership in Medicaid and Medicare, partially offset by the impact of expected attrition in Marketplace membership;
•Consolidated medical care ratio (“MCR”) was 87.5%, compared with 88.1% for the thirdsecond quarter of 2016. Adjusted net loss per diluted share* was $1.62 in the third quarter2022, reflecting continued strong operating performance and medical cost management;
•General and administrative expense (“G&A”) ratio of 2017,7.4%, compared with adjusted net income per diluted share* of $0.85 in the third quarter of 2016. Loss before income tax benefit for the third quarter of 2017 was $113 million.

Medical care costs measured as a percentage of premium revenue (the “medical care ratio”) declined to 88.3% in the third quarter of 2017 from 89.4% in the third quarter of 2016 and from 94.8%6.8% in the second quarter of 2017. Improved medical cost performance2022, reflecting new business implementation spending ahead of new contract wins starting in the third quarter of 2017 was the result of:
◦
Improved sequential performance at our Illinois, New Mexico, Ohio, Puerto Rico, Texas, and Washington health plans, exclusive of the Marketplace program.
◦Improved performance of our Marketplace program, including a reduction to the premium deficiency reserve of $30 million ($0.33 per diluted share, net of tax). The reserve, which was $100 million at June 30, 2017, decreased to $70 million as of September 30, 2017.
GeneralJuly 2023 and administrative costs, measured as a percentage of total revenue (the “administrative cost ratio”), were 7.6% in the third quarter of 2017, consistent with the third quarter of 2016, and 50 basis points lower than the second quarter of 2017. Excluding Marketplace broker commission and exchange fees, the administrative cost ratio decreased 30 basis points from the third quarter of 2016.
Restructuring costs and the impairment of certain purchased intangible assets increased loss before income tax benefit in the third quarter of 2017 by approximately $247 million. Specifically:
We recorded $118 million ($1.39 per diluted share, net of tax) of restructuring costs in the third quarter of 2017. Restructuring costs incurred to date consist primarily of termination benefits, write-offs of capitalized software due to the re-design of our core operating processes, restructuring of our direct delivery operations, and consulting fees.
We recorded $129 million ($1.77 per diluted share, net of tax) in non-cash goodwill impairment losses for our Pathways behavioral health subsidiary and our Molina Medicaid Solutions (MMS) segment. In the third quarter of 2017, management determined that neither business will provide future benefits relating to the integration of their operations with the Health Plans segment to the extent previously expected.
The table below summarizes the impact of certain items significant to our financial performance in the periods presented.
Summary of Significant Items Affecting 2017 Financial Results
 Three Months Ended Nine Months Ended
 September 30, 2017 September 30, 2017
 (In millions, except per diluted share amounts)
 Amount 
Per Diluted Share (1)
 Amount 
Per Diluted Share (1)
Restructuring and separation costs$118
 $1.39
 $161
 $1.92
Impairment losses129
 1.77
 201
 2.77
Change in Marketplace premium deficiency reserve for 2017 service dates(30) (0.33) 40
 0.45
Termination fee received for terminated Medicare acquisition—
 —
 (75) (0.84)
 $217
 $2.83
 $327
 $4.30
________________________
(1)
Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at our statutory income tax rate of 37%, which is in excess of the effective tax rate recorded in our consolidated statements of operations.

Marketplace Cost Share Reduction (CSR) Update
Our third quarter results do not include any potential impact from the October 12, 2017, direction to Centers for Medicare and Medicaid Services (CMS) from Acting Department of Health and Human Services Secretary Hargan to cease payment of Marketplace CSR subsidies. At September 30, 2017, we had a total of approximately $220 million in excess CSR subsidies, recorded as a payable to CMS. This payable represents the extent to which payments received by us from CMS exceeded our estimate of the actual cost of member subsidies incurred by us through September 30, 2017.
We expect to incur approximately $85 million in unreimbursed expense associated with the cessation of CSR subsidies in the fourth quarter of 2017. It has been the practice of CMS to perform a reconciliation on an annual

basis of CSR subsidies paid to all health plans against the actual costs incurred2024, partially offset by the health plans. Were such a reconciliation to be performed for the full calendar yearbenefits of 2017—consistentdisciplined cost management; and
•After-tax margin of 3.7%, which was in line with past practice—we would be able to offset nearly allour expectations.

Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 22
Table of the $85 million expense incurred in the fourth quarter against the excess amounts received prior to September 30, 2017. However, should CMS transition to a nine month reconciliation period ending September 30, 2017—the last month for which CSR subsidies have been paid—the absence of CSR subsidy reimbursement would reduce income before income tax expense by approximately $85 million in the fourth quarter of 2017.Contents
Nine Months ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
Net loss per diluted share was $4.44 in the nine months ended September 30, 2017 compared with net income per diluted share of $1.77 reported for the nine months ended September 30, 2016. Adjusted net loss per diluted share* was $4.17 in the nine months ended September 30, 2017, compared with adjusted net income per diluted share* of $2.03 in the nine months ended September 30, 2016. Loss before income tax benefit for the nine months ended September 30, 2017 was $296 million. Results for the nine months ended September 30, 2017, were affected by the significant items presented in the table, and as further described, above. In total, these adjustments increased pretax loss in the nine months ended September 30, 2017 by $327 million.
RESTRUCTURING AND PROFIT IMPROVEMENT PLAN UPDATE
As previously disclosed, we estimate that our restructuring plan will reduce annualized run-rate expenses by approximately $300 million to $400 million when completed by the end of 2018. We have already achieved $200 million of these run-rate reductions on an annualized basis, which will take full effect no later than January 1, 2018. Our third quarter results include approximately $10 million of these reductions. All savings targets discussed in regards to the restructuring plan represent annualized run-rate savings that we expect to achieve during the year following the indicated implementation date. We expect one-time costs associated with the restructuring plan to exceed the benefits realized in 2017 due to the upfront payment of implementation costs and the delayed benefit of full savings until the beginning of 2018.
TRENDS AND UNCERTAINTIES
ACA and the Marketplace
The future of the Affordable Care Act (ACA) and its underlying programs, including the Marketplace, are subject to substantial uncertainty. We have taken the following steps in regards to our participation in the ACA Marketplace in 2018:
1.As previously announced, we will exit the Utah and Wisconsin ACA Marketplaces effective December 31, 2017.
2.In our remaining Marketplace plans, we are increasing 2018 premiums by 55% to take into account the absence of cost sharing reduction (CSR) subsidies and other risks related to ACA Marketplace uncertainties.
3.We have reduced the scope of our 2018 participation in the state of Washington Marketplace.
4.
We continue to monitor the current political and programmatic developments pertaining to the ACA Marketplace.

Medicaid Contract Re-ProcurementCONSOLIDATED FINANCIAL SUMMARY
The following table illustrates Health Plans segment Medicaid contracts scheduled for re-procurement in the near term. While we have been notifiedsummarizes our consolidated results of the Medicaid regulators’ intention to re-procure the contracts, the anticipated award datesoperations and effective dates are management’s current best estimates; such dates are subject to change. Premium revenue is stated in millions.
      Premium Revenue    
    Membership as of Nine Months Ended Anticipated
State Health Plan Medicaid Program(s) September 30, 2017 September 30, 2017 Award Date Effective Date
Florida All 355,000
 $1,105
 Q2 2018 1/1/2019
New Mexico All 225,000
 893
 Q1 2018 1/1/2019
Texas ABD 87,000
 1,065
 Q3 2018 9/1/2019
Texas CHIP 24,000
 31
 Q4 2017 9/1/2018
Illinois Health Plan. In August 2017, Molina Healthcare of Illinois, Inc. was awarded a statewide Medicaid managed care contract by the Illinois Department of Healthcare and Family Services. This Medicaid contract further integrates behavioral health and physical health by combining the State’s three current managed care programs into one program. The contract begins January 1, 2018, for four years with options to renew annually for up to four additional years.
Washington Health Plan. In May 2017, Molina Healthcare of Washington, Inc. was selected by the Washington State Health Care Authority to negotiate and enter into managed care contractsother financial information for the North Central region of the state’s Apple Health Integrated Managed Care Program. The start date for the new contract is scheduled for January 1, 2018.periods indicated:

 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 (In millions, except per-share amounts)
Premium revenue$8,042 $7,799 $15,927 $15,330 
Less: medical care costs7,038 6,872 13,909 13,435 
Medical margin1,004 927 2,018 1,895 
MCR (1)
87.5 %88.1 %87.3 %87.6 %
Other revenues:
Premium tax revenue169 215 341 423 
Investment income97 22 168 33 
Other revenue19 18 40 38 
General and administrative expenses618 551 1,209 1,122 
G&A ratio (2)
7.4 %6.8 %7.3 %7.1 %
Premium tax expenses169 215 341 423 
Depreciation and amortization42 44 86 84 
Other17 11 33 27 
Operating income443 361 898 733 
Interest expense27 27 55 55 
Income before income tax expense416 334 843 678 
Income tax expense107 86 213 172 
Net income$309 $248 $630 $506 
Net income per share – Diluted$5.35 $4.25 $10.87 $8.63 
Diluted weighted average shares outstanding57.9 58.4 58.0 58.6 
Other Key Statistics
Ending membership5.2 5.1 5.2 5.1 
Effective income tax rate25.5 %25.8 %25.2 %25.4 %
After-tax margin (3)
3.7 %3.1 %3.8 %3.2 %
________________________
REPORTABLE SEGMENTS
How We Assess Performance
We derive our revenues primarily from health insurance premiums, and our primary customers are state Medicaid agencies and the federal government.
One of the key metrics used to assess the performance of our most significant segment, the Health Plans segment, is the medical care ratio, or MCR. The medical care ratio(1)    MCR represents medical care costs as a percentage of premium revenue. Therefore, the underlying gross
(2)    G&A ratio represents general and administrative expenses as a percentage of total revenue.
(3)    After-tax margin or the amount earned by the Health Plans segment after medical costs are deducted from premium revenue, is the most important measurerepresents net income as a percentage of earnings reviewed by management.total revenue.
Gross margin for our Health Plans segment is referred to as “Medical margin,” and for our Molina Medicaid Solutions and Other segments, as “Service margin.” The service margin is equal to service revenue minus cost of service revenue. Management’s discussion and analysis of the changes
CONSOLIDATED RESULTS
NET INCOME AND OPERATING INCOME
Net income in the individual componentssecond quarter of gross margin, by reportable segment, is presented2023 amounted to $309 million, or $5.35 per diluted share, compared with $248 million, or $4.25 per diluted share, in the “Health Plans—Financial Overview,” “Molina Medicaid Solutions—Financial Overview,” and “Other—Financial Overview” sectionssecond quarter of this MD&A.2022. The 25% increase in net income is consistent with the improvement in operating income, which increased to $443 million in the second quarter of 2023, compared with $361 million in the second quarter of 2022.

SEGMENT SUMMARYNet income in the six months ended June 30, 2023 amounted to $630 million, or $10.87 per diluted share, compared with $506 million, or $8.63 per diluted share, in the six months ended June 30, 2022. The 25% increase in net income is consistent with the improvement in operating income of $898 million in the six months ended June 30, 2023, compared with $733 million in the six months ended June 30, 2022.
Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 23
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (In millions)
Segment gross margin:       
Health Plans medical margin (1)
$557
 $443
 $1,343
 $1,285
Molina Medicaid Solutions service margin (2)
5
 6
 13
 17
Other (2)
2
 8
 8
 29
Total segment gross margin564
 457
 1,364
 1,331
Other operating revenues (3)
124
 222
 379
 625
Other operating expenses (4)
(769) (561) (2,029) (1,644)
Operating (loss) income(81) 118
 (286) 312
Other expenses, net32
 26
 10
 76
(Loss) income before income tax expense(113) 92
 (296) 236
Income tax (benefit) expense(16) 50
 (46) 137
Net (loss) income$(97) $42
 $(250) 99
_______________________
(1)Represents premium revenue minus medical care costs.
(2)Represents service revenue minus cost of service revenue.
(3)Other operating revenues include premium tax revenue, health insurer fee revenue, investment income and other revenue.
(4)Other operating expenses include general and administrative expenses, premium tax expenses, health insurer fee expenses, depreciation and amortization, impairment losses, and restructuring and separation costs.

