UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


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

For the transition period from ________ to ________

Commission file number: 001-31719

MOLINA HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)


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

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

(562) 435-3666

(Registrant’s telephone number, including area code)

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


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

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

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

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

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

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

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

The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of ~~October~~April 21, ~~2022,~~2023, was approximately ~~58,400,000.~~58,300,000.

Table of Contents

MOLINA HEALTHCARE, INC. FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

TABLE OF CONTENTS


ITEM NUMBER	ITEM NUMBER		Page	ITEM NUMBER		Page

PART I	PART I			PART I

1.	1.	Financial Statements	3	1.	Financial Statements	3

2.	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

3.	3.	Quantitative and Qualitative Disclosures About Market Risk	34	3.	Quantitative and Qualitative Disclosures About Market Risk	30

4.	4.	Controls and Procedures	34	4.	Controls and Procedures	30

PART II	PART II			PART II

1.	1.	Legal Proceedings	34	1.	Legal Proceedings	30

1A.	1A.	Risk Factors	34	1A.	Risk Factors	30

2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	35	2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

3.	3.	Defaults Upon Senior Securities	Not Applicable.	3.	Defaults Upon Senior Securities	Not Applicable.

4.	4.	Mine Safety Disclosures	Not Applicable.	4.	Mine Safety Disclosures	Not Applicable.

5.	5.	Other Information	Not Applicable.	5.	Other Information	Not Applicable.

6.	6.	Exhibits	36	6.	Exhibits	32

		Signatures	37		Signatures	33

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in millions, except per-share amounts) (Unaudited)									(Dollars in millions, except per-share amounts) (Unaudited)
Revenue:	Revenue:									Revenue:
Premium revenue	Premium revenue	$	7,636	$	6,800	$	22,966	$	19,689	Premium revenue	$	7,885	$	7,531
Premium tax revenue	Premium tax revenue	223		204		646		576		Premium tax revenue	172		208

Investment income	Investment income	49		20		82		39		Investment income	71		11
Other revenue	Other revenue	19		16		57		58		Other revenue	21		20
Total revenue	Total revenue	7,927		7,040		23,751		20,362		Total revenue	8,149		7,770
Operating expenses:	Operating expenses:									Operating expenses:
Medical care costs	Medical care costs	6,748		6,049		20,183		17,342		Medical care costs	6,871		6,563
General and administrative expenses	General and administrative expenses	560		532		1,682		1,489		General and administrative expenses	591		571
Premium tax expenses	Premium tax expenses	223		204		646		576		Premium tax expenses	172		208

Depreciation and amortization	Depreciation and amortization	45		32		129		96		Depreciation and amortization	44		40
Other	Other	16		2		43		30		Other	16		16
Total operating expenses	Total operating expenses	7,592		6,819		22,683		19,533		Total operating expenses	7,694		7,398
Operating income	Operating income	335		221		1,068		829		Operating income	455		372
Other expenses, net:	Other expenses, net:									Other expenses, net:
Interest expense	Interest expense	28		30		83		90		Interest expense	28		28

Total other expenses, net	Total other expenses, net	28		30		83		90		Total other expenses, net	28		28
Income before income tax expense	Income before income tax expense	307		191		985		739		Income before income tax expense	427		344
Income tax expense	Income tax expense	77		48		249		183		Income tax expense	106		86
Net income	Net income	$	230	$	143	$	736	$	556	Net income	$	321	$	258

Net income per share - Basic	Net income per share - Basic	$	4.00	$	2.49	$	12.74	$	9.63	Net income per share - Basic	$	5.58	$	4.45
Net income per share - Diluted	Net income per share - Diluted	$	3.95	$	2.46	$	12.58	$	9.51	Net income per share - Diluted	$	5.52	$	4.39

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions) (Unaudited)									(In millions) (Unaudited)
Net income	Net income	$	230	$	143	$	736	$	556	Net income	$	321	$	258
Other comprehensive loss:
Unrealized investment loss		(75)		(13)		(237)		(27)
Other comprehensive gain (loss):										Other comprehensive gain (loss):
Unrealized investment gain (loss)										Unrealized investment gain (loss)	46		(100)
Less: effect of income taxes	Less: effect of income taxes	(18)		(4)		(57)		(7)		Less: effect of income taxes	11		(24)
Other comprehensive loss, net of tax		(57)		(9)		(180)		(20)
Other comprehensive gain (loss), net of tax										Other comprehensive gain (loss), net of tax	35		(76)
Comprehensive income	Comprehensive income	$	173	$	134	$	556	$	536	Comprehensive income	$	356	$	182

See accompanying notes.

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 3

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CONSOLIDATED BALANCE SHEETS


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in millions, except per-share amounts)					(Dollars in millions, except per-share amounts)
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,242	$	4,438	Cash and cash equivalents	$	4,554	$	4,006
Investments	Investments	3,639		3,202		Investments	3,810		3,499
Receivables	Receivables	2,220		2,177		Receivables	2,536		2,302
Prepaid expenses and other current assets	Prepaid expenses and other current assets	391		247		Prepaid expenses and other current assets	259		277
Total current assets	Total current assets	10,492		10,064		Total current assets	11,159		10,084
Property, equipment, and capitalized software, net	Property, equipment, and capitalized software, net	412		396		Property, equipment, and capitalized software, net	274		259
Goodwill, and intangible assets, net	Goodwill, and intangible assets, net	1,263		1,252		Goodwill, and intangible assets, net	1,369		1,390
Restricted investments	Restricted investments	242		212		Restricted investments	242		238
Deferred income taxes	Deferred income taxes	198		106		Deferred income taxes	208		220
Other assets	Other assets	186		179		Other assets	119		123
Total assets	Total assets	$	12,793	$	12,209	Total assets	$	13,371	$	12,314

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Medical claims and benefits payable	Medical claims and benefits payable	$	3,622	$	3,363	Medical claims and benefits payable	$	3,824	$	3,528
Amounts due government agencies	Amounts due government agencies	2,139		2,472		Amounts due government agencies	2,349		2,079
Accounts payable, accrued liabilities and other	Accounts payable, accrued liabilities and other	818		842		Accounts payable, accrued liabilities and other	787		889
Deferred revenue	Deferred revenue	663		370		Deferred revenue	654		359
Total current liabilities	Total current liabilities	7,242		7,047		Total current liabilities	7,614		6,855
Long-term debt	Long-term debt	2,175		2,173		Long-term debt	2,177		2,176
Finance lease liabilities	Finance lease liabilities	217		219		Finance lease liabilities	204		215
Other long-term liabilities	Other long-term liabilities	118		140		Other long-term liabilities	88		104
Total liabilities	Total liabilities	9,752		9,579		Total liabilities	10,083		9,350
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at March 31, 2023 and December 31, 2022						Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at March 31, 2023 and December 31, 2022	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—		Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	Additional paid-in capital	289		236		Additional paid-in capital	296		328
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(185)		(5)		Accumulated other comprehensive loss	(125)		(160)
Retained earnings	Retained earnings	2,937		2,399		Retained earnings	3,117		2,796
Total stockholders’ equity	Total stockholders’ equity	3,041		2,630		Total stockholders’ equity	3,288		2,964
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	12,793	$	12,209	Total liabilities and stockholders’ equity	$	13,371	$	12,314

See accompanying notes.

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 4

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Outstanding Amount
(In millions)
(Unaudited)
Balance at December 31, 2021 58 $ — $ 236 $ (5) $ 2,399 $ 2,630
Net income — — — — 258 258
Other comprehensive loss, net — — — (76) — (76)
Share-based compensation 1 — (18) — — (18)
Balance at March 31, 2022 59 — 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, 2022 58 — 251 (128) 2,707 2,830
Net income — — — — 230 230
Other comprehensive loss, net — — — (57) — (57)
Share-based compensation — — 38 — — 38
Balance at September 30, 2022 58 $ — $ 289 $ (185) $ 2,937 $ 3,041


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

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









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


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

		(In millions)																		(In millions)
		(Unaudited)																		(Unaudited)
Balance at December 31, 2020		59	$	—			$	199						$	37			$	1,860		$	2,096
Net income		—	—		—				—			228				228
Common stock purchases		(1)	—		(2)				—			(120)				(122)

Other comprehensive loss, net		—	—		—				(11)			—				(11)
Share-based compensation		—	—		(27)				—			—				(27)
Balance at March 31, 2021		58	—		170				26			1,968				2,164
Net income		—	—		—				—			185				185

Share-based compensation		—	—		21				—			—				21
Balance at June 30, 2021		58	—		191				26			2,153				2,370
Balance at December 31, 2021																			Balance at December 31, 2021	58			$	—		$	236		$	(5)		$	2,399		$	2,630
Net income	Net income	—	—		—				—			143				143			Net income	—			—		—			—			258			258

Other comprehensive loss, net	Other comprehensive loss, net	—	—		—				(9)			—				(9)			Other comprehensive loss, net	—			—		—			(76)			—			(76)
Share-based compensation	Share-based compensation	—	—		14				—			—				14			Share-based compensation	1			—		(18)			—			—			(18)
Balance at September 30, 2021		58	$	—	$	205			$	17		$	2,296			$	2,518
Balance at March 31, 2022																			Balance at March 31, 2022	59			$	—	$	218		$	(81)		$	2,657		$	2,794

See accompanying notes.