HEALTH PLANS
The Health Plans segment consistsTable of health plans operating in 12 states and the Commonwealth of Puerto Rico. As of September 30, 2017, these health plans served approximately 4.5 million members eligible for Medicaid, Medicare, and other government-sponsored health care programs for low-income families and individuals. This membership includes Affordable Care Act Marketplace (Marketplace) members, most of whom receive government premium subsidies.Contents
BUSINESS OVERVIEW
Recent Developments — Health Plans Segment
Refer to Notes to Consolidated Financial Statements, Note 1, “Basis of Presentation.”

Health Plans Membership
The following tables set forth our Health Plans membership as of the dates indicated:
 September 30,
2017		 December 31,
2016		 September 30,
2016
Ending Membership by Program:     
Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP)2,451,000
 2,536,000
 2,529,000
Marketplace877,000
 526,000
 568,000
Medicaid Expansion662,000
 673,000
 658,000
Aged, Blind or Disabled (ABD)411,000
 396,000
 395,000
Medicare-Medicaid Plan (MMP) – Integrated (1)
58,000
 51,000
 51,000
Medicare Special Needs Plans (Medicare)44,000
 45,000
 45,000
 4,503,000
 4,227,000
 4,246,000
Ending Membership by Health Plan:     
California751,000
 683,000
 683,000
Florida641,000
 553,000
 563,000
Illinois163,000
 195,000
 195,000
Michigan399,000
 391,000
 387,000
New Mexico256,000
 254,000
 253,000
New York33,000
 35,000
 37,000
Ohio343,000
 332,000
 339,000
Puerto Rico306,000
 330,000
 331,000
South Carolina113,000
 109,000
 109,000
Texas444,000
 337,000
 352,000
Utah160,000
 146,000
 150,000
Washington770,000
 736,000
 716,000
Wisconsin124,000
 126,000
 131,000
 4,503,000
 4,227,000
 4,246,000
_________________________
(1)MMP members receive both Medicaid and Medicare coverage from Molina Healthcare.

Premiums by Program
The amount ofimprovement in operating income for both periods was mainly due to membership growth that drove higher premium revenues, and medical margin, and increased investment income.
PREMIUM REVENUE
Premium revenue increased $243 million, or 3%, in the premiums paid to our health plans may vary substantially between states and among various government programs. The following table sets forth the ranges of premiums paid to our state health plans by program on a per member per month (PMPM) basis, for the nine months ended September 30, 2017. The “Consolidated” column represents the weighted-average amounts for our total membership by program.
 PMPM Premiums
 Low High Consolidated
TANF and CHIP$120.00
 $310.00
 $180.00
Marketplace190.00
 470.00
 280.00
Medicaid Expansion320.00
 510.00
 390.00
ABD380.00
 1,480.00
 1,030.00
MMP – Integrated1,250.00
 3,280.00
 2,190.00
Medicare960.00
 1,260.00
 1,140.00


FINANCIAL OVERVIEW
In the thirdsecond quarter of 2017, premium revenue increased approximately 14%, or $586 million,2023, when compared with the thirdsecond quarter of 2016. Member months grew 8% while revenue PMPM2022, and increased 6%. Medical care costs as a percent of premium revenue decreased to 88.3%$597 million, or 4%, in the third quarter of 2017 from 89.4% in the third quarter of 2016. Medical margin increased 26% in the third quarter of 2017 from the third quarter of 2016.
In the ninesix months ended SeptemberJune 30, 2017, premium revenue increased approximately 16%, or $1,950 million,2023, when compared with the ninesix months ended SeptemberJune 30, 2016. Member months grew 11% while revenue PMPM increased 5%. Medical care costs as a percent of2022. The higher premium revenue reflects increased to 90.5%organic membership in the nine months ended September 30, 2017Medicaid and Medicare segments and the impact from 89.5%the AgeWell acquisition that closed in the nine months ended September 30, 2016. Medical margin increased 5%fourth quarter of 2022, partially offset by a decline in the nine months ended September 30, 2017 from the nine months ended September 30, 2016.Marketplace segment.
FINANCIAL PERFORMANCE BY PROGRAMMEDICAL CARE RATIO
The following tables summarize member months, premium revenue, medical care costs, medical care ratio and medical margin by program for the periods indicated (PMPM amounts are in whole dollars; member months and other dollar amounts are in millions):
 Three Months Ended September 30, 2017
 
Member
Months (1)
 Premium Revenue Medical Care Costs 
MCR (2)
 Medical Margin
  Total PMPM Total PMPM  
TANF and CHIP7.5
 $1,392
 $185.95
 $1,242
 $165.76
 89.1% $150
Medicaid Expansion2.0
 773
 385.58
 667
 332.99
 86.4
 106
ABD1.2
 1,288
 1,038.85
 1,259
 1,016.06
 97.8
 29
Total Medicaid10.7
 3,453
 321.77
 3,168
 295.23
 91.8
 285
MMP0.2
 378
 2,263.07
 336
 2,013.67
 89.0
 42
Medicare0.1
 163
 1,231.61
 126
 951.01
 77.2
 37
Total Medicare0.3
 541
 1,806.26
 462
 1,543.05
 85.4
 79
Excluding Marketplace11.0
 3,994
 362.04
 3,630
 329.08
 90.9
 364
Marketplace2.7
 783
 301.72
 590
 227.22
 75.3
 193
 13.7
 $4,777
 $350.55
 $4,220
 $309.68
 88.3% $557

 Three Months Ended September 30, 2016
 
Member
Months (1)
 Premium Revenue Medical Care Costs 
MCR (2)
 Medical Margin
  Total PMPM Total PMPM  
TANF and CHIP7.6
 $1,373
 $180.74
 $1,246
 $164.04
 90.8% $127
Medicaid Expansion2.0
 763
 386.98
 642
 325.68
 84.2
 121
ABD1.1
 1,186
 1,008.28
 1,094
 929.93
 92.2
 92
Total Medicaid10.7
 3,322
 309.19
 2,982
 277.55
 89.8
 340
MMP0.2
 334
 2,165.26
 280
 1,818.75
 84.0
 54
Medicare0.1
 136
 1,019.19
 134
 1,003.85
 98.5
 2
Total Medicare0.3
 470
 1,633.62
 414
 1,440.73
 88.2
 56
Excluding Marketplace11.0
 3,792
 343.68
 3,396
 307.84
 89.6
 396
Marketplace1.7
 399
 238.86
 352
 210.38
 88.1
 47
 12.7
 $4,191
 $329.88
 $3,748
 $295.01
 89.4% $443

 Nine Months Ended September 30, 2017
 
Member
Months (1)
 Premium Revenue Medical Care Costs 
MCR (2)
 Medical Margin
  Total PMPM Total PMPM  
TANF and CHIP22.8
 $4,185
 $183.69
 $3,861
 $169.44
 92.2% $324
Medicaid Expansion6.1
 2,376
 389.14
 2,045
 334.93
 86.1
 331
ABD3.6
 3,769
 1,033.45
 3,634
 996.58
 96.4
 135
Total Medicaid32.5
 10,330
 317.49
 9,540
 293.21
 92.4
 790
MMP0.5
 1,083
 2,189.96
 976
 1,974.22
 90.1
 107
Medicare0.4
 449
 1,142.68
 369
 939.21
 82.2
 80
Total Medicare0.9
 1,532
 1,726.39
 1,345
 1,516.09
 87.8
 187
Excluding Marketplace33.4
 11,862
 354.88
 10,885
 325.66
 91.8
 977
Marketplace8.4
 2,303
 276.27
 1,937
 232.31
 84.1
 366
 41.8
 $14,165
 $339.19
 $12,822
 $307.03
 90.5% $1,343

 Nine Months Ended September 30, 2016
 
Member
Months (1)
 Premium Revenue Medical Care Costs 
MCR (2)
 Medical Margin
  Total PMPM Total PMPM  
TANF and CHIP22.5
 $3,999
 $177.60
 $3,646
 $161.93
 91.2% $353
Medicaid Expansion5.8
 2,184
 376.98
 1,850
 319.38
 84.7
 334
ABD3.5
 3,466
 987.20
 3,173
 903.85
 91.6
 293
Total Medicaid31.8
 9,649
 303.23
 8,669
 272.46
 89.9
 980
MMP0.5
 989
 2,160.14
 867
 1,894.38
 87.7
 122
Medicare0.4
 396
 1,015.14
 385
 986.40
 97.2
 11
Total Medicare0.9
 1,385
 1,633.26
 1,252
 1,476.57
 90.4
 133
Excluding Marketplace32.7
 11,034
 337.76
 9,921
 303.72
 89.9
 1,113
Marketplace5.1
 1,181
 231.69
 1,009
 197.77
 85.4
 172
 37.8
 $12,215
 $323.44
 $10,930
 $289.41
 89.5% $1,285
_______________________
(1)A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)“MCR” represents medical costs as a percentage of premium revenue.

Medicaid: TANF/CHIP, Medicaid Expansion and ABD
The medical care ratios of the combined TANF/CHIP, Medicaid Expansion and ABD programs increased to 91.8%consolidated MCR in the thirdsecond quarter of 2017, from 89.8% in the third quarter of 2016. Margin pressures at the California health plan (primarily due to reduced Medicaid Expansion premium rates effective July 1, 2017), the Florida health plan; and the Illinois health plan more than offset improved performance at the Washington health plan.
The medical care ratios of the combined TANF/CHIP, Medicaid Expansion and ABD programs increased to 92.4% in the nine months ended September 30, 2017, from 89.9% in the nine months ended September 30, 2016. For the nine months ended September 30, 2017, margin pressures at the Florida, Illinois, New Mexico and Texas health plans more than offset improved performance at the Washington health plan. Financial results for the Texas health plan in 2016 benefited from the recognition of $44 million of quality revenue related to 2015 and 2014.
MMP and Medicare
The medical care ratio for these programs, in the aggregate, decreased in the third quarter of 2017 when compared with the third quarter of 2016, and also in the nine months ended September 30, 2017, compared with the nine months ended September 30, 2016. Utilization of inpatient and pharmacy services among our Medicare members has been subdued for the first nine months of 2017.
Marketplace
Marketplace member months increased 64% in the nine months ended September 30, 2017, when compared with the nine months ended September 30, 2016, as a result of membership growth primarily in California, Florida and Texas.