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 5

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CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022

		(In millions) (Unaudited)					(In millions) (Unaudited)
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	736	$	556	Net income	$	321	$	258
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	129		96		Depreciation and amortization	44		40
Deferred income taxes	Deferred income taxes	(35)		(8)		Deferred income taxes	1		16
Share-based compensation	Share-based compensation	80		49		Share-based compensation	25		34

Other, net	Other, net	(3)		9		Other, net	5		(8)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	(15)		(247)		Receivables	(234)		21
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(110)		(43)		Prepaid expenses and other current assets	7		(32)
Medical claims and benefits payable	Medical claims and benefits payable	251		522		Medical claims and benefits payable	296		263
Amounts due government agencies	Amounts due government agencies	(360)		810		Amounts due government agencies	270		137
Accounts payable, accrued liabilities and other	Accounts payable, accrued liabilities and other	(40)		129		Accounts payable, accrued liabilities and other	(215)		(81)
Deferred revenue	Deferred revenue	293		(374)		Deferred revenue	295		(352)
Income taxes	Income taxes	59		23		Income taxes	101		67
Net cash provided by operating activities	Net cash provided by operating activities	985		1,522		Net cash provided by operating activities	916		363
Investing activities:	Investing activities:					Investing activities:
Purchases of investments	Purchases of investments	(1,764)		(2,018)		Purchases of investments	(646)		(403)
Proceeds from sales and maturities of investments	Proceeds from sales and maturities of investments	1,082		965		Proceeds from sales and maturities of investments	371		513
Net cash paid in business combinations		(134)		—

Purchases of property, equipment and capitalized software	Purchases of property, equipment and capitalized software	(81)		(56)		Purchases of property, equipment and capitalized software	(32)		(23)
Other, net	Other, net	(41)		3		Other, net	5		(13)
Net cash used in investing activities		(938)		(1,106)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(302)		74
Financing activities:	Financing activities:					Financing activities:
Common stock purchases		(200)		(128)

Common stock withheld to settle employee tax obligations	Common stock withheld to settle employee tax obligations	(53)		(52)		Common stock withheld to settle employee tax obligations	(58)		(52)

Contingent consideration liabilities settled	Contingent consideration liabilities settled	(20)		(20)		Contingent consideration liabilities settled	—		(20)

Other, net	Other, net	15		(4)		Other, net	(7)		(5)
Net cash used in financing activities	Net cash used in financing activities	(258)		(204)		Net cash used in financing activities	(65)		(77)
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents		(211)		212
Net increase in cash, cash equivalents, and restricted cash and cash equivalents						Net increase in cash, cash equivalents, and restricted cash and cash equivalents	549		360
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	4,506		4,223		Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	4,048		4,506
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	4,295	$	4,435	Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	4,597	$	4,866

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 6

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30, 2022~~MARCH 31, 2023

1. Organization and Basis of Presentation

Organization and Operations

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

As of ~~September 30, 2022,~~March 31, 2023, we served approximately ~~5.2~~5.3 million members eligible for government-sponsored healthcare programs, located across 19 states.

Our state Medicaid contracts typically have terms of three to five years, contain renewal options exercisable by the state Medicaid agency, and allow either the state or the health plan to terminate the contract with or without cause. Such contracts are subject to risk of loss in states that issue requests for proposal (“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 renewed.

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

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

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

Recent Developments

~~New York Acquisition—~~Indiana Procurement—Medicaid. ~~On October 1, 2022, we closed on our acquisition of the Medicaid Managed Long Term Care business of AgeWell New York. See Note 4, “Business Combinations,” for further information.~~

~~Nebraska Procurement—Medicaid.~~In ~~September 2022,~~March 2023, we announced that ~~our Nebraska health plan had been selected by~~ the ~~Nebraska~~Indiana Department of ~~Health~~Administration has recommended that contract negotiations begin with our Indiana health plan. Under the proposed contract with the Indiana Family and ~~Human~~Social Services ~~(DHHS)~~Administration (“FSSA”), we are expected to provide ~~health care services to Nebraskans under the state’s Medicaid~~risk-based managed care ~~program.~~long term services and supports as part of the Indiana Pathways for Aging LTSS program pursuant to the request for proposal issued by FSSA in February 2022. The new ~~five-year~~ contract is expected to ~~begin on January 1, 2024, and may be extended for~~have an ~~additional two-years.~~

~~Iowa Procurement—Medicaid.~~ In August 2022, we announced that our Iowa health plan had been notified by the Iowa Department of Health and Human Services (HHS) of its intent to award a Medicaid managed care contract pursuant to the Request for Proposal issued by HHS on February 17, 2022. The newinitial four-year ~~contract is expected to begin on July 1, 2023, and may be extended for an additional four years.~~

~~California Procurement—Medicaid.~~ In August 2022, we announced that our California health plan had been notified by the California Department of Health Care Services of its intent to award a Medi-Cal contract in each of Los Angeles, Riverside, San Bernardino, Sacramento, and San Diego Counties. The five Medi-Cal contracts are expected to commence on January 1, 2024, which enables us to continue serving Medi-Cal members in our existing counties and expand footprintterm, with the ~~addition of the Los Angeles County contract.~~

~~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~~potential for ~~its Mississippi Coordinated Access Program and Mississippi Children’s Health Insurance Program pursuant to the Request for Qualifications issued by DOM on December 10, 2021. The~~ ~~four-year contract is expected to begin on July 1, 2023, and may be extended for an additional~~ two ~~years. The award enables us to continue serving Medicaid members across the state.~~

~~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 early 2023.

~~Texas Procurement—Medicaid.~~ In March 2022, the Texas Health and Human Services Commission posted the ABD program (known in Texas as STAR+PLUS) RFP. We submitted our proposal in June 2022 to continue serving STAR+PLUS members, with awards estimated to be announced in the first quarter of 2023, and start of operations in February 2024. Further, in October 2022, the draft RFP was posted for the TANF and CHIP programs (known as

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 7~~

~~Table of Contents~~

~~the STAR & CHIP programs, and both existing contracts for us), with awards expected in late Q4 2023 or early Q1 2024 and the start of operations in late Q4 2024 or early Q1 2025.~~

~~Nevada Procurement—Medicaid.~~ Our new contract in Clark and Washoe Counties commenced on January 1, 2022, and offers health coverage to TANF, CHIP and Medicaid Expansion beneficiaries. This new contract is four years with a potential two-year extension.

~~Texas Acquisition—Medicaid and Medicare.~~ On January 1, 2022, we closed on our acquisition of Cigna Corporation’s Texas Medicaid and Medicare-Medicaid Plan (“MMP”) contracts, along with certain operating assets. See Note 4, “Business Combinations,” for further information.one-year renewal terms.

Consolidation and Interim Financial Information

The consolidated financial statements include the accounts of Molina Healthcare, Inc., and its subsidiaries. In the opinion of management, these financial statements reflect all normal recurring adjustments, which are considered necessary for a fair presentation of the results as of the dates and for the interim periods presented. All significant intercompany balances and transactions have been eliminated. The consolidated results of operations for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results for the entire year ending December 31, ~~2022.~~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, ~~2021.~~2022. Accordingly, certain disclosures that would substantially duplicate the disclosures contained in our December 31, ~~2021,~~2022, audited consolidated financial statements have been omitted. These unaudited consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the fiscal year ended December 31, ~~2021.~~2022.

Use of Estimates

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

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 7

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2. Significant Accounting Policies

Cash and Cash Equivalents

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

September 30,
2022 2021
(In millions)
Cash and cash equivalents $ 4,242 $ 4,357
Restricted cash and cash equivalents 53 78
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows $ 4,295 $ 4,435

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 8~~

~~Table of Contents~~


	March 31,
	2023		2022

	(In millions)
Cash and cash equivalents	$	4,554	$	4,804
Restricted cash and cash equivalents	43		62
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	4,597	$	4,866

Receivables

Receivables consist primarily of premium amounts due from government agencies, which are subject to potential retroactive adjustments. Because substantially all of our receivable amounts are readily determinable and substantially all of our creditors are governmental authorities, our allowance for credit losses is insignificant. Any amounts determined to be uncollectible are charged to expense when such determination is made.