The medical care ratio for the Marketplace program2023 decreased to 75.3% in the third quarter of 2017, from87.5%, compared with 88.1% in the thirdsecond quarter of 2016. Absent a $30 million reduction to a previously established premium deficiency reserve, the medical care ratio for our Marketplace program would have been approximately 79%2022, or 60 basis points. The consolidated MCR in the third quarter of 2017. The medical care ratio of the Marketplace programsix months ended June 30, 2023 decreased to 87.3%, compared with 87.6% MCR for the ninesix months ended SeptemberJune 30, 2017 was 84.1%,2022, or 30 basis points. The improvement reflects continued strong operating performance and generally consistent with the medical care ratio reportedcost management. See further discussion in “Reportable Segments—Segment Financial Performance,” below.
Prior year reserve development has been favorable for the same period in 2016.
FINANCIAL PERFORMANCE BY STATE
The following tables summarize membersix months premium revenue, medical care costs, medical care ratio,ended June 30, 2023, but its impact on earnings has been mostly absorbed by minimum MLRs and medical margin by state health plan for the periods indicated (PMPM amounts are in whole dollars; member months and other dollar amounts are in millions):
Health Plans Segment Financial Data — Non-Marketplace
 Three Months Ended September 30, 2017
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California1.9
 $601
 $322.97
 $563
 $302.67
 93.7% $38
Florida1.0
 388
 355.59
 390
 356.83
 100.3
 (2)
Illinois0.5
 137
 287.69
 138
 289.36
 100.6
 (1)
Michigan1.2
 390
 337.17
 345
 298.83
 88.6
 45
New Mexico0.7
 304
 429.07
 277
 390.91
 91.1
 27
New York (3)0.1
 43
 435.00
 41
 413.02
 94.9
 2
Ohio0.9
 549
 560.06
 483
 492.61
 88.0
 66
Puerto Rico1.0
 191
 202.59
 159
 168.25
 83.1
 32
South Carolina0.3
 113
 332.48
 101
 297.74
 89.6
 12
Texas0.7
 541
 778.50
 506
 728.19
 93.5
 35
Utah0.2
 89
 318.98
 71
 254.99
 79.9
 18
Washington2.3
 612
 276.73
 522
 236.11
 85.3
 90
Wisconsin0.2
 34
 175.77
 27
 141.78
 80.7
 7
Other (4)—
 2
 —
 7
 —
 —
 (5)
 11.0
 $3,994
 $362.04
 $3,630
 $329.08
 90.9% $364
 Three Months Ended September 30, 2016
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California1.8
 $575
 $310.64
 $493
 $266.81
 85.9% $82
Florida1.0
 335
 323.98
 317
 305.71
 94.4
 18
Illinois0.6
 163
 275.26
 145
 244.86
 89.0
 18
Michigan1.2
 385
 335.34
 335
 291.69
 87.0
 50
New Mexico0.7
 323
 451.06
 293
 409.24
 90.7
 30
New York (3)0.1
 32
 427.40
 30
 403.71
 94.5
 2
Ohio1.0
 492
 497.08
 417
 421.95
 84.9
 75
Puerto Rico1.0
 184
 183.46
 167
 167.44
 91.3
 17
South Carolina0.3
 102
 312.28
 94
 285.97
 91.6
 8
Texas0.7
 534
 728.84
 484
 662.79
 90.9
 50
Utah0.3
 83
 288.59
 71
 242.77
 84.1
 12
Washington2.0
 546
 264.01
 500
 241.49
 91.5
 46
Wisconsin0.3
 35
 166.82
 26
 125.86
 75.4
 9
Other (4)—
 3
 —
 24
 —
 —
 (21)
 11.0
 $3,792
 $343.68
 $3,396
 $307.84
 89.6% $396

 Nine Months Ended September 30, 2017
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California5.6
 $1,771
 $316.83
 $1,586
 $283.82
 89.6% $185
Florida3.2
 1,132
 347.41
 1,112
 341.15
 98.2
 20
Illinois1.6
 447
 284.18
 492
 312.54
 110.0
 (45)
Michigan3.5
 1,162
 332.60
 1,035
 296.28
 89.1
 127
New Mexico2.2
 933
 431.70
 887
 410.24
 95.0
 46
New York (3)0.3
 135
 444.77
 128
 421.58
 94.8
 7
Ohio2.9
 1,598
 541.56
 1,434
 486.02
 89.7
 164
Puerto Rico2.9
 553
 190.99
 513
 177.01
 92.7
 40
South Carolina1.0
 329
 325.43
 301
 298.43
 91.7
 28
Texas2.1
 1,592
 760.76
 1,468
 701.32
 92.2
 124
Utah0.8
 267
 315.35
 219
 258.64
 82.0
 48
Washington6.7
 1,835
 275.60
 1,603
 240.83
 87.4
 232
Wisconsin0.6
 101
 170.64
 80
 136.04
 79.7
 21
Other (4)—
 7
 —
 27
 —
 —
 (20)
 33.4
 $11,862
 $354.88
 $10,885
 $325.66
 91.8% $977
 Nine Months Ended September 30, 2016
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California5.5
 $1,603
 $291.20
 $1,411
 $256.41
 88.1% $192
Florida3.0
 974
 322.69
 892
 295.43
 91.6
 82
Illinois1.8
 466
 266.11
 414
 236.39
 88.8
 52
Michigan3.6
 1,136
 323.08
 1,013
 288.13
 89.2
 123
New Mexico2.1
 974
 460.71
 873
 412.92
 89.6
 101
New York (3)0.1
 32
 427.40
 30
 403.71
 94.5
 2
Ohio2.9
 1,444
 489.63
 1,286
 435.99
 89.0
 158
Puerto Rico3.0
 535
 176.44
 516
 170.46
 96.6
 19
South Carolina0.9
 273
 288.93
 232
 245.13
 84.8
 41
Texas2.2
 1,650
 744.71
 1,466
 662.01
 88.9
 184
Utah0.9
 255
 293.33
 221
 253.79
 86.5
 34
Washington6.0
 1,576
 261.23
 1,431
 237.20
 90.8
 145
Wisconsin0.7
 107
 165.53
 78
 120.82
 73.0
 29
Other (4)—
 9
 —
 58
 —
 —
 (49)
 32.7
 $11,034
 $337.76
 $9,921
 $303.72
 89.9% $1,113


Health Plans Segment Financial Data — Marketplace
 Three Months Ended September 30, 2017
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California0.3
 $88
 $208.19
 $63
 $147.87
 71.0% $25
Florida0.9
 260
 313.36
 235
 283.13
 90.4
 25
Michigan—
 14
 212.08
 10
 150.24
 70.8
 4
New Mexico0.1
 29
 383.58
 20
 269.28
 70.2
 9
Ohio0.1
 23
 386.09
 20
 364.31
 94.4
 3
Texas0.7
 183
 291.14
 109
 172.70
 59.3
 74
Utah0.3
 49
 241.65
 31
 155.13
 64.2
 18
Washington0.1
 42
 327.40
 33
 256.52
 78.3
 9
Wisconsin0.2
 95
 527.17
 70
 385.65
 73.2
 25
Other (3)
—
 —
 —
 (1) —
 —
 1
 2.7
 $783
 $301.72
 $590
 $227.22
 75.3% $193
 Three Months Ended September 30, 2016
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California0.3
 $37
 $185.04
 $30
 $140.10
 75.7% $7
Florida0.6
 159
 253.16
 145
 231.78
 91.6
 14
Michigan—
 2
 221.84
 2
 132.62
 59.8
 —
New Mexico0.1
 15
 290.63
 11
 220.32
 75.8
 4
Ohio—
 9
 307.24
 7
 215.01
 70.0
 2
Texas0.4
 63
 189.85
 41
 121.06
 63.8
 22
Utah0.1
 23
 142.10
 33
 208.48
 146.7
 (10)
Washington0.1
 23
 307.55
 21
 300.71
 97.8
 2
Wisconsin0.1
 68
 375.60
 64
 357.60
 95.2
 4
Other (3)—
 —
 —
 (2) —
 —
 2
 1.7
 $399
 $238.86
 $352
 $210.38
 88.1% $47
 Nine Months Ended September 30, 2017
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California1.2
 $241
 $193.33
 $156
 $124.32
 64.3% $85
Florida2.8
 821
 296.14
 758
 273.55
 92.4
 63
Michigan0.2
 41
 187.96
 27
 126.76
 67.4
 14
New Mexico0.2
 82
 338.18
 62
 256.05
 75.7
 20
Ohio0.2
 68
 365.35
 64
 346.93
 95.0
 4
Texas2.1
 517
 252.32
 351
 171.57
 68.0
 166
Utah0.7
 135
 209.43
 135
 209.13
 99.9
 —
Washington0.4
 123
 315.95
 128
 327.51
 103.7
 (5)
Wisconsin0.6
 275
 469.44
 260
 443.41
 94.5
 15
Other (3)—
 —
 —
 (4) —
 —
 4
 8.4
 $2,303
 $276.27
 $1,937
 $232.31
 84.1% $366

 Nine Months Ended September 30, 2016
 Member
Months		 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California0.6
 $104
 $177.57
 $74
 $124.29
 70.0% $30
Florida2.0
 473
 237.37
 409
 205.37
 86.5
 64
Michigan—
 7
 213.35
 5
 138.37
 64.9
 2
New Mexico0.2
 42
 264.76
 32
 201.73
 76.2
 10
Ohio0.1
 28
 322.36
 20
 232.44
 72.1
 8
Texas1.1
 202
 196.45
 133
 128.97
 65.7
 69
Utah0.4
 75
 160.33
 91
 194.78
 121.5
 (16)
Washington0.2
 58
 281.80
 48
 235.78
 83.7
 10
Wisconsin0.5
 192
 357.80
 200
 373.94
 104.5
 (8)
Other (3)—
 —
 —
 (3) —
 —
 3
 5.1
 $1,181
 $231.69
 $1,009
 $197.77
 85.4% $172
Health Plans Segment Financial Data — Total
 Three Months Ended September 30, 2017
 
Member
Months
 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California2.2
 $689
 $301.64
 $626
 $273.90
 90.8% $63
Florida1.9
 648
 337.40
 625
 325.09
 96.4
 23
Illinois0.5
 137
 287.69
 138
 289.36
 100.6
 (1)
Michigan1.2
 404
 330.27
 355
 290.63
 88.0
 49
New Mexico0.8
 333
 424.61
 297
 378.98
 89.3
 36
New York (1)
0.1
 43
 435.00
 41
 413.02
 94.9
 2
Ohio1.0
 572
 550.75
 503
 485.61
 88.2
 69
Puerto Rico1.0
 191
 202.59
 159
 168.25
 83.1
 32
South Carolina0.3
 113
 332.48
 101
 297.74
 89.6
 12
Texas1.4
 724
 546.57
 615
 463.83
 84.9
 109
Utah0.5
 138
 286.39
 102
 212.91
 74.3
 36
Washington2.4
 654
 279.52
 555
 237.23
 84.9
 99
Wisconsin0.4
 129
 345.63
 97
 259.66
 75.1
 32
Other (2) 
—
 2
 —
 6
 —
 —
 (4)
 13.7
 $4,777
 $350.55
 $4,220
 $309.68
 88.3% $557

 Three Months Ended September 30, 2016
 
Member
Months
 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California2.1
 $612
 $298.05
 $523
 $254.11
 85.3% $89
Florida1.6
 494
 297.24
 462
 277.79
 93.5
 32
Illinois0.6
 163
 275.26
 145
 244.86
 89.0
 18
Michigan1.2
 387
 334.25
 337
 290.16
 86.8
 50
New Mexico0.8
 338
 440.12
 304
 396.35
 90.1
 34
New York (1)
0.1
 32
 427.40
 30
 403.71
 94.5
 2
Ohio1.0
 501
 491.51
 424
 415.87
 84.6
 77
Puerto Rico1.0
 184
 183.46
 167
 167.44
 91.3
 17
South Carolina0.3
 102
 312.28
 94
 285.97
 91.6
 8
Texas1.1
 597
 559.98
 525
 493.07
 88.1
 72
Utah0.4
 106
 236.31
 104
 230.53
 97.6
 2
Washington2.1
 569
 265.48
 521
 243.49
 91.7
 48
Wisconsin0.4
 103
 262.32
 90
 231.86
 88.4
 13
Other (2)
—
 3
 —
 22
 —
 —
 (19)
 12.7
 $4,191
 $329.88
 $3,748
 $295.01
 89.4% $443
 Nine Months Ended September 30, 2017
 