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions)					(In millions)
Government receivables	Government receivables	$	1,545	$	1,566	Government receivables	$	1,896	$	1,702
Pharmacy rebate receivables	Pharmacy rebate receivables	290		276		Pharmacy rebate receivables	275		291

Other	Other	385		335		Other	365		309

Total	Total	$	2,220	$	2,177	Total	$	2,536	$	2,302

Premium Revenue Recognition and Amounts Due Government Agencies

Premium revenue is generated from our contracts with state and federal agencies, in connection with our participation in the Medicaid, Medicare, and Marketplace programs. Premium revenue is generally received based on per member per month (“PMPM”) rates established in advance of the periods covered. These premium revenues are recognized in the month that members are entitled to receive healthcare services, and premiums collected in advance are deferred. State Medicaid programs and the federal Medicare program periodically adjust premium ~~rates.~~

~~Certain~~rates, including certain components of premium revenue that are subject to accounting estimates and are described ~~in further detail~~ below, and in our ~~2021~~2022 Annual Report on Form 10-K, Note 2, “Significant Accounting Policies,” under “Contractual Provisions That May Adjust or Limit Revenue or Profit,” and “Quality Incentives.”

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Contractual Provisions That May Adjust or Limit Revenue or Profit

Many of our contracts contain provisions that may adjust or limit revenue or profit, as described below. Consequently, we recognize premium revenue as it is earned under such provisions. Liabilities accrued for premiums to be returned under such provisions are reported in the aggregate as “Amounts due government agencies,” in the accompanying consolidated balance sheets.

~~The following table sets forth~~ Categorized by program, such amounts due government agencies ~~categorized by program:~~included the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions)					(In millions)
Medicaid program:	Medicaid program:					Medicaid program:
Minimum MLR and profit sharing		$	1,091	$	1,016
Other		617		263
Minimum MLR, corridors, and profit sharing						Minimum MLR, corridors, and profit sharing	$	1,302	$	1,145
Other premium adjustments						Other premium adjustments	557		482
Medicare program:	Medicare program:					Medicare program:
Minimum MLR and profit sharing	Minimum MLR and profit sharing	100		101		Minimum MLR and profit sharing	85		84
Risk adjustment and Part D risk sharing	Risk adjustment and Part D risk sharing	74		89		Risk adjustment and Part D risk sharing	61		76
Other		23		35
Other premium adjustments						Other premium adjustments	27		27
Marketplace program:	Marketplace program:					Marketplace program:
Risk adjustment	Risk adjustment	179		902		Risk adjustment	278		230
Minimum MLR	Minimum MLR	4		18		Minimum MLR	1		2
Other		51		48
Other premium adjustments						Other premium adjustments	38		33

Total amounts due government agencies	Total amounts due government agencies	$	2,139	$	2,472	Total amounts due government agencies	$	2,349	$	2,079

Medicaid Program

Minimum MLR and ~~Retroactive~~Medical Cost Corridors. A portion of our premium revenue may be returned if certain minimum amounts are not spent on defined medical care costs as a percentage of premium revenue, or minimum medical loss ratio (“Minimum MLR”). Under certain medical cost corridor provisions, the health plans may refund premiums or receive additional premiums, depending on whether amounts spent on medical care costs fall below or exceed defined thresholds. This includes remaining risk corridors that were enacted by various states in 2020 in response to the reduced demand for medical services stemming from COVID-19.

Profit Sharing. Our contracts with certain states contain profit sharing provisions under which we refund amounts to the states if our health plans generate profit above a certain specified percentage. In some cases, we are limited in the amount of administrative costs that we may deduct in calculating the refund, if any.

Other Premium Adjustments. State Medicaid programs periodically adjust premium ~~rates~~revenues 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 adjust our premium revenue in the period in which we determine that the adjustment is probable and reasonably estimable, based on our best estimate of the ultimate premium we expect to realize for the period being adjusted.

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 9~~

~~Table of Contents~~

~~Beginning in 2020, various states enacted temporary risk corridors in response to the reduced demand for medical services stemming from COVID-1~~9, which have resulted in a reduction of our medical margin. In some cases, these risk corridors were retroactive to earlier periods in 2020, or as early as the beginning of the states’ fiscal years in 2019. Since the second quarter of 2020, we have recognized risk corridors that we believe to be probable, and where the ultimate premium amount is reasonably estimable. For the three and nine months ended September 30, 2022, we recognized approximately $34 million and $156 million, respectively, related to such risk corridors, primarily in the Medicaid segment, compared to $17 million and $183 million, respectively, recognized in the three and nine months ended September 30, 2021. The decrease is due to the elimination of several of the COVID-19 risk corridors.

It is possible that certain states could change the structure of existing risk corridors, implement new risk corridors in the future or discontinue existing risk corridors. Due to these uncertainties, the ultimate outcomes could differ materially from our estimates as a result of changes in facts or further developments, which could have an adverse effect on our consolidated financial position, results of operations, or cash flows.

Marketplace Program

Risk Adjustment. Under this 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 adjustment 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 adjustment payment from the pool if their composite risk scores are above the average risk score for all plan participants in a state (risk adjustment receivable). Under CMS rules, the Marketplace risk adjustment pool 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 income. As of ~~September 30, 2022,~~March 31, 2023, Marketplace risk adjustment estimated payables amounted to ~~$179~~$278 million and ~~related~~estimated receivables amounted to ~~$94~~$173 million, for a net payable of ~~$85~~$105 million. As of December 31, ~~2021,~~2022, Marketplace risk adjustment estimated payables amounted to ~~$902~~$230 million and ~~related~~estimated receivables amounted to $7$135 million, for a net payable of ~~$895~~$95 million.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 9

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Concentrations of Credit Risk

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

Income Taxes

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

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

Recent Accounting Pronouncements

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

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 10~~

~~Table of Contents~~

3. Net Income Per Share

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions, except net income per share)									(In millions, except net income per share)
Numerator:	Numerator:									Numerator:
Net income	Net income	$	230	$	143	$	736	$	556	Net income	$	321	$	258
Denominator:	Denominator:									Denominator:
Shares outstanding at the beginning of the period	Shares outstanding at the beginning of the period	57.6		57.8		57.9		58.0		Shares outstanding at the beginning of the period	57.4		57.9
Weighted-average number of shares issued:	Weighted-average number of shares issued:									Weighted-average number of shares issued:
Stock-based compensation	Stock-based compensation	—		—		0.2		0.3		Stock-based compensation	0.1		0.1
Stock purchases		—		—		(0.3)		(0.5)

Denominator for basic net income per share	Denominator for basic net income per share	57.6		57.8		57.8		57.8		Denominator for basic net income per share	57.5		58.0
Effect of dilutive securities: (1)	Effect of dilutive securities: (1)									Effect of dilutive securities: (1)
Stock-based compensation	Stock-based compensation	0.7		0.7		0.7		0.7		Stock-based compensation	0.5		0.7

Denominator for diluted net income per share	Denominator for diluted net income per share	58.3		58.5		58.5		58.5		Denominator for diluted net income per share	58.0		58.7

Net income per share - Basic (2)	Net income per share - Basic (2)	$	4.00	$	2.49	$	12.74	$	9.63	Net income per share - Basic (2)	$	5.58	$	4.45
Net income per share - Diluted (2)	Net income per share - Diluted (2)	$	3.95	$	2.46	$	12.58	$	9.51	Net income per share - Diluted (2)	$	5.52	$	4.39

(1) The dilutive effect of all potentially dilutive common shares is calculated using the treasury stock method.

(2) Source data for calculations in thousands.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 10

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4. ~~Business Combinations~~

~~AgeWell.~~ As described in Note 1, “Organization and Basis of Presentation,” we announced this acquisition closed on October 1, 2022. Because the closing date fell on a weekend, the $134 million purchase price was paid on September 30, 2022 and was recorded to prepaid expenses and other assets. Such amounts are reported in investing activities in the accompanying consolidated statements of cash flows. The initial accounting for this transaction is incomplete.

~~Cigna.~~ On January 1, 2022, we closed on our acquisition of Cigna Corporation’s Texas Medicaid and Medicare-Medicaid Plan contracts, along with certain operating assets, for purchase consideration of approximately $60 million. We acquired membership and a provider network with a preliminary fair value of approximately $36 million. We allocated the remaining $24 million of purchase consideration to goodwill, primarily in the Medicaid segment, which relates to future economic benefits arising from expected synergies from the use of our existing infrastructure to support the added membership, and from the assembled workforce. The goodwill is deductible for income tax purposes.

~~Affinity.~~ On October 25, 2021, we closed on our acquisition of substantially all of the assets of Affinity Health Plan, Inc., a Medicaid health plan in New York, for initial purchase consideration of approximately $176 million. In the nine months ended September 30, 2022, we recorded various measurement period adjustments, including an increase of $8 million to “Medical claims and benefits payable,” and an increase of $1 million to “Receivables” net of “Amounts due government agencies.” In the aggregate, we recorded a net increase of $7 million to goodwill for these measurement period adjustments and various purchase price adjustments.

5. Fair Value Measurements

We consider the carrying amounts of current assets and current liabilities to approximate their fair values because of the relatively short period of time between the origination of these instruments and their expected realization or payment. For our financial instruments measured at fair value on a recurring basis, we prioritize the inputs used in measuring fair value according to the three-tier fair value hierarchy. For a description of the methods and assumptions used to: a) estimate the fair value; and b) determine the classification according to the fair value

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 11~~

~~Table of Contents~~

hierarchy for each financial instrument, refer to our ~~2021~~2022 Annual Report on Form 10-K, Note 5, “Fair Value Measurements.”

The net changes in fair value of Level 3 financial instruments are reported in “Other” operating expenses in our consolidated statements of income. In the nine months ended September 30, 2022 and 2021, we recognized a loss of $4 million and $3 million, respectively, for the increase in the fair value of the contingent consideration liabilities described below.

Our financial instruments measured at fair value on a recurring basis at ~~September 30, 2022,~~March 31, 2023, were as follows:


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

		(In millions)									(In millions)
Corporate debt securities	Corporate debt securities	$	2,283	$	—	$	2,283	$	—	Corporate debt securities	$	2,335	$	—	$	2,335	$	—
Mortgage-backed securities	Mortgage-backed securities	743		—		743		—		Mortgage-backed securities	851		—		851		—
Asset-backed securities	Asset-backed securities	303		—		303		—		Asset-backed securities	323		—		323		—
Municipal securities	Municipal securities	148		—		148		—		Municipal securities	151		—		151		—
U.S. Treasury notes	U.S. Treasury notes	116		—		116		—		U.S. Treasury notes	123		—		123		—

Other	Other	46		—		46		—		Other	27		—		27		—
Total assets	Total assets	$	3,639	$	—	$	3,639	$	—	Total assets	$	3,810	$	—	$	3,810	$	—

Contingent consideration liabilities		$	8	$	—	$	—	$	8
Total liabilities		$	8	$	—	$	—	$	8

Our financial instruments measured at fair value on a recurring basis at December 31, ~~2021,~~2022, were as follows:


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

		(In millions)									(In millions)
Corporate debt securities	Corporate debt securities	$	1,833	$	—	$	1,833	$	—	Corporate debt securities	$	2,184	$	—	$	2,184	$	—
Mortgage-backed securities	Mortgage-backed securities	614		—		614		—		Mortgage-backed securities	731		—		731		—
Asset-backed securities	Asset-backed securities	247		—		247		—		Asset-backed securities	288		—		288		—
Municipal securities	Municipal securities	123		—		123		—		Municipal securities	149		—		149		—
U.S. Treasury notes	U.S. Treasury notes	353		—		353		—		U.S. Treasury notes	105		—		105		—

Other	Other	32		—		32		—		Other	42		—		42		—
Total assets	Total assets	$	3,202	$	—	$	3,202	$	—	Total assets	$	3,499	$	—	$	3,499	$	—

Contingent consideration liabilities	Contingent consideration liabilities	$	47	$	—	$	—	$	47	Contingent consideration liabilities	$	8	$	—	$	—	$	8
Total liabilities	Total liabilities	$	47	$	—	$	—	$	47	Total liabilities	$	8	$	—	$	—	$	8

Contingent Consideration Liabilities

~~Our Level 3 financial instruments at September 30, 2022 are comprised solely of contingent consideration liabilities of~~In the three months ended March 31, 2023, we paid $8 million in connection with our 2020 acquisition of certain assets of Passport Health Plan, Inc., ~~a Medicaid health plan in Kentucky. Such liabilities are recorded at fair value on a recurring basis. In~~which represented the ~~nine months ended September 30, 2022,~~final payment of the ~~estimated fair value of contingent purchase~~ consideration ~~increased by approximately $4 million,~~due relating to an operating income guarantee.

In the nine months ended September 30, 2022, we paid the seller $43 million, of which $23 million was for the remaining half of the consideration due for minimum member enrollment targets and $20 million was for the first payment of the consideration due for the operating income guarantee. For the amounts The amount paid in the ~~nine~~three months ended ~~September 30, 2022, $20 million~~March 31, 2023, has been presented in ~~“Financing~~“Operating activities” in the accompanying consolidated statements of cash ~~flows, with the balance reflected in “Operating activities.” The remaining balance of~~flows.

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 1211

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~~the liabilities is reported in “Accounts payable, accrued liabilities and other” in the accompanying consolidated balance sheets.~~

Fair Value Measurements – Disclosure Only

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


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value

		(In millions)									(In millions)
4.375% Notes due 2028	4.375% Notes due 2028	$	792	$	715	$	791	$	829	4.375% Notes due 2028	$	793	$	742	$	792	$	729
3.875% Notes due 2030	3.875% Notes due 2030	642		541		642		675		3.875% Notes due 2030	643		568		643		554
3.875% Notes due 2032	3.875% Notes due 2032	741		612		740		760		3.875% Notes due 2032	741		637		741		629
Total	Total	$	2,175	$	1,868	$	2,173	$	2,264	Total	$	2,177	$	1,947	$	2,176	$	1,912

6.5. Investments

Available-for-Sale

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


		September 30, 2022									March 31, 2023
		Amortized Cost		Gross Unrealized				Estimated Fair Value			Amortized Cost		Gross Unrealized				Estimated Fair Value
				Gains		Losses							Gains		Losses

		(In millions)									(In millions)
Corporate debt securities	Corporate debt securities	$	2,431	$	—	$	148	$	2,283	Corporate debt securities	$	2,428	$	6	$	99	$	2,335
Mortgage-backed securities	Mortgage-backed securities	804		—		61		743		Mortgage-backed securities	897		2		48		851
Asset-backed securities	Asset-backed securities	322		—		19		303		Asset-backed securities	337		—		14		323
Municipal securities	Municipal securities	159		—		11		148		Municipal securities	160		—		9		151
U.S. Treasury notes	U.S. Treasury notes	117		—		1		116		U.S. Treasury notes	123		—		—		123

Other	Other	49		—		3		46		Other	29		—		2		27
Total	Total	$	3,882	$	—	$	243	$	3,639	Total	$	3,974	$	8	$	172	$	3,810


		December 31, 2021									December 31, 2022
		Amortized Cost		Gross Unrealized				Estimated Fair Value			Amortized Cost		Gross Unrealized				Estimated Fair Value
				Gains		Losses							Gains		Losses

		(In millions)									(In millions)
Corporate debt securities	Corporate debt securities	$	1,836	$	9	$	12	$	1,833	Corporate debt securities	$	2,303	$	2	$	121	$	2,184
Mortgage-backed securities	Mortgage-backed securities	616		2		4		614		Mortgage-backed securities	787		—		56		731
Asset-backed securities	Asset-backed securities	248		—		1		247		Asset-backed securities	308		—		20		288
Municipal securities	Municipal securities	123		1		1		123		Municipal securities	160		—		11		149
U.S. Treasury notes	U.S. Treasury notes	353		—		—		353		U.S. Treasury notes	106		—		1		105

Other	Other	32		—		—		32		Other	45		—		3		42
Total	Total	$	3,208	$	12	$	18	$	3,202	Total	$	3,709	$	2	$	212	$	3,499

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 1312

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The contractual maturities of our current investments as of ~~September 30, 2022~~March 31, 2023 are summarized below:


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value

		(In millions)					(In millions)
Due in one year or less	Due in one year or less	$	378	$	374	Due in one year or less	$	280	$	277
Due after one year through five years	Due after one year through five years	2,330		2,186		Due after one year through five years	2,340		2,245
Due after five years through ten years	Due after five years through ten years	390		364		Due after five years through ten years	455		443
Due after ten years	Due after ten years	784		715		Due after ten years	899		845
Total	Total	$	3,882	$	3,639	Total	$	3,974	$	3,810

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 were insignificant for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023, and 2022. Gross realized ~~investment gains~~investments losses amounted to $6$10 million ~~and $7 million for~~in the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2023, and were reclassified into earnings from other comprehensive income on a net-of-tax basis. Gross realized investment losses were insignificant ~~for~~in the three ~~and nine~~ months ended ~~September 30, 2022, and 2021.~~March 31, 2022.