Member
Months
 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California6.8
 $2,012
 $294.26
 $1,742
 $254.67
 86.5% $270
Florida6.0
 1,953
 323.86
 1,870
 310.09
 95.7
 83
Illinois1.6
 447
 284.18
 492
 312.54
 110.0
 (45)
Michigan3.7
 1,203
 324.12
 1,062
 286.35
 88.3
 141
New Mexico2.4
 1,015
 422.25
 949
 394.66
 93.5
 66
New York (1)
0.3
 135
 444.77
 128
 421.58
 94.8
 7
Ohio3.1
 1,666
 531.17
 1,498
 477.81
 90.0
 168
Puerto Rico2.9
 553
 190.99
 513
 177.01
 92.7
 40
South Carolina1.0
 329
 325.43
 301
 298.43
 91.7
 28
Texas4.2
 2,109
 509.09
 1,819
 439.11
 86.3
 290
Utah1.5
 402
 269.48
 354
 237.20
 88.0
 48
Washington7.1
 1,958
 277.83
 1,731
 245.62
 88.4
 227
Wisconsin1.2
 376
 319.57
 340
 289.24
 90.5
 36
Other (2) 
—
 7
 —
 23
 —
 —
 (16)
 41.8
 $14,165
 $339.19
 $12,822
 $307.03
 90.5% $1,343

 Nine Months Ended September 30, 2016
 
Member
Months
 Premium Revenue Medical Care Costs MCR Medical Margin
  Total PMPM Total PMPM  
California6.1
 $1,707
 $280.21
 $1,485
 $243.64
 86.9% $222
Florida5.0
 1,447
 288.74
 1,301
 259.60
 89.9
 146
Illinois1.8
 466
 266.11
 414
 236.39
 88.8
 52
Michigan3.6
 1,143
 322.08
 1,018
 286.77
 89.0
 125
New Mexico2.3
 1,016
 447.07
 905
 398.22
 89.1
 111
New York (1)
0.1
 32
 427.40
 30
 403.71
 94.5
 2
Ohio3.0
 1,472
 484.82
 1,306
 430.14
 88.7
 166
Puerto Rico3.0
 535
 176.44
 516
 170.46
 96.6
 19
South Carolina0.9
 273
 288.93
 232
 245.13
 84.8
 41
Texas3.3
 1,852
 570.65
 1,599
 492.79
 86.4
 253
Utah1.3
 330
 246.78
 312
 233.14
 94.5
 18
Washington6.2
 1,634
 261.91
 1,479
 237.15
 90.5
 155
Wisconsin1.2
 299
 252.45
 278
 235.25
 93.2
 21
Other (2)
—
 9
 —
 55
 —
 —
 (46)
 37.8
 $12,215
 $323.44
 $10,930
 $289.41
 89.5% $1,285
(1)The New York health plan was acquired on August 1, 2016.
(2)“Other” medical care costs include primarily medically related administrative costs of the parent company, and direct delivery costs.

MEDICAL CARE COSTS BY TYPE
The following table provides the details of consolidated medical care costs by category for the periods indicated (dollars in millions except PMPM amounts):
 Three Months Ended September 30,
 2017 2016
 Amount PMPM % of Total Amount PMPM % of Total
Fee for service$3,196
 $234.51
 75.8% $2,799
 $220.29
 74.7%
Pharmacy638
 46.85
 15.1
 567
 44.65
 15.1
Capitation342
 25.07
 8.1
 302
 23.83
 8.1
Direct delivery18
 1.37
 0.4
 21
 1.66
 0.5
Other26
 1.88
 0.6
 59
 4.58
 1.6
 $4,220
 $309.68
 100.0% $3,748
 $295.01
 100.0%
 Nine Months Ended September 30,
 2017 2016
 Amount PMPM % of Total Amount PMPM % of Total
Fee for service$9,630
 $230.58
 75.1% $8,156
 $215.96
 74.6%
Pharmacy1,904
 45.60
 14.8
 1,621
 42.93
 14.8
Capitation1,022
 24.47
 8.0
 901
 23.86
 8.3
Direct delivery62
 1.50
 0.5
 55
 1.46
 0.5
Other204
 4.88
 1.6
 197
 5.20
 1.8
 $12,822
 $307.03
 100.0% $10,930
 $289.41
 100.0%
cost corridors.
PREMIUM TAXESTAX REVENUE AND EXPENSES
The premium tax ratio (premium tax expense as a percentage of premium revenue plus premium tax revenue) was 2.2% in2.0% and 2.7% for the thirdsecond quarter of 2017 compared with 2.9% in2023 and 2022, respectively, and 2.1% and 2.7% for the third quarter of 2016 and 2.3% in the nine months

ended September 30, 2017, compared with 2.7% in the ninesix months ended SeptemberJune 30, 2016. This decline2023 and 2022, respectively. The current year ratio decrease was primarilymainly due to the temporary suspension of a Michigan HMO use tax effective January 1, 2017, which was partially offset by a higher California premium tax rate effective July 1, 2016, and significant revenue growth at our Florida health plan, which operateschanges in a state with no premium tax.business mix.
HEALTH INSURER FEE (HIF) REVENUE AND EXPENSESINVESTMENT INCOME
The Consolidated Appropriations Act of 2016 provided for a HIF moratorium in 2017. Therefore, there are no HIF revenues or expenses in 2017.

MOLINA MEDICAID SOLUTIONS

The Molina Medicaid Solutions segment provides supportInvestment income increased to state government agencies in the administration of their Medicaid programs, including business processing, information technology development and administrative services.
FINANCIAL OVERVIEW
The Molina Medicaid Solutions segment service margin for the third quarter of 2017 and 2016, and for the nine months ended September 30, 2017 and 2016, was insignificant.
As discussed further in Notes to Consolidated Financial Statements, Note 10, “Impairment Losses,” we recorded a goodwill impairment charge of $28$97 million reported in our consolidated statements of operations as “Impairment losses.”

OTHER

The Other segment includes primarily our Pathways behavioral health and social services provider, and corporate amounts not allocated to other reportable segments.
FINANCIAL OVERVIEW
The Other segment service margin for the third quarter of 2017 and 2016, and for the nine months ended September 30, 2017 and 2016, was insignificant.
As discussed further in Notes to Consolidated Financial Statements, Note 10, “Impairment Losses,” in the second quarter of 2017 we recorded impairment losses, primarily relating to our Pathways subsidiary, of $61 million for goodwill and $11 million for intangible assets, or $722023, compared with $22 million in the aggregate. In the thirdsecond quarter of 2017, we recorded2022, and increased to $168 million in the six months ended June 30, 2023, compared with $33 million in the six months ended June 30, 2022.The increase in both periods was mainly driven by an increase in interest rates and, to a further goodwill impairment loss relating to the Pathways subsidiary,lesser extent, higher levels of $101 million.

invested assets.
OTHER CONSOLIDATED INFORMATIONREVENUE
GENERAL AND ADMINISTRATIVEOther revenue increased slightly to $19 million in the second quarter of 2023, compared with $18 million in the second quarter of 2022, and increased to $40 million in the six months ended June 30, 2023, compared with $38 million in the six months ended June 30, 2022. Other revenue mainly includes service revenue associated with long-term services and supports consultative services we provide in Wisconsin.
G&A EXPENSES
The G&A expense ratio was 7.6% for bothincreased to 7.4% in the thirdsecond quarter of 2017 and 2016.2023, compared with 6.8% in the second quarter of 2022. The G&A expense ratio increased to 8.2% forwas 7.3% in the ninesix months ended SeptemberJune 30, 2017,2023, compared with 7.8% for7.1% in the ninesix months ended SeptemberJune 30, 2016. Refer to discussion above,2022. The increase resulted primarily from deployment costs for new business implementation associated with our recent contract wins that started in “Consolidated Results.”July and will start in 2024 and was partially offset by the benefits of scale and continued disciplined cost management.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization was $42 million in the second quarter of 2023, compared with $44 million in the second quarter of 2022, and increased to $86 million in the six months ended June 30, 2023, compared with $84 million in the six months ended June 30, 2022.
OTHER OPERATING EXPENSES
Other operating expenses increased to $17 million in the second quarter of 2023, compared with $11 million in the second quarter of 2022, and increased to $33 million in the six months ended June 30, 2023, compared with $27 million in the six months ended June 30, 2022. Other operating expenses mainly includes service costs associated with long-term services and supports consultative services we provide in Wisconsin, as noted above.
INTEREST EXPENSE
Interest expense was $27 million in the second quarter of 2023 and 2022, and $55 million in the six months ended June 30, 2023 and 2022.
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INCOME TAXES
Income tax expense amounted to $107 million in the second quarter of 2023, or 25.5% of pretax income, compared with income tax expense of $86 million, or 25.8% of pretax income in the second quarter of 2022. Income tax expense amounted to $213 million in the six months ended June 30, 2023, or 25.2% of pretax income, compared with income tax expense of $172 million, or 25.4% of pretax income in the six months ended June 30, 2022. The difference in the effective tax rate is primarily due to state income taxes.

TRENDS AND UNCERTAINTIES
COVID-19 PANDEMIC
Federal Economic Stabilization and Other Programs
The PHE officially ended on May 11, 2023. There are several other healthcare programs tied to the PHE which are impacted by this change in policy. These include coverage of COVID-19 testing and vaccines, changes to the Medicare fee schedule for COVID-related treatments, and free coverage of at-home COVID-19 diagnostic tests. Per federal statutory and regulatory requirements, some of these programs concluded with the end of the PHE, while some will continue for the rest of 2023 or through 2024, and some will remain in place permanently.
Operations
Enrollment and Premium Revenue
Excluding acquisitions and our exit from Puerto Rico, we added approximately 800,000 new Medicaid members since March 31, 2020, when we first began to report on the impacts of the pandemic. We believe this membership increase was mainly due to the suspension of redeterminations for Medicaid eligibility. The recently passed Consolidated Appropriations Act of 2023 authorizes states to resume redeterminations and terminate coverage for ineligible enrollees starting on April 1, 2023, irrespective of the status of the PHE. Consequently, during the second quarter of 2023, all but four of the states in which we operate began disenrolling members, with the remaining states initiating disenrollment on July 1, 2023. Our Medicaid membership declined 93,000 members during the second quarter of 2023, which was within our expectations. Although the medical cost profile of members who have left is slightly more favorable than the portfolio average, the impact on our Medicaid MCR during the second quarter of 2023 was negligible and within our expectations. We are still in the early stages of the Medicaid redetermination process, but based on the experience to date, we continue to expect that we will retain approximately half the membership gained since March 31, 2020.
OTHER RECENT DEVELOPMENTS
Iowa Procurement—Medicaid. Our new contract with the Iowa Department of Health and Human Services commenced on July 1, 2023, and offers health coverage to TANF, CHIP, ABD, LTSS and Medicaid Expansion beneficiaries. This new contract has a term of four years, with a potential for two two-year extensions.
Mississippi Procurement—Medicaid. In August 2022, we announced that our Mississippi health plan had been notified by the Mississippi Division of Medicaid (“DOM”) of its intent to award a Medicaid Coordinated Care Contract for its Mississippi Coordinated Access Program and Mississippi Children’s Health Insurance Program pursuant to the Request for Qualifications issued by DOM in December 2021. The four-year contract was expected to begin on July 1, 2023, but in the second quarter of 2023, DOM extended the existing contracts by an additional year. We now expect the four-year contract to commence July 1, 2024, and DOM has discretion to extend the new awards for an additional two-years. The award enables us to continue serving Medicaid members across the state.
California Acquisition—Medicare. On June 30, 2023, we announced a definitive agreement to acquire 100% of the issued and outstanding capital stock of Brand New Day and Central Health Plan of California, each of which is a wholly owned subsidiary of Bright Health Company of California, Inc. The purchase price for the transaction is approximately $510 million, net of certain tax benefits, which we intend to fund with available funds including cash on hand. The transaction is subject to federal and state regulatory approvals, the solvency and continued operation as a going concern of Bright Health Group throughout the pre-closing period, and other closing conditions. We currently expect the transaction to close by the first quarter of 2024.
Indiana Procurement—Medicaid. In March 2023, we announced that the Indiana Department of Administration has recommended that contract negotiations begin with our Indiana health plan. Under the proposed contract with the Indiana Family and Social Services Administration (“FSSA”), we are expected to provide risk-based managed care long term services and supports as part of the Indiana Pathways for Aging LTSS program pursuant to the request
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for proposal issued by FSSA in February 2022. The new contract is expected to have an initial four-year term, with the potential for two, one-year renewal terms.
Wisconsin Acquisition—Medicaid and Medicare. On July 13, 2022, we announced a definitive agreement to acquire substantially all the assets of My Choice Wisconsin (“MCW”). The purchase price for the transaction is approximately $150 million, net of expected tax benefits and required regulatory capital, which we intend to fund with cash on hand. The transaction is subject to receipt of applicable federal and state regulatory approvals, and the satisfaction of other customary closing conditions. We currently expect the transaction to close in the fourth quarter of 2023.
For a discussion of additional segment trends, uncertainties and other developments, refer to our 2022 Annual Report on Form 10-K, “Item 1. Business—Our Business,” and “—Legislative and Political Environment.”