We have determined that unrealized losses at ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, 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.

The following table segregates those available-for-sale investments that have been in a continuous loss position for less than 12 months, and those that have been in a continuous loss position for 12 months or more as of ~~September 30, 2022:~~March 31, 2023:

In a Continuous Loss Position
for Less than 12 Months In a Continuous Loss Position
for 12 Months or More
Estimated
Fair
Value Unrealized
Losses Total Number of Positions Estimated
Fair
Value Unrealized
Losses Total Number of Positions
(Dollars in millions)
Corporate debt securities $ 1,764 $ 103 909 $ 433 $ 45 167
Mortgage-backed securities 555 36 282 188 25 75
Asset-backed securities 242 13 128 56 6 28
Municipal securities 106 7 110 31 4 35
U.S. Treasury notes 116 1 8 — — —
Other 32 3 20 — — —
Total $ 2,815 $ 163 1,457 $ 708 $ 80 305


	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	$	719	$	15	480	$	1,107	$	84	510
Mortgage-backed securities	257		6		144	467		42		228
Asset-backed securities	134		2		76	133		12		73
Municipal securities	48		1		28	83		8		105

Other	8		1		9	10		1		7



Total	$	1,166	$	25	737	$	1,800	$	147	923


		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 Positions	Estimated 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	Corporate debt securities	$	1,063	$	12	395	$	—	$	—	—	Corporate debt securities	$	1,124	$	45	683	$	887	$	76	371
Mortgage-backed securities	Mortgage-backed securities	408		4		146	—		—		—	Mortgage-backed securities	395		20		220	319		36		131
Asset-backed securities	Asset-backed securities	166		1		75	—		—		—	Asset-backed securities	161		6		108	118		14		59
Municipal securities												Municipal securities	75		4		83	57		7		57
U.S. Treasury notes												U.S. Treasury notes	88		1		6	—		—		—

Municipal securities		69		1		61	—		—		—

Other												Other	15		1		16	17		2		6

Total	Total	$	1,706	$	18	677	$	—	$	—	—	Total	$	1,858	$	77	1,116	$	1,398	$	135	624

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 1413

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Restricted Investments Held-to-Maturity

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

We have the ability to hold these restricted investments until maturity and, as a result, we would not expect the value of these investments to decline significantly due to a sudden change in market interest rates. Our held-to-maturity restricted investments are carried at amortized cost, which approximates fair value. Such investments amounted to $242 million at ~~September 30, 2022,~~March 31, 2023, of which ~~$201~~$123 million will mature in one year or less, ~~$37~~$111 million will mature in one through five years, and $4$8 million will mature after five years.

7.6. Medical Claims and Benefits Payable

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions)					(In millions)
Claims incurred but not paid (“IBNP”)	Claims incurred but not paid (“IBNP”)	$	2,553	$	2,486	Claims incurred but not paid (“IBNP”)	$	2,589	$	2,597
Pharmacy payable	Pharmacy payable	241		219		Pharmacy payable	233		206
Capitation payable	Capitation payable	90		82		Capitation payable	95		94
Other	Other	738		576		Other	907		631
Total	Total	$	3,622	$	3,363	Total	$	3,824	$	3,528

“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 income. Non-risk provider payables amounted to ~~$317~~$493 million and ~~$226~~$228 million as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively.

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


		Nine Months Ended September 30, 2022									Three Months Ended March 31, 2023
		Medicaid		Medicare		Marketplace		Consolidated			Medicaid		Medicare		Marketplace		Consolidated

		(In millions)									(In millions)
Medical claims and benefits payable, beginning balance	Medical claims and benefits payable, beginning balance	$	2,580	$	404	$	379	$	3,363	Medical claims and benefits payable, beginning balance	$	2,815	$	452	$	261	$	3,528
Components of medical care costs related to:	Components of medical care costs related to:									Components of medical care costs related to:
Current year	Current year	16,520		2,525		1,476		20,521		Current year	5,865		934		370		7,169
Prior years	Prior years	(282)		(38)		(18)		(338)		Prior years	(250)		(14)		(34)		(298)
Total medical care costs	Total medical care costs	16,238		2,487		1,458		20,183		Total medical care costs	5,615		920		336		6,871
Payments for medical care costs related to:	Payments for medical care costs related to:									Payments for medical care costs related to:
Current year	Current year	14,133		2,103		1,302		17,538		Current year	3,728		542		217		4,487
Prior years	Prior years	1,861		337		283		2,481		Prior years	1,822		369		167		2,358
Total paid	Total paid	15,994		2,440		1,585		20,019		Total paid	5,550		911		384		6,845
Acquired balances, net of post-acquisition adjustments	Acquired balances, net of post-acquisition adjustments	8		—		—		8		Acquired balances, net of post-acquisition adjustments	—		—		—		—
Change in non-risk and other provider payables	Change in non-risk and other provider payables	91		(4)		—		87		Change in non-risk and other provider payables	270		—		—		270
Medical claims and benefits payable, ending balance	Medical claims and benefits payable, ending balance	$	2,923	$	447	$	252	$	3,622	Medical claims and benefits payable, ending balance	$	3,150	$	461	$	213	$	3,824

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		Nine Months Ended September 30, 2021									Three Months Ended March 31, 2022
		Medicaid		Medicare		Marketplace		Consolidated			Medicaid		Medicare		Marketplace		Consolidated

		(In millions)									(In millions)
Medical claims and benefits payable, beginning balance	Medical claims and benefits payable, beginning balance	$	2,129	$	392	$	175	$	2,696	Medical claims and benefits payable, beginning balance	$	2,580	$	404	$	379	$	3,363
Components of medical care costs related to:	Components of medical care costs related to:									Components of medical care costs related to:
Current year	Current year	13,491		2,195		1,872		17,558		Current year	5,424		840		505		6,769
Prior years	Prior years	(158)		(36)		(22)		(216)		Prior years	(154)		(25)		(27)		(206)
Total medical care costs	Total medical care costs	13,333		2,159		1,850		17,342		Total medical care costs	5,270		815		478		6,563
Payments for medical care costs related to:	Payments for medical care costs related to:									Payments for medical care costs related to:
Current year	Current year	11,530		1,816		1,534		14,880		Current year	3,402		465		330		4,197
Prior years	Prior years	1,538		340		130		2,008		Prior years	1,633		306		260		2,199
Total paid	Total paid	13,068		2,156		1,664		16,888		Total paid	5,035		771		590		6,396
Acquired balances, net of post-acquisition adjustments	Acquired balances, net of post-acquisition adjustments	(19)		(8)		—		(27)		Acquired balances, net of post-acquisition adjustments	(25)		—		—		(25)
Change in non-risk and other provider payables	Change in non-risk and other provider payables	68		—		—		68		Change in non-risk and other provider payables	93		3		—		96
Medical claims and benefits payable, ending balance	Medical claims and benefits payable, ending balance	$	2,443	$	387	$	361	$	3,191	Medical claims and benefits payable, ending balance	$	2,883	$	451	$	267	$	3,601

Our estimates of medical claims and benefits payable recorded at December 31, ~~2021,~~2022, and ~~2020~~2021 developed favorably by approximately ~~$338~~$298 million and ~~$216~~$206 million as of ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ respectively.

The favorable prior year development recognized in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was primarily due to lower than expected utilization of medical services by our members and improved operating performance. Consequently, the ultimate costs recognized in ~~2022,~~2023, as claims payments were processed, were lower than our estimates in ~~2021.~~2022.

8.7. Debt

~~All our debt is held at the parent, which is reported in the Other segment.~~ The following table summarizes our outstanding debt obligations, all of which are non-current as of the dates reported below:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions)					(In millions)

Non-current long-term debt:	Non-current long-term debt:					Non-current long-term debt:
4.375% Notes due 2028	4.375% Notes due 2028	$	800	$	800	4.375% Notes due 2028	$	800	$	800
3.875% Notes due 2030	3.875% Notes due 2030	650		650		3.875% Notes due 2030	650		650
3.875% Notes due 2032	3.875% Notes due 2032	750		750		3.875% Notes due 2032	750		750
Deferred debt issuance costs	Deferred debt issuance costs	(25)		(27)		Deferred debt issuance costs	(23)		(24)
Total	Total	$	2,175	$	2,173	Total	$	2,177	$	2,176

Credit Agreement

We are party to a credit agreement (the “Credit Agreement”) which includes a revolving credit facility (“Credit Facility”) of $1.0 billion, among other provisions. The Credit Agreement has a term of five years, and all amounts outstanding will be due and payable on June 8, 2025. Borrowings under the Credit Agreement bear interest based, at our election, on a base rate or other defined rate, plus in each case, the applicable margin. In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the 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.