REPORTABLE SEGMENTS
As of June 30, 2023, we served approximately 5.2 million members eligible for Medicaid, Medicare, and other government-sponsored healthcare programs for low-income families and individuals, including Marketplace members, most of whom receive government premium subsidies.
We currently have four reportable segments consisting of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other.
The Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which we offer managed healthcare services. The Other segment, which is insignificant to our consolidated results of operations, includes long-term services and supports consultative services in Wisconsin.
HOW WE ASSESS PERFORMANCE
We derive our revenues primarily from health insurance premiums. Our primary customers are state Medicaid agencies and the federal government.
The key metrics used to assess the performance of our Medicaid, Medicare, and Marketplace segments are premium revenue, medical margin and medical care ratio (“MCR”). MCR represents the amount of medical care costs as a percentage of totalpremium revenue. Therefore, the underlying medical margin, or the amount earned by the Medicaid, Medicare, and Marketplace segments after medical costs are deducted from premium revenue, was 0.7%represents the most important measure of earnings reviewed by management, and 0.8%is used by our chief executive officer to review results, assess performance, and allocate resources. The key metric used to assess the performance of our Other segment is service margin. The service margin is equal to service revenue minus cost of service revenue.
Management’s discussion and analysis of the change in the nine months ended September 30, 2017 and 2016, respectively.

IMPAIRMENT LOSSES
Seemedical margin is discussed below under “Segment Financial Performance.” For more information, see Notes to Consolidated Financial Statements, Note 10, “Impairment Losses.8, “Segments.”
RESTRUCTURING AND SEPARATION COSTSSEGMENT MEMBERSHIP
See Notes to Consolidated Financial Statements, Note 11, “RestructuringThe following table sets forth our membership by segment as of the dates indicated:
June 30,December 31,June 30,
202320222022
Medicaid4,741,000 4,754,000 4,610,000 
Medicare166,000 156,000 151,000 
Marketplace269,000 348,000 357,000 
Total5,176,000 5,258,000 5,118,000 
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SEGMENT FINANCIAL PERFORMANCE
The following tables summarize premium revenue, medical margin, and Separation Costs.”
INTEREST EXPENSE
Interest expense was $32 millionMCR by segment for the thirdperiods indicated (dollars in millions):
Three Months Ended June 30,
20232022
Premium
Revenue		Medical
Margin		MCRPremium
Revenue		Medical
Margin		MCR
Medicaid$6,485 $756 88.3 %$6,301 $755 88.0 %
Medicare1,044 113 89.2 957 124 86.9 
Marketplace513 135 73.7 541 48 91.2 
Total$8,042 $1,004 87.5 %$7,799 $927 88.1 %
Six Months Ended June 30,
20232022
Premium
Revenue		Medical
Margin		MCRPremium
Revenue		Medical
Margin		MCR
Medicaid$12,834 $1,490 88.4 %$12,281 $1,465 88.1 %
Medicare2,090 239 88.6 1,900 252 86.7 
Marketplace1,003 289 71.2 1,149 178 84.5 
Total$15,927 $2,018 87.3 %$15,330 $1,895 87.6 %
Medicaid
Medicaid premium revenue increased $184 million, or 3% in the second quarter of 2017,2023, when compared with $26the second quarter of 2022. Medicaid premium revenue increased $553 million, or 5% in the six months ended June 30, 2023, when compared with the six months ended June 30, 2022. The increases were mainly due to organic membership growth and the impact from the AgeWell acquisition that closed in the fourth quarter of 2022. Excluding the AgeWell acquisition, membership growth was across several states and was mainly driven by the extension of the PHE period and the associated suspension of membership redeterminations due to COVID-19.
The medical margin in our Medicaid program in the second quarter of 2023 was essentially flat when compared with the second quarter of 2022, and increased $25 million, or 2%, in the six months ended June 30, 2023 when compared with the six months ended June 30, 2022. The year-over-year changes for both periods were driven by increased premium revenues and margin associated with the membership growth discussed above, partially offset by an increase in MCR.
The Medicaid MCR increased 30 basis points to 88.3% in the second quarter of 2023, from 88.0% in the second quarter of 2022, and increased 30 basis points to 88.4% in the six months ended June 30, 2023, from 88.1% in the six months ended June 30, 2022. The increase was mainly attributable to changes in business and membership mix, partially offset by improved operating performance and medical cost management. The Medicaid MCR for the thirdsix months ended June 30, 2023 is consistent with our long-term target range.
Medicare
Medicare premium revenue increased $87 million, or 9%, in the second quarter of 2016. Interest expense was $852023 compared to the second quarter of 2022, and increased $190 million, foror 10%, in the ninesix months ended SeptemberJune 30, 2017,2023 compared with $76 million forto the ninesix months ended SeptemberJune 30, 2016. Interest expense includes non-cash interest expense relating2022. The increase was primarily due to the amortizationimpact of the discount on convertible senior notes, which amounted to $8 millionMAPD and D-SNP membership expansion, including organic membership growth in existing states.
The medical margin for both the third quarter of 2017 and 2016, and $24 million and $23Medicare decreased $11 million in the ninesecond quarter of 2023, and decreased $13 million in the six months ended SeptemberJune 30, 2017 and 2016, respectively. We expect interest expense2023, when compared to continuethe same periods in 2022. The decrease in both periods was mainly due to the increase in future periods as a resultMCR discussed below, partially offset by the increase in premium revenues.
The Medicare MCR increased to 89.2% in the second quarter of 2023, from 86.9% in the second quarter of 2022, or 230 basis points. The Medicare MCR increased to 88.6% in the six months ended June 30, 2023, compared to 86.7% in the six months ended June 30, 2022, or 190 basis points. The increases were primarily driven by increased utilization in professional and outpatient services and the impact of lower risk-adjusted premiums associated with new MAPD and D-SNP members, partially offset by higher risk scores on renewing members that
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more closely reflect the acuity of our recent $330 million offering of 4.875% Notes,membership, and borrowings under the Credit Facility. See further discussion in Notes to Consolidated Financial Statements, Note 7, “Debt.”
OTHER INCOME, NET
As described in Notes to Consolidated Financial Statements, Note 1, “Basis of Presentation,” in February 2017, we received an aggregate termination fee of $75 millionstrong medical cost management. The Medicare MCR for the terminated Medicare Acquisition. This amountsix months ended June 30, 2023 is reportedwithin our long-term target range.
Marketplace
Marketplace premium revenue decreased $28 million in “Other income, net”the second quarter of 2023 compared to the second quarter of 2022, and decreased $146 million in the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in both periods was mainly due to an expected reduction in membership, partially offset by an increase in premium revenue PMPM. Our Marketplace membership as of June 30, 2023, amounted to 269,000 members, representing a decrease of 88,000 members compared to June 30, 2022, which is in line with our consolidated statements of operations.
INCOME TAXESproduct and pricing strategy to achieve our target margins in this segment. The increase in premium revenue PMPM was due to higher silver metal tier product mix consistent with the product and pricing strategy.
The (benefit) provision for income taxes was recorded at an effective rate of 14.6% forMarketplace medical margin increased $87 million in the thirdsecond quarter of 2017,2023 when compared with 54.0% for the thirdsecond quarter of 2016,2022, and an effective rate of 15.5% forincreased $111 million in the ninesix months ended SeptemberJune 30, 20172023 when compared with 58.0% for the ninesix months ended SeptemberJune 30, 2016.2022. The significantimprovement in the second quarter of 2023 was due mainly to the decrease in MCR discussed below, partially offset by the decrease in membership and premiums.
The Marketplace MCR decreased to 73.7% in the second quarter of 2023, compared to 91.2% in the second quarter of 2022, or 1,750 basis points, and decreased to 71.2% in the six months ended June 30, 2023, compared to 84.5% in the six months ended June 30, 2022, or 1,330 basis points. The decreases resulted mainly from our product and pricing strategy to achieve our target margins and a favorable change in the effective tax rate2022 risk adjustment payable recognized in the second quarter of 2023, compared to an unfavorable change in the 2021 risk adjustment payable recognized in the second quarter of 2022. These impacts were partially offset by changes in membership mix discussed above. Silver metal tier products incur less MCR seasonality than bronze metal tier products due to lower deductibles. Our second quarter 2023 Marketplace MCR was primarily a resultbelow full year expectations, but consistent with seasonality patterns.
Other
The Other segment includes service revenues and costs associated with long-term services and supports consultative services we provide in Wisconsin, and also includes certain corporate amounts not allocated to the Medicaid, Medicare, or Marketplace segments. Such amounts were immaterial to our consolidated results of pretax losses in 2017 combined with significant nondeductible expenses (primarily, separation costsoperations for the three and goodwill impairment)six months ended June 30, 2023 and the 2017 HIF moratorium as described above in “Health Plans—Health Insurer Fee (HIF) Revenue and Expenses.”2022.


LIQUIDITY, AND FINANCIAL CONDITION AND CAPITAL RESOURCES
INTRODUCTIONLIQUIDITY
We manage our cash, investments, and capital structure to meet the short- and long-term obligations of our business while maintaining liquidity and financial flexibility. We forecast, analyze, and monitor our cash flows to enable prudent investment management and financing within the confines of our financial strategy.
We maintain liquidity at two levels: 1) the regulated health plan subsidiaries; and 2) the parent company. Our regulated subsidiaries generate significant cash flows from premium revenue, which is generally received a short time before related healthcare services are paid. Premium revenue is our primary source of liquidity. Thus, any decline in the receipt of premium revenue, and our profitability, could have a negative impact on our liquidity.
A majority of the assets held by our Health Plans segment regulated health plan subsidiaries is in the form of cash, cash equivalents, and investments. When available and as permitted by applicable regulations, cash in excess of the capital needs of our regulated health plan subsidiaries is generally paid in the form of dividends to our parent company to be used for general corporate purposes. In the second quarter and six months ended June 30, 2023, the parent company received $148 million and $248 million, respectively, in dividends and return of capital from the regulated health plan subsidiaries. See further discussion of dividends below in “Future Sources and Uses of Liquidity—Future Sources.”
The parent company may also contribute capital to the regulated health plan subsidiaries to satisfy minimum statutory net worth requirements, including funding for newer health plans. In the second quarter and six months ended June 30, 2023, the parent company contributed capital in the aggregate amount of $17 million and $33 million, respectively, to certain of the regulated health plan subsidiaries.
Cash, cash equivalents and investments at the parent company amounted to $482 million and $375 million as of June 30, 2023, and December 31, 2022, respectively. The increase as of June 30, 2023, was primarily due to
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dividends received from regulated health plan subsidiaries, partially offset by the timing of corporate payments and capital contributions to regulated health plan subsidiaries.
Investments
After considering expected cash flows from operating activities, we generally invest cash of regulated subsidiaries that exceeds our expected short-term obligations in longer term, investment-grade, and marketable debt securities to improve our overall investment return. These investments are made pursuant to board-approved investment policies thatwhich conform to applicable state laws and regulations.

Our investment policies are designed to provide liquidity, preserve capital, and maximize total return on invested assets, all in a manner consistent with state requirements that prescribe the types of instruments in which our subsidiaries may invest. These investment policies require that our investments have final maturities of less than 15 years, or less than 15 years average life for structured securities. Professional portfolio managers operating under documented guidelines manage our investments and a portion of our cash equivalents. Our portfolio managers must obtain our prior approval before selling investments where the loss position of those investments exceeds certain levels.
The overall rating of our portfolio remains strong and is rated A+. Our investments are classified as current assets, except forinvestment policy has directives in conjunction with state guidelines to minimize risks and exposures in volatile markets. Additionally, our held-to-maturity restricted investments, which are classified as non-current assets, and which are not includedportfolio managers assist us in navigating volatility in the totals below. capital markets.
Our held-to-maturity restricted investments are invested principally in certificatescash, cash equivalents, U.S. Treasury securities, and corporate debt securities; we have the ability to hold such restricted investments until maturity. All of deposit and U.S. treasury securities.
moh-33120_chartx55244a02.jpgmoh-63020_chartx34844a01.jpg
Investment income increased to $37 million for the nine months ended September 30, 2017, compared with $25 million for the nine months ended September 30, 2016, primarily due to the increase in investedour unrestricted investments are classified as current assets.
MARKET RISKCash Flow Activities
Our earnings and financial position are exposed to financial market risk relating to changes in interest rates, and the resulting impact on investment income and interest expense.
Substantially all of our investments and restricted investments are subject to interest rate risk and will decrease in value if market interest rates increase. Assuming a hypothetical and immediate 1% increase in market interest rates at September 30, 2017, the fair value of our fixed income investments would decrease by approximately $25 million. Declines in interest rates over time will reduce our investment income.
For further information on fair value measurements and our investment portfolio, please refer to Notes to Consolidated Financial Statements, Note 4, “Fair Value Measurements,” and Note 5, “Investments.”
Borrowings under our Credit Facility bear interest based, at our election, on a base rate or an adjusted London Interbank Offered Rate (LIBOR), plus in each case the applicable margin. As of September 30, 2017, $300 million was outstanding under the Credit Facility.


LIQUIDITY
A condensed schedule of cash flows to facilitate our discussion of liquidityare summarized as follows:
Six Months Ended June 30,
Nine Months Ended September 30,20232022Change
2017 2016 Change
(In millions)(In millions)
Net cash provided by operating activities$957
 $633
 $324
Net cash provided by operating activities$1,403 $731 $672 
Net cash used in investing activities(474) (131) (343)Net cash used in investing activities(439)(591)152 
Net cash provided by financing activities632
 11
 621
Net increase in cash and cash equivalents$1,115
 $513
 $602
Net cash used in financing activitiesNet cash used in financing activities(55)(268)213 
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalentsNet increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents$909 $(128)$1,037 
Operating Activities
Cash provided by operating activities increased $324 million in the nine months ended September 30, 2017 compared with the nine months ended September 30, 2016. The change in net (loss) income, partially offset by the effect of adjustments to reconcile net loss to net cash provided by operating activities, reduced cash provided by operating activities by $169 million. This change was more than offset by the aggregate of the following changes:
Medical claims and benefits payable. In 2017, the change in medical claims and benefits payable increased cash flows from operations by $381 million, primarily due to additional accruals relating to increased membership in 2017.
Receivables and deferred revenue. In 2017, the aggregate change in receivables and deferred revenue increased cash flows from operations by $395 million. Cash flows from operations in each period were impacted by the timing of premium revenues receipts. In general, state or federal payors may delay our premium payments, which we record as a receivable, or they may prepay the following month’s premium payment, which we record as deferred revenue. We typically receive capitation payments monthly;monthly, in advance of payments for medical claims; however, state or federalgovernment payors may decide to adjust their payment schedules, which could positively or negatively impactimpacting our reported cash flows from operating activities in any given period. For example, government payors may delay our premium payments, or they may prepay the following month’s premium payment.
Amounts due government agencies. In 2017,Net cash provided by operations for the changesix months ended June 30, 2023 was $1,403 million, compared with $731 million in amounts due government agencies decreasedthe six months ended June 30, 2022. The $672 million increase in cash flows from operations by $381 million, primarilyflow was due to paymentsthe net impact of timing differences in government receivables and payables accompanied by the third quarter of 2017.growth in operations and net earnings.
Investing Activities
Net cash used in investing activities increased $343was $439 million in the ninesix months ended SeptemberJune 30, 20172023, compared with $591 million used in the ninesix months ended SeptemberJune 30, 2016,2022, an increase in cash flow of $152 million. This increase in cash flow was primarily due to higherthe net activity of proceeds and purchases of investments net of sales and maturities, in the current year.six months ended June 30, 2023.
Financing Activities
Net cash provided byused in financing activities increased $621was $55 million in the ninesix months ended SeptemberJune 30, 20172023, compared with $268 million used in the ninesix months ended SeptemberJune 30, 2016, due2022, an increase in cash flow of $213 million. In the six months ended June 30, 2023, financing cash outflows included $59 million for common stock withheld to proceeds received fromsettle employee tax obligations. In the 4.875% Notes offeringsix months ended June 30, 2022, financing cash outflows included common stock purchases
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of $200 million and borrowings under$53 million for common stock withheld to settle employee tax obligations. Additionally, we paid $20 million in the Credit Facility.six months ended June 30, 2022, to settle contingent consideration liabilities.

FINANCIAL CONDITION
We believe that our cash resources, combined with borrowing capacity available under ourthe Credit Facility,Agreement as discussed further below in “Future Sources and Uses of Liquidity—Sources”,Future Sources,” and internally generated funds will be sufficient to support costs under the Restructuring Plan,our operations, regulatory requirements, debt repayment obligations and capital expenditures for at least the next 12 months.
On a consolidated basis, at SeptemberJune 30, 2017,2023, our working capital was $1,746 million,$3.9 billion, compared with $1,418 million$3.2 billion at December 31, 2016.2022. At SeptemberJune 30, 2017,2023, our cash and investments amounted to $6,166 million,$9.0 billion, compared with $4,689$7.7 billion at December 31, 2022. A significant portion of our portfolio is held in cash and cash equivalents and we do not anticipate the fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position since we intend to hold our securities to maturity. Net unrealized losses on our investments classified as current and available for sale decreased to $193 million at June 30, 2023 compared to $210 million at December 31, 2016.2022. We have determined that the unrealized losses primarily resulted from fluctuating interest rates, rather than a deterioration of the creditworthiness of the issuers.
Regulatory Capital and Dividend Restrictions
Each of our regulated, wholly owned subsidiaries must maintain a minimum amount of statutory capital determined by statute or regulations. Such statutes, regulations and capital requirements also restrict the timing, payment and amount of dividends and other distributions, loans or advances that may be paid to us as the sole stockholder. To the extent our subsidiaries must comply with these regulations, they may not have the financial flexibility to transfer funds to us. Based upon current statutes and regulations, the minimum capital and surplus requirement for these subsidiaries was estimated to be approximately $2.3 billion at both June 30, 2023 and December 31, 2022. The aggregate capital and surplus of our regulated, wholly owned subsidiaries was in excess of these minimum capital requirements as of both dates.
Under applicable regulatory requirements, the amount of dividends that may be paid by our regulated, wholly owned subsidiaries without prior approval by regulatory authorities as of June 30, 2023, was approximately $270 million in the aggregate. These subsidiaries may pay dividends over this amount, but only after approval is granted by the regulatory authorities.
Based on our cash and investments balances as of June 30, 2023, management believes that our regulated, wholly owned subsidiaries remain well capitalized and exceed their regulatory minimum requirements. We have the ability, and have committed to provide, additional capital to each of our health plans as necessary to ensure compliance with statutory capital and surplus requirements.
Debt Ratings. Our 5.375% Notes areRatings
Each of our senior notes is rated “BB”“BB-” by Standard & Poor’s, and “B2”“Ba3” by Moody’s Investor Service, Inc. A significant downgrade in our ratings could adversely affect our borrowing capacity and increase our future borrowing costs.

Financial Covenants
Financial Covenants. OurThe Credit FacilityAgreement contains customary non-financial and financial covenants, including a net leverage ratio and an interest coverage ratio. Such ratios presented below, are computed as defined by the terms of the Credit Facility.
Credit Facility Financial CovenantsRequired Per AgreementAs of September 30, 2017
Net leverage ratio<4.0x2.5x
Interest coverage ratio>3.5x8.8x
Agreement.
In addition, the termsindentures governing each of our 4.875% Notes, 5.375% Notes and each of the 1.125% and 1.625% Convertible Notesoutstanding senior notes contain cross-default provisions with the Credit Facility that are triggered upon an eventdefault by us or any of default underour subsidiaries on any indebtedness in excess of the Credit Facility, and when borrowings under the Credit Facility equal or exceed certain amounts as definedamount specified in the related indentures.applicable indenture. As of SeptemberJune 30, 2017,2023, we were in compliance with all financial and non-financial covenants under the Credit Facility.Agreement and the indentures governing our senior notes.