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The Credit Agreement contains customary non-financial and financial covenants. As of ~~September 30, 2022,~~March 31, 2023, we were in compliance with all financial and non-financial covenants under the Credit Agreement. As of ~~September 30, 2022,~~March 31, 2023, no amounts were outstanding under the Credit Facility.

For an understanding of the terms and provisions of the Credit Agreement, reference should be made to the copy of the agreement attached as Exhibit 10.1 to this Form 10-Q and incorporated by reference herein.

Senior Notes

Our senior notes are described below. Each of these notes are senior unsecured obligations of the parent corporation, Molina Healthcare, Inc., and rank equally in right of payment with all existing and future senior debt, and senior to all existing and future subordinated

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~~debt of Molina.~~ In addition, each of the indentures governing the senior notes contain customary non-financial covenants and change of control provisions. As of ~~September 30, 2022,~~March 31, 2023, we were in compliance with all non-financial covenants in the indentures governing the senior notes.

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

4.375% Notes due 2028. We had $800 million aggregate principal amount of senior notes (the “4.375% Notes”) outstanding as of ~~September 30, 2022,~~March 31, 2023, which are due June 15, 2028, unless earlier redeemed. Interest, at a rate of 4.375% per annum, is payable semiannually in arrears on June 15 and December 15.

3.875% Notes due 2030. We had $650 million aggregate principal amount of senior notes (the “3.875% Notes due 2030”) outstanding as of ~~September 30, 2022,~~March 31, 2023, which are due November 15, 2030, unless earlier redeemed. Interest, at a rate of 3.875% per annum, is payable semiannually in arrears on May 15 and November 15.

3.875% Notes due 2032. We had $750 million aggregate principal amount of senior notes (the “3.875% Notes due 2032”) outstanding as of ~~September 30, 2022,~~March 31, 2023, which are due May 15, 2032, unless earlier redeemed. Interest, at a rate of 3.875% per annum, is payable semiannually in arrears on May 15 and November 15.

~~9. Stockholders' Equity~~

In September 2021, our board of directors authorized the purchase of up to $500 million, in the aggregate, of our common stock. This new program, which superseded the stock purchase program approved by our board of directors in September 2020, is funded with cash on hand and extends through December 31, 2022. The exact timing and amount of any repurchase is determined by management based on market conditions and share price, in addition to other factors, and subject to the restrictions relating to volume, price, and timing under applicable law. Under this program, pursuant to a Rule 10b5-1 trading plan, we purchased approximately 658,000 shares for $200 million in the second quarter of 2022 (average cost of $304.13 per share).

~~10.~~8. Segments

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

The Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which we offer managed healthcare services. The Other segment, which is insignificant to our consolidated results of operations, includes certain corporate amounts not associated with or allocated to the Medicaid, Medicare, or Marketplace segments. Additionally, the Other segment includes service revenues and service costs associated with the long-term services and supports consultative services ~~we provide~~ in Wisconsin.

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

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Total revenue:	Total revenue:									Total revenue:
Medicaid	Medicaid	$	6,380	$	5,354	$	19,091	$	15,583	Medicaid	$	6,578	$	6,187
Medicare	Medicare	955		875		2,867		2,502		Medicare	1,056		949
Marketplace	Marketplace	575		793		1,740		2,224		Marketplace	497		616
Other	Other	17		18		53		53		Other	18		18
Total	Total	$	7,927	$	7,040	$	23,751	$	20,362	Total	$	8,149	$	7,770

The following table reconciles margin by segment to consolidated income before income taxes.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Margin:	Margin:									Margin:
Medicaid	Medicaid	$	703	$	532	$	2,168	$	1,687	Medicaid	$	734	$	710
Medicare	Medicare	108		151		360		329		Medicare	126		128
Marketplace	Marketplace	77		68		255		331		Marketplace	154		130
Other	Other	2		4		8		11		Other	2		3
Total margin	Total margin	890		755		2,791		2,358		Total margin	1,016		971
Add: other operating revenues (1)	Add: other operating revenues (1)	274		222		732		620		Add: other operating revenues (1)	246		221
Less: other operating expenses (2)	Less: other operating expenses (2)	(829)		(756)		(2,455)		(2,149)		Less: other operating expenses (2)	(807)		(820)
Operating income	Operating income	335		221		1,068		829		Operating income	455		372
Other expenses, net	Other expenses, net	28		30		83		90		Other expenses, net	28		28
Income before income tax expense	Income before income tax expense	$	307	$	191	$	985	$	739	Income before income tax expense	$	427	$	344

______________________

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

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

~~11.~~9. Commitments and Contingencies

~~COVID-19 Pandemic~~

We continue to monitor and assess the estimated operating and financial impact of the COVID-19 pandemic on our business and, as it evolves, we continue to process, assemble, and assess member utilization information. We believe that our cash resources, borrowing capacity available under the Credit Agreement, and cash flow generated from operations will be sufficient to withstand the financial impact of the pandemic, and will enable us to continue to support our operations, regulatory requirements, debt repayment obligations, and capital expenditures for the foreseeable future.

Legal Proceedings

The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments. Compliance with these laws and regulations can be subject to government review and interpretation, as well as regulatory actions unknown and unasserted at this time. Penalties associated with violations of these laws and regulations include significant fines and penalties, exclusion from participating in publicly funded programs, the repayment of previously billed and collected revenues and reputational damage.

We are involved in legal actions in the ordinary course of business including, but not limited to, various employment claims, vendor disputes and provider claims. Some of these legal actions seek monetary damages, including claims for punitive damages, which may not be covered by insurance. We review legal matters and update our estimates of

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reasonably possible losses and related disclosures, as necessary. We have accrued liabilities for legal matters for which we deem the loss to be both probable and reasonably estimable. These liability estimates could change as a result of further developments of the matters. The outcome of legal actions is inherently uncertain. An adverse determination in one or more of these pending matters could have an adverse effect on our consolidated financial position, results of operations, or cash flows.

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Kentucky RFP. On September 4, 2020, Anthem Kentucky Managed Care Plan, Inc. brought an action in Franklin County Circuit Court against the Kentucky Finance and Administration Cabinet, the Kentucky Cabinet for Health and Family Services, and all of the five winning bidder health plans, including our Kentucky health plan. On September 9, 2022, the Kentucky Court of ~~Appeal~~Appeals ruled ~~among other things,~~ that, with regard to the earlier Circuit Court ruling granting Anthem relief, the Circuit Court should not have invalidated the 2020 procurement and thus should not have awarded a contract to Anthem. Anthem ~~filed a petition for rehearing with the Kentucky Court of Appeals and will likely seek~~sought discretionary review by the Kentucky Supreme ~~Court.~~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. Pending further Court order, our Kentucky health plan will continue to operate for the foreseeable future under its current Medicaid contract.

Puerto Rico. On August 13, 2021, Molina Healthcare of Puerto Rico, Inc. (“MHPR”) filed a complaint with the Commonwealth of Puerto Rico, Court of First Instance, San Juan (State Court) asserting, among other claims, breach of contract against ~~the~~ Puerto Rico Health Insurance Administration (“ASES”)~~, asserting, among other claims, breach of contract.~~. On September 13, 2021, ASES filed a counterclaim and a third-party complaint against MHPR and the Company. This matter remains subject to significant additional proceedings, and no prediction can be made as to the outcome.