FUTURE SOURCES AND USES OF LIQUIDITY
Future Sources
Our Health Plans segment regulated subsidiaries generate significant cash flows from premium revenue, which weis generally receivereceived a short time before we pay for the related health care services. Such cash flowshealthcare services are paid. Premium revenue is our primary source of liquidity. Thus, any future decline in the receipt of premium revenue, and our profitability, maycould have a negative impact on our liquidity.
Potential Impact of COVID-19 Pandemic. Excluding acquisitions and our exit from Puerto Rico, we added approximately 800,000 new Medicaid members since March 31, 2020, when we first began to report on the impacts of the pandemic. We believe this membership increase was mainly due to the suspension of redeterminations for Medicaid eligibility. The recently passed Consolidated Appropriations Act of 2023 authorizes states to resume
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redeterminations and terminate coverage for ineligible enrollees starting on April 1, 2023, irrespective of the status of the PHE. Consequently, during the second quarter of 2023, all but four of the states in which we operate began disenrolling members, with the remaining states initiating disenrollment on July 1, 2023. Our Medicaid membership declined 93,000 members during the second quarter of 2023, which was within our expectations. Although the medical cost profile of members who have left is slightly more favorable than the portfolio average, the impact on our Medicaid MCR during the second quarter of 2023 was negligible and within our expectations. We are still in the early stages of the Medicaid redetermination process, but based on the experience to date, we continue to expect that we will retain approximately half the membership gained since March 31, 2020.
Dividends from Subsidiaries. When available and as permitted by applicable regulations, cash in excess of the capital needs of our regulated health plans is generally paid in the form of dividends to our unregulated parent company to be used for general corporate purposes.
Credit Agreement Borrowing Capacity. As of June 30, 2023, we had available borrowing capacity of $1 billion under the revolving credit facility of our Credit Agreement. In addition, the nine months ended September 30, 2017Credit Agreement provides for a $15 million swingline sub-facility and 2016, we receiveda $100 million and $50letter of credit sub-facility, as well as incremental term loans available to finance certain acquisitions up to $500 million, respectively, in dividends fromplus an unlimited amount of such term loans as long as our regulated health plan subsidiaries. We received $36 million in dividends from our unregulated subsidiaries in the nine months ended September 30, 2017.consolidated net leverage ratio is not greater than a defined maximum. See further discussion in Notes to Consolidated Financial Statements, Note 13, “Commitments and Contingencies—Regulatory Capital Requirements and Dividend Restrictions.”
Restructuring Plan. As previously disclosed, we estimate that our restructuring plan will reduce annualized run-rate expenses by approximately $300 million to $400 million when completed by the end of 2018. We have already achieved $200 million of these run-rate reductions on an annualized basis, which will take full effect no later than January 1, 2018. All savings targets discussed in regards to the restructuring plan represent annualized run-rate savings that we expect to achieve during the year following the indicated implementation date. We expect one-time costs associated with the restructuring plan to exceed the benefits realized in 2017 due to the upfront payment of implementation costs and the delayed benefit of full savings until the beginning of 2018. We expect the cost savings to reduce both “General and administrative expenses” and “Medical care costs” reported on our consolidated statements of operations.
The following table illustrates our estimates of run-rate savings associated with the restructuring plan. Such savings will be offset, through the end of 2018, by the costs noted below in “Uses.” Following 2018, the savings will be offset by approximately $20 million in run-rate expenses resulting from the implementation of restructuring plan initiatives.
Estimated Savings Expected to be Realized by Reportable SegmentHealth PlansOtherTotal
(In millions)
General and administrative expenses$50$120 to $140$170 to $190
Medical care costs$110 to $190$20$130 to $210
$160 to $240$140 to $160��$300 to $400
Credit Facility. Refer to Notes to Consolidated Financial Statements, Note 7, “Debt,” for a detailed discussion of our Credit Facility. In August 2017, we drew against the Credit Facility in the amount of $300 million.
4.875% Notes. The 4.875% Notes contain a limitation on the use of proceeds which required us to deposit the net proceeds from their issuance into a segregated deposit account, a current asset reported as “Restricted investments” in our consolidated balance sheets. See further discussion in Notes to Consolidated Financial Statements, Note 7, “Debt.”

Future Uses
Shelf Registration Statement. We have a shelf registration statementCommon Stock Purchases. In November 2022, our board of directors authorized the purchase of up to $500 million of our common stock. This new program is funded with cash on file with the Securitieshand and Exchange Commission to register an unlimitedextends through December 31, 2023. The exact timing and amount of any combination of debt or equity securitiesrepurchase is determined by management based on market conditions and share price, in one or more offerings. Specific information regarding the termsaddition to other factors, and securities being offered will be provided at the time of an offering. Proceeds from future offerings are expected to be used for general corporate purposes, including, but not limitedsubject to the repaymentrestrictions relating to volume, price, and timing under applicable law. As of debt, investments in or extensionsJune 30, 2023, $300 million remained available to purchase our common stock under this program through December 31, 2023.
Acquisitions.On July 13, 2022, we announced a definitive agreement to acquire substantially all the assets of creditMy Choice Wisconsin (“MCW”). The purchase price for the transaction is approximately $150 million, net of expected tax benefits and required regulatory capital, which we intend to our subsidiariesfund with cash on hand. The transaction is subject to receipt of applicable federal and state regulatory approvals, and the financingsatisfaction of possible acquisitions or business expansion.
Uses
Restructuring. other customary closing conditions. We recorded $118 million of restructuring costs incurrently expect the third quarter of 2017. Restructuring costs incurredtransaction to date consist primarily of termination benefits, write-offs of capitalized software due to the re-design of our core operating processes, restructuring of our direct delivery operations, and consulting fees. Under the restructuring plan, and also including separation costs to former executives, we have made cash payments of $24 million in the nine months ended September 30, 2017, and have accrued a liability of $65 million for future payments as of September 30, 2017.
We estimate that total pre-tax costs associated with the restructuring plan will be approximately $70 million to $90 millionclose in the fourth quarter of 2017,2023.
On June 30, 2023, we announced a definitive agreement to acquire 100% of the issued and outstanding capital stock of Brand New Day and Central Health Plan of California, each of which is a wholly owned subsidiary of Bright Health Company of California, Inc. The purchase price for the transaction is approximately $510 million, net of certain tax benefits, which we intend to fund with an additional $20 millionavailable funds including cash on hand. The transaction is subject to $40 million to be incurred in 2018.federal and state regulatory approvals, the solvency and continued operation as a going concern of Bright Health Group throughout the pre-closing period, and other closing conditions. We currently estimate that a majority ofexpect the costs we expecttransaction to incur inclose by the fourthfirst quarter of 2017 will be settled in cash. The costs we incur associated with the restructuring plan are reported in “Restructuring and separation costs” in our consolidated statements of operations.2024.
Estimated Costs Expected to be Incurred by Reportable SegmentHealth PlansMolina Medicaid SolutionsOtherTotal
(In millions)
Termination benefits$30 to $35—
$30 to $35$60 to $70
Other restructuring costs$40 to $45$10$110 to $115$160 to $170
$70 to $80$10$140 to $150$220 to $240
Regulatory Capital RequirementsRequirements. We have the ability, and Dividend Restrictions. For more information on our regulatoryhave committed to provide, additional capital requirements and dividend restrictions, refer to Notes to Consolidated Financial Statements, Note 13, “Commitments and Contingencies.”
States’ Budgets. From time to time, the states in whicheach of our health plans operate may experience financial difficulties, which could leadas necessary to delays in premium payments. Until July 4, 2017, the state of Illinois operated without a budget for its current fiscal year. As of September 30, 2017, our Illinois health plan served approximately 163,000 members,ensure compliance with statutory capital and recognized premium revenue of approximately $447 million in the nine months ended September 30, 2017. As of October 27, 2017, the state of Illinois owed us approximately $220 million for certain March through September 2017 premiums.surplus requirements.
On May 3, 2017, Puerto Rico’s financial oversight board filed for a form of bankruptcy in the U.S. District Court in Puerto Rico under Title III of PROMESA. The Title III provision allows for a court debt restructuring process similar to U.S. bankruptcy protection. To the extent such bankruptcy results in our failure to receive payment of amounts due under our Medicaid contract with the Commonwealth or the inability of the Commonwealth to extend our Medicaid contract at the end of its current term, such bankruptcy could have a material adverse effect on our business, financial condition, cash flows, or results of operations. As of September 30, 2017, the plan served approximately 306,000 members and recorded premium revenue of approximately $553 million in the nine months ended September 30, 2017. As of October 27, 2017, the Commonwealth was current with its premium payments.
Convertible Notes. We have outstanding $550 million aggregate principal amount of 1.125% cash convertible senior notes due January 15, 2020, unless earlier repurchased or converted. We refer to these notes as our 1.125% Convertible Notes. We also have outstanding $302 million aggregate principal amount of 1.625% convertible senior notes due August 14, 2044, unless earlier repurchased, redeemed, or converted. We refer to these notes as our 1.625% Convertible Notes. We refer to the 1.125% Convertible Notes and 1.625% Convertible Notes collectively as the Convertible Notes. The 1.125% Convertible Notes are convertible entirely into cash, and the 1.625% Convertible Notes are convertible partially into cash, each prior to their respective maturity dates under certain circumstances, one of which relates to the closing price of our common stock over a specified period. We refer to this conversion trigger as the stock price trigger.

The stock price trigger for the 1.125% Convertible Notes is $53.00 per share. The 1.125% Convertible Notes met this trigger in the quarter ended September 30, 2017; therefore, they are convertible into cash and are reported in current portion of long-term debt as of September 30, 2017.
The stock price trigger for the 1.625% Convertible Notes is $75.51 per share. The 1.625% Convertible Notes did not meet this stock price trigger in the quarter ended September 30, 2017. However, on contractually specified dates beginning in 2018, holders of the 1.625% Convertible Notes may require us to repurchase some or all of such notes. In addition, beginning May 15, 2018 until August 19, 2018, holders may convert some or all of the 1.625% Convertible Notes. Because of these put and conversion features, the 1.625% Convertible Notes are reported in current portion of long-term debt as of September 30, 2017. As noted above, because the proceeds from the 4.875% Notes are initially restricted to payments upon conversion or redemption of the 1.625% Convertible Notes, such restricted investments are also classified as current in the accompanying consolidated balance sheets.
For economic reasons related to the trading market for our Convertible Notes, we believe that the amount of the notes that may be converted over the next twelve months, if any, will not be significant. However, if the trading market for our Convertible Notes becomes closed or restricted due to market turmoil or other reasons such that the notes cannot be traded, or if the trading price of our Convertible Notes, which normally trade at a marginal premium to the underlying composite stock-and-interest economic value, no longer includes that marginal premium, holders of our Convertible Notes may elect to convert the notes to cash.
We currently have sufficient available cash, combined with borrowing capacity available under our Credit Facility, to fund such conversions.
CONTRACTUAL OBLIGATIONS
A summary of future obligations under our various contractual obligations and commitments as of December 31, 2016,2022, was disclosed in our 20162022 Annual Report on Form 10-K.
As described further in the Notes to Consolidated Financial Statements, Note 7 “Debt,” on June 6, 2017, we completed the private offering of $330 million aggregate principal amount of senior notes (4.875% Notes) due June 15, 2025. In addition, in the third quarter of 2017, we borrowed $300 million under our Credit Facility.
Other than the transactions described above, thereThere were no materialsignificant changes to this previously filed informationour contractual obligations and commitments outside the ordinary course of business during the ninesix months ended SeptemberJune 30, 2017.2023.