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

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q 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. Many of the forward-looking statements are located under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “guidance,” “future,” “anticipates,” “believes,” “estimates,” “expects,” “growth,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “can,” “may,” and similar terms. Readers are cautioned not to place undue reliance on any forward-looking statements, as forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited to, the risk factors identified in the section titled “Risk Factors” in our ~~2021~~2022 Annual Report on Form 10-K, including without limitation risks related to the ~~following:~~following matters:

•the impact of Medicaid redeterminations across the ~~COVID-19 pandemic and its associated or indirect effects on our business, operations, and financial results, including without limitation~~country following the ~~duration~~ending of the Public Health Emergency ~~Declaration~~ (“PHE”) ~~and associated suspension in redeterminations,~~for the COVID-19 pandemic, including the accuracy of our projections regarding the number of members we expect to retain, their health acuity levels, and the ~~potential impact on our workforce or contractors~~scale of ~~federal or state vaccine mandates;~~the transition of members out of the Medicaid program and the actuarially sound adjustment of rates with regard to the remaining population;

•~~significant~~ budget pressures on state governments ~~from diminished tax revenues incidental to~~following the ~~COVID-19 pandemic~~ending of the PHE and ~~their~~reduced federal matching funds, and states’ efforts to reduce rates or limit rate ~~increases, to impose profit caps or risk corridors, or to recoup previously paid premium amounts on a retroactive basis;~~increases;

•the ~~numerous political, judicial, and market-based uncertainties associated with the Affordable Care Act (the “ACA”);~~

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

•~~the outcome of the legal proceedings in Kentucky with regard to the Medicaid contract award to our Kentucky health plan and our acquisition of certain assets of Passport;~~members;

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

•the success of the scaling up of our operations in California, Iowa, Nebraska, and Indiana in connection with our recent request for proposal (“RFP”) wins;

•our ability to close, integrate, and realize benefits from acquisitions, including ~~our contracts in Texas;~~the acquisitions of AgeWell New York and My Choice Wisconsin;

•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;

•our ability to consummate, integrate, and realize benefits from acquisitions, including the completed acquisitions of Magellan Complete Care, Passport, Affinity, the Medicaid assets of Cigna in Texas, AgeWell New York and the announced acquisition of My Choice Wisconsin;

•effective management of our medical costs;

•our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with COVID-19;

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

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

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

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

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

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

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•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 and requirements;

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•the Medicaid expansion medical cost 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;

•the success and ~~renewal~~continuance 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 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 renewal of Medicaid coverage;

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

•~~our exit from Puerto Rico, including~~ the ~~payment in full~~success of our ~~outstanding accounts receivable,~~providers, including delegated providers, the ~~effective run-out of claims, the return~~adequacy of our ~~capital,~~provider networks, the successful maintenance of relations with our providers, and the ~~outcome of the claims filed against our Puerto Rico health plan and us by the Puerto Rico Health Insurance Administration, or ASES;~~

•~~changes with respect to our provider contracts 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 resolution ~~favorable or unfavorable,~~ of litigation, arbitration, or administrative proceedings;

•the ~~relatively small number of states in which we operate health plans, including the~~ greater scale and revenues of our health plans in California, New York, Ohio, Texas, and Washington, ~~health plans;~~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;

•the ~~sufficiency of funds on hand to pay the amounts due upon 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;~~industry, including any new federal or state legislation that impacts the business space in which we operate;

•increases in government surcharges, taxes, and assessments;

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

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

•increasing competition and consolidation in the Medicaid 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 our ~~2021~~2022 Annual Report on Form 10-K, 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 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 ~~2021~~2022 Annual Report on Form 10-K.

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OVERVIEW

Molina Healthcare, Inc., a FORTUNE 500 company (currently ranked 125), provides managed healthcare services under the Medicaid and Medicare programs, and through the state insurance marketplaces (the “Marketplace”). We served approximately ~~5.2~~5.3 million members as of ~~September 30, 2022,~~March 31, 2023, located across 19 states.

~~THIRD~~FIRST QUARTER ~~2022~~2023 HIGHLIGHTS

We reported net income of ~~$230~~$321 million, or ~~$3.95~~$5.52 per diluted share, for the ~~third~~first quarter of ~~2022,~~2023, which reflected the following:

•Membership ~~increase of 337,000,~~increased 181,000, or 7%4%, compared with ~~September 30, 2021,~~March 31, 2022, and ~~a 57,000 sequential increase~~increased sequentially by 8,000 compared to ~~June 30,~~December 31, 2022;

•Premium revenue of ~~$7.6~~$7.9 billion increased ~~12%~~5% compared with the ~~third~~first quarter of ~~2021,~~2022, reflecting the ~~impact of acquisitions,~~ increased organic membership in Medicaid and Medicare, and the impact of acquisitions, partially offset by the impact of expected attrition in Marketplace membership;

•Consolidated medical care ratio (“MCR”) was ~~88.4%~~87.1%, ~~compared~~consistent with ~~88.9% for~~ the ~~third~~first quarter of ~~2021;~~2022, which we believe demonstrates continued strong operating performance;

•General and administrative expense (“G&A”) ratio of ~~7.1%~~7.2%, which improved compared with ~~7.5%~~7.4% in the ~~third~~first quarter of ~~2021,~~2022, reflecting the benefits of scale produced by our increase in revenue and disciplined cost management; and

•After-tax margin of ~~2.9%~~3.9%, which was in line with our expectations.

~~We note the following factors impacting the 2022 third quarter financial results:~~

•The net effect of COVID decreased net income by approximately $0.59 per diluted share and increased the MCR by 60 basis points in the third quarter of 2022. The net effect of COVID decreased net income by approximately $1.00 per diluted share and increased the MCR by 110 basis points in the third quarter of 2021; and

•~~Higher net investment income that was mainly driven by recent Federal Reserve interest rate increases.~~

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 2221

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CONSOLIDATED FINANCIAL SUMMARY


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022			2021			2022			2021				2023			2022

		(In millions, except per-share amounts)													(In millions, except per-share amounts)
Premium revenue	Premium revenue	$	7,636		$	6,800		$	22,966		$	19,689		Premium revenue	$	7,885		$	7,531
Less: medical care costs	Less: medical care costs	6,748			6,049			20,183			17,342			Less: medical care costs	6,871			6,563
Medical margin	Medical margin	888			751			2,783			2,347			Medical margin	1,014			968
MCR (1)	MCR (1)	88.4		%	88.9		%	87.9		%	88.1		%	MCR (1)	87.1		%	87.1		%

Other revenues:	Other revenues:													Other revenues:
Premium tax revenue	Premium tax revenue	223			204			646			576			Premium tax revenue	172			208

Investment income	Investment income	49			20			82			39			Investment income	71			11
Other revenue	Other revenue	19			16			57			58			Other revenue	21			20

General and administrative expenses	General and administrative expenses	560			532			1,682			1,489			General and administrative expenses	591			571
G&A ratio (2)	G&A ratio (2)	7.1		%	7.5		%	7.1		%	7.3		%	G&A ratio (2)	7.2		%	7.4		%

Premium tax expenses	Premium tax expenses	223			204			646			576			Premium tax expenses	172			208

Depreciation and amortization	Depreciation and amortization	45			32			129			96			Depreciation and amortization	44			40
Other	Other	16			2			43			30			Other	16			16
Operating income	Operating income	335			221			1,068			829			Operating income	455			372
Interest expense	Interest expense	28			30			83			90			Interest expense	28			28

Income before income tax expense	Income before income tax expense	307			191			985			739			Income before income tax expense	427			344
Income tax expense	Income tax expense	77			48			249			183			Income tax expense	106			86
Net income	Net income	$	230		$	143		$	736		$	556		Net income	$	321		$	258

Net income per share – Diluted	Net income per share – Diluted	$	3.95		$	2.46		$	12.58		$	9.51		Net income per share – Diluted	$	5.52		$	4.39

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	58.3			58.5			58.5			58.5			Diluted weighted average shares outstanding	58.0			58.7

Other Key Statistics	Other Key Statistics													Other Key Statistics
Ending membership	Ending membership	5.2			4.8			5.2			4.8			Ending membership	5.3			5.1
Effective income tax rate	Effective income tax rate	24.9		%	24.8		%	25.2		%	24.7		%	Effective income tax rate	25.0		%	25.0		%
After-tax margin (3)	After-tax margin (3)	2.9		%	2.0		%	3.1		%	2.7		%	After-tax margin (3)	3.9		%	3.3		%

________________________

(1) MCR represents medical care costs as a percentage of premium revenue.

(2) G&A ratio represents general and administrative expenses as a percentage of total revenue.

(3) After-tax margin represents net income as a percentage of total revenue.

CONSOLIDATED RESULTS

NET INCOME AND OPERATING INCOME

Net income in the ~~third~~first quarter of ~~2022~~2023 amounted to ~~$230~~$321 million, or ~~$3.95~~$5.52 per diluted share, compared with ~~$143~~$258 million, or ~~$2.46~~$4.39 per diluted share, in the ~~third~~first quarter of ~~2021.~~2022. The ~~61%~~24% increase in net income is consistent with the improvement in operating income, which increased to ~~$335~~$455 million in the ~~third~~first quarter of ~~2022,~~2023, compared with ~~$221~~$372 million in the ~~third~~first quarter of ~~2021.~~

Net income in the nine months ended September 30, 2022 amounted to $736 million, or $12.58 per diluted share, compared with $556 million, or $9.51 per diluted share, in the nine months ended September 30, 2021. The 32% increase in net income is consistent with the improvement in operating income of $1,068 million in the nine months ended September 30, 2022, compared with $829 million in the nine months ended September 30, 2021.2022.