CRITICAL ACCOUNTING ESTIMATES
When we prepare our consolidated financial statements, we use estimates andbased on assumptions that may affect reported amounts and disclosures; actual results could differ from these estimates. Our critical accounting estimates relate to:
Health Plans segment medical•Medical claims and benefits payable. Refer to Notes to Consolidated Financial Statements, Note 6, “Medical“Medical Claims and Benefits Payable,,” for a table that presents the components of the change in medical
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claims and benefits payable, and for additional information regarding the factors used to determine our changes in estimates for all periods presented in the accompanying consolidated financial statements. Other than the discussion as noted above, in the six months ended June 30, 2023 there have beenwere no significant changes during the nine months ended September 30, 2017, to our disclosure reported in “Critical Accounting Estimates” in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.
10-K.
Health Plans segment contractual•Contractual provisions that may adjust or limit revenue or profit. For a discussion of this topic, including amounts recorded in our consolidated financial statements, refer to Notes to Consolidated Financial Statements, Note 2, “Significant“Significant Accounting Policies.Policies.”
Health Plans segment quality•Quality incentives. For a discussion of this topic, including amounts recorded in our consolidated financial statements, refer to Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies.”
Molina Medicaid Solutions segment revenue and cost recognition. There have beenIn the six months ended June 30, 2023, there were no significant changes during the nine months ended September 30, 2017, to our disclosure reported in “Critical Accounting Estimates” in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.
10-K.
Goodwill•Business combinations, goodwill, and intangible assets, net. Please In the six months ended June 30, 2023, there were no significant changes to our disclosure reported in “Critical Accounting Estimates” in our 2022 Annual Report on Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings and financial position are exposed to financial market risk relating to changes in interest rates, and the resulting impact on investment income and interest expense.
Substantially all of our investments and restricted investments are subject to interest rate risk and will decrease in value if market interest rates increase. Assuming a hypothetical and immediate 1% increase in market interest rates at June 30, 2023, the fair value of our fixed income investments would decrease by approximately $99 million. Declines in interest rates over time will reduce our investment income.
For further information on fair value measurements and our investment portfolio, please refer to Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies,4, “Fair Value Measurements,” regardingand Note 5, “Investments.”
Borrowings under the Credit Agreement bear interest based, at our adoption of Accounting Standards Update No. 2017-04 as of June 30, 2017, which has simplifiedelection, on a base rate or other defined rate, plus in each case, the test for goodwill impairment. In the third quarter of 2017, we

recorded impairment charges of $129 million for goodwill, and in the second quarter of 2017, we recorded impairment charges of $61 million for goodwill and $11 million for intangible assets, or $72 million in the aggregate. Such charges are reported in the accompanying consolidated statements of operations as “Impairment losses.” At September 30, 2017, goodwill and intangible assets, net, represented approximately 6% of total assets and 37% of total stockholders’ equity, compared with 10% and 46%, respectively, at December 31, 2016. Refer toapplicable margin. For further information, see Notes to Consolidated Financial Statements, Note 10, “Impairment Losses.7, “Debt.”

SUPPLEMENTAL INFORMATION
FINANCIAL MEASURES THAT SUPPLEMENT U.S. GAAP (NON-GAAP FINANCIAL MEASURES)
We use these non-GAAP financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performance of other public companies in the health care industry.
EBITDA*
We believe that earnings before interest, taxes, depreciation and amortization (EBITDA*) is helpful in assessing our ability to meet the cash demands of our operating units.
 Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
 (In millions)
Net (loss) income$(97) $42
 $(250) $99
Adjustments:       
Depreciation, and amortization of intangible assets and capitalized software39
 42
 129
 118
Interest expense32
 26
 85
 76
Income tax (benefit) expense(16) 50
 (46) 137
EBITDA*$(42) $160
 $(82) $430
ADJUSTED NET (LOSS) INCOME* AND ADJUSTED NET (LOSS) INCOME PER SHARE*
We believe that adjusted net (loss) income* and adjusted net (loss) income per diluted share* are helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles. The following table reconciles net income, which we believe to be the most comparable GAAP measure, to adjusted net (loss) income*.
 Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
 (In millions, except diluted per-share amounts)
Net (loss) income$(97) $(1.70) $42
 $0.76
 $(250) $(4.44) $99
 $1.77
Adjustment:               
Amortization of intangible assets7
 0.13
 9
 0.15
 24
 0.43
 24
 0.42
Income tax effect (1)
(3) (0.05) (4) (0.06) (9) (0.16) (9) (0.16)
Amortization of intangible assets, net of tax effect4
 0.08
 5
 0.09
 15
 0.27
 15
 0.26
Adjusted net (loss) income*$(93) $(1.62) $47
 $0.85
 $(235) $(4.17) $114
 $2.03
__________________________
(1)Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 37%.


CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:Procedures. Our management, with the participation of our interim chief executive officer and our chief financial officer, has concluded, based upon its evaluationevaluated, as of the end of the period covered by this report, thatQuarterly Report on Form 10-Q, the Company’s “disclosureeffectiveness of our disclosure controls and procedures”procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange ActAct). Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of 1934, as amended (the “Exchange Act”)),June 30, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level because of the material weakness in our internal control over financial reporting described below. Notwithstanding the material weakness described below, management has concluded that our consolidated financial statements included in this interim report on Form 10-Q are fairly stated in all material respects in accordance with U.S. generally accepted accounting principles (GAAP) for each of the periods presented herein.level.
Existence of a Material Weakness in Internal Control as of September 30, 2017
During the quarter ended September 30, 2017, we determined that a material weakness existed in our internal control over financial reporting relating to the design and operating effectiveness of our internal control for our interim goodwill impairment tests for our Pathways subsidiary and Molina Medicaid Solutions segment. Specifically, spreadsheet formula errors in our valuation model, and errors made in the calculation of impairment losses recorded, were not detected in our review procedures. As a result, we initially miscalculated the goodwill impairment in the three and nine months ended September 30, 2017. The impairment calculation was corrected prior to the filing of our unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2017.
Remediation Plan for Material Weakness
We will implement a remediation plan developed to address this material weakness as of September 30, 2017. The remediation efforts we intend to implement include the enhancement of the design of the controls relating to the computation and rigor of review of the goodwill impairment tests. The enhancement of the controls will include the engagement of additional subject matter experts to support the valuation calculations, key assumptions and review process. In addition, we intend to develop new review controls that operate at an appropriate level of precision to prevent or detect potential material errors within the valuation calculations. We believe these measures will remediate the material weakness identified above and will strengthen our internal control over financial reporting for the computation of reporting unit fair value and potential consequent goodwill impairment. We are currently targeting to complete the implementation of the control enhancements during the fourth quarter of 2017. We will test the operating effectiveness of the control enhancements subsequent to implementation. If the remedial measures described above are insufficient to address the material weakness described above, or are not implemented timely, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and could have the effects described in “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2016.
Changes in Internal Control Over Financial Reporting: Except as described above, management did not identify any changeReporting. There were no changes in our internal control over financial reporting during the fiscal quartersix months ended SeptemberJune 30, 20172023, that has materially affected, or isare reasonably likely to materially affect, our internal controls over financial reporting.
Existence of a Material Weakness in Internal Control as of December 31, 2016
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016, based on the framework set forth in Internal Control-Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
We determined that a material weakness existed in our internal control over financial reporting relating to the operation of an element of our process for calculating the amount owed to California by our California health plan. More specifically, a Medicaid Expansion contract amendment executed in the fourth quarter of 2016 changed the medical loss ratio corridor formula and such amendment was not initially considered in determining the liability. As a result, we understated net income by $44 million for the year ended December 31, 2016, which was material to our consolidated results for the year ended December 31, 2016. This amount was corrected prior to the issuance of our consolidated financial statements as of and for the year ended December 31, 2016.

Because of this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2016, based on criteria described in Internal Control - Integrated Framework (2013) issued by COSO.
Remediation Plan for Material Weakness
We are executing the remediation plan developed to address the material weakness reported as of December 31, 2016. The remediation efforts we have implemented include the development of robust protocols to ensure that the control, relating to the review of a contractual amendment affecting the computation of the Medicaid Expansion medical loss ratio corridor for our California health plan, is operating as designed. We believe these measures will remediate the material weakness identified above and will strengthen our internal control over financial reporting for the computation of our California Medicaid Expansion medical loss ratio corridor. We currently are targeting to complete the implementation of the control enhancements during 2017. We will test the ongoing operating effectiveness of the control enhancements subsequent to implementation, and consider the material weakness remediated after the applicable remedial control enhancements operate effectively for a sufficient period of time. If the remedial measures described above are insufficient to address the material weakness described above, or are not implemented timely, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and could have the effects described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.



LEGAL PROCEEDINGS
For information regarding legal proceedings, see Notes to Consolidated Financial Statements, Note 13,9, “Commitments and Contingencies.”


RISK FACTORS
Certain risks may have a material adverse effect on our business, financial condition, cash flows, results of operations, or stock price, and you should carefully consider them before making an investment decision.decision with respect to our securities. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed inunder the caption “Risk Factors,” in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.10-K. The risk factors described in our 20162022 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017, are not the only risks that we face. Additional risks and
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uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows, results of operations, or stock price.


UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
Purchases of common stock made by us, or on our behalf, during the second quarter ended September 30, 2017,of 2023, including shares withheld by us to satisfy our employees’ income tax obligations, are set forth below:
 
Total Number
of Shares
Purchased (1)
 
Average Price 
Paid per Share
 
Total Number of Shares
Purchased as Part of
Publicly 
Announced 
Plans or
Programs
 
Approximate 
Dollar Value
of Shares Authorized to Be Purchased Under the Plans or Programs
July 1 - July 31665
 $69.18
 —
 $—
August 1 - August 31285
 $57.03
 —
 $—
September 1 - September 30—
 $—
 —
 $—
Total950
 $65.54
 —
  
Total Number
of Shares
Purchased (1)
Average Price Paid per ShareTotal Number of Shares
Purchased as Part of
Publicly 
Announced 
Plans or
Programs
Approximate Dollar Value
of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 - April 303,000 $267.49 — $300,000,000 
May 1 - May 31— $— — $300,000,000 
June 1 - June 30— $— — $300,000,000 
Total3,000 $267.49 — 
_______________________
(1)During the second quarter of 2023, we withheld approximately 3,000 shares of common stock, to settle employee income tax obligations, for releases of awards granted under the Molina Healthcare, Inc. 2019 Equity Incentive Plan.
(2)For further information on our stock repurchase programs, refer to our 2022 Annual Report on Form 10-K, Note 13, “Stockholders' Equity.”

OTHER INFORMATION
(a)    None.        
(b)    None.
(c)    No director or officer (as defined in 17 CFR § 240.16a-1(f)) of the Company adopted or terminated (i) any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), or (ii) any “non-Rule 10b5-1 trading arrangement” (as defined in 17 CFR § 229.408(c)) during the three months ended June 30, 2023.





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INDEX TO EXHIBITS
(1)During the three months ended September 30, 2017, we withheld 950 shares of common stock under our 2011 Equity Incentive Plan to settle employee income tax obligations.

INDEX TO EXHIBITS
Exhibit No.TitleMethod of Filing
31.1Filed herewith.
31.2Employment Agreement, dated October 9, 2017, by and between Molina Healthcare, Inc. and Joseph M. Zubretsky. Filed as Exhibit 10.1 to registrant’s Form 8-K filed October 10, 2017.herewith.
32.1
31.1
Filed herewith.
32.2
32.1
Filed herewith.
101.INS 
101.INS Inline XBRL Taxonomy Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.Filed herewith.
101.SCH 
101.SCH Inline XBRL Taxonomy Extension Schema Document.Filed herewith.
101.CAL 
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.Filed herewith.
101.DEF 
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.Filed herewith.
101.LAB 
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.Filed herewith.
101.PRE
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentDocument.Filed herewith.
104Cover Page Interactive Data file (formatted as Inline XBRL and embedded within Exhibit 101)Filed herewith.



Molina Healthcare, Inc. June 30, 2023 Form 10-Q | 34
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MOLINA HEALTHCARE, INC.
(Registrant)
Dated:November 5, 2017July 27, 2023/s/ JOSEPH W. WHITEM. ZUBRETSKY
Joseph W. WhiteM. Zubretsky
Interim Chief Executive Officer
(Principal Executive Officer)
Dated:November 5, 2017July 27, 2023/s/ JOSEPH W. WHITEMARK L. KEIM
Joseph W. WhiteMark L. Keim
Chief Financial Officer and Treasurer
(Principal Financial Officer)


Molina Healthcare, Inc. 2017June 30, 2023 Form 10-Q | 6735