The improvement in operating income ~~for both periods~~ was mainly due to membership growth ~~and~~that drove higher premium revenues, and ~~a decrease in MCR for the three~~medical margin, and ~~nine months ended September 30, 2022 compared to the prior year periods.~~

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 23~~

~~Table of Contents~~

Net income per share in the third quarter and nine months ended September 30, 2022 was favorably impacted by the reduction in common shares outstanding as a result of our share repurchases in the second quarter of 2022. See further discussion in “Liquidity and Financial Condition,” below.increased investment income.

PREMIUM REVENUE

Premium revenue increased ~~$836~~$354 million, or ~~12%~~5%, in the ~~third~~first quarter of ~~2022,~~2023, when compared with the ~~third~~first quarter of ~~2021, and increased $3.3 billion, or 17%, in the nine months ended September 30, 2022, when compared with the nine months ended September 30, 2021.~~2022. The higher premium revenue reflects ~~the impact of acquisitions,~~ increased organic membership in the Medicaid and Medicare segments and the impact of our recent acquisitions, partially offset by a decline in the Marketplace segment.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 22

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MEDICAL CARE RATIO

The consolidated MCR in the ~~third~~first quarter of ~~2022 decreased to 88.4%~~2023 was 87.1%, ~~compared~~and was consistent with ~~88.9% in~~ the ~~third~~first quarter of ~~2021, or 50 basis points.~~2022. The ~~improvement mainly relates to our~~ Medicaid and Medicare MCRs increased slightly, while the Marketplace segments, partially offset by an increase in the Medicare segment. The results reflect a favorable year-over-year change in the net effect of COVID, which impacted all of our segments and increased the consolidated MCR by approximately 60 basis points in the third quarter of 2022, compared to approximately 110 basis points in the third quarter of 2021. The year-over-year change in the net effect of COVID mainly reflects lower COVID inpatient costs, partially offset by lower COVID-related utilization curtailment.

The consolidated MCR in the nine months ended September 30, 2022 decreased to 87.9%, compared with 88.1% MCR for the nine months ended September 30, 2021, or 20 basis points. Similar to the quarter-to-date consolidated MCR, net effect of COVID impacted each period; however, the results were varied by segment. See further explanation in “Segment Financial Performance,” below.decreased.

The prior year reserve development in the ~~third~~first quarter ~~and nine months ended September 30, 2022~~of 2023 was favorable, ~~and~~but its impact on earnings was ~~partially~~mostly absorbed by ~~the COVID-related risk~~minimum MLRs and medical cost corridors.

PREMIUM TAX REVENUE AND EXPENSES

The premium tax ratio (premium tax expense as a percentage of premium revenue plus premium tax revenue) was ~~2.8%~~2.1% and ~~2.9%~~2.7% for the ~~third~~first quarter of ~~2022~~2023 and ~~2021, respectively, and 2.7% and 2.8% for the nine months ended September 30,~~ 2022, ~~and 2021,~~ respectively. The current year ratio decrease was mainly due to changes in business mix.

INVESTMENT INCOME

Investment income increased to ~~$49~~$71 million in the ~~third~~first quarter of 2023, compared with $11 million in the first quarter of 2022, mainly due to an increase in interest rates and, to a lesser extent, higher levels of invested assets.

OTHER REVENUE

Other revenue amounted to $21 million in the first quarter of 2023, compared with $20 million in the ~~third~~first quarter of 2021, and increased to $82 million in the nine months ended September 30, 2022, compared with $39 million in the nine months ended September 30, 2021.The improvement in both periods was driven by recent increases in market interest rates and higher invested assets. Additionally, investment yields were lower in the first half of 2021 due to a temporary allocation in shorter-term invested assets due to the COVID-19 pandemic, which was rescinded in the second quarter of 2021.

~~OTHER REVENUE~~

Other revenue increased to $19 million in the third quarter of 2022, compared with $16 million in the third quarter of 2021, and decreased to $57 million in the nine months ended September 30, 2022, compared with $58 million in the nine months ended September 30, 2021.2022. 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 ~~decreased to 7.1%~~was 7.2% in the ~~third~~first quarter of 2023, compared with 7.4% in the first quarter of 2022, compared with 7.5% in the third quarter of 2021. The G&A expense ratio was 7.1% in the nine months ended September 30, 2022, compared with 7.3% in the nine months ended September 30, 2021, which reflectsmainly reflecting the benefits of scale produced by our increase in revenue and continued disciplined cost ~~management.~~management, net of deployment costs for new business implementation associated with our recent contract wins that will start in mid-2023 and January 2024.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased to ~~$45~~$44 million in the ~~third~~first quarter of ~~2022,~~2023, compared with ~~$32~~$40 million in the ~~third~~first quarter of ~~2021, and increased to $129 million in the nine months ended September 30,~~ 2022, ~~compared with $96 million in the nine months ended September 30, 2021. The increases in both periods were~~ due primarily to amortization associated with ~~acquisitions~~the AgeWell acquisition completed in the fourth quarter of ~~2021 and the first quarter of~~ 2022.

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 24~~

~~Table of Contents~~

OTHER OPERATING EXPENSES

Other operating expenses ~~increased to~~totaled $16 million in the ~~third~~first quarter of ~~2022, compared~~2023 and were consistent with ~~$2 million in~~ the ~~third~~first quarter of ~~2021, and increased to $43 million in the nine months ended September 30, 2022, compared with $30 million in the nine months ended September 30, 2021.~~2022. Other operating expenses mainly ~~includes~~include service costs associated with long-term services and supports consultative services we provide in Wisconsin, as noted above.

INTEREST EXPENSE

Interest expense ~~decreased to~~totaled $28 million in the ~~third~~first quarter of ~~2022, compared~~2023 and was consistent with ~~$30 million in~~ the ~~third~~first quarter of 2021, and to $83 million in the nine months ended September 30, 2022, compared with $90 million in the nine months ended September 30, 2021. The decrease resulted from our early redemption of $700 million aggregate principal amount of our 5.375% senior notes due 2022 in the fourth quarter of 2021, partially offset by interest related to the private offering of the 3.875% Notes due 2032 in the same period.2022.

INCOME TAXES

Income tax expense amounted to ~~$77~~$106 million in the ~~third~~first quarter of ~~2022,~~2023, or ~~24.9%~~25.0% of pretax income, compared with income tax expense of ~~$48~~$86 million, or ~~24.8%~~25.0% of pretax income in the ~~third~~first quarter of 2021. Income tax expense amounted to $249 million in the nine months ended September 30, 2022, or 25.2% of pretax income, compared with income tax expense of $183 million, or 24.7% of pretax income in the nine months ended September 30, 2021. The difference in the effective tax rate is primarily due to an increase in nondeductible expenses and differences in discrete tax benefits recognized in the respective periods.2022.

TRENDS AND UNCERTAINTIES

COVID-19 PANDEMIC

As the COVID-19 pandemic continues to evolve, its ongoing impact to our business, results of operations, financial condition, and cash flows is uncertain and difficult to predict. Specific trends and uncertainties related to our Medicaid, Medicare, and Marketplace segments follow.

Federal Economic Stabilization and Other Programs

~~Effective October 13, 2022,~~On January 30, 2023, the Biden Administration ~~extended~~issued a Statement of Administration Policy declaring its intent to end the PHE on May 11, 2023. While the Consolidated Appropriations Act of 2023 decoupled Medicaid eligibility redeterminations from the PHE, there are several other healthcare programs tied to the PHE which will be impacted by this change in policy. These include coverage of COVID-19 testing and vaccines, changes to the Medicare fee schedule for ~~another 90 days~~COVID-related treatments, and itfree coverage of at-home COVID-19 diagnostic tests. Upon the end of the PHE on May 11, 2023, per federal statutory and regulatory requirements, some of these policies will end immediately, some will continue for the rest of 2023 or through 2024, and some will remain in ~~effect until January 11,~~place permanently.

Molina Healthcare, Inc. March 31, 2023 ~~unless extended.~~Form 10-Q | 23

~~Due to the uncertainty as to the duration and breadth~~

Table of ~~the pandemic, we are unable to reasonably estimate the ultimate impact of the economic stabilization and other programs to our business, financial condition, and operating results.~~Contents

Operations

Enrollment and Premium Revenue

Excluding acquisitions and our exit from Puerto Rico, we added ~~over 750,000~~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. ~~We expect~~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, Medicaid enrollment ~~to continue~~continued to benefit from the ~~extension of the PHE period, and the associated~~ pause on membership redeterminations ~~at least~~ through ~~mid-January~~March 31, 2023, and then is expected to decline as states resume normal enrollment and renewal operations on April 1, 2023.

Beginning in 2020, various states enacted temporary risk corridors in response to the reduced demand for medical services stemming from COVID-19, which have resulted in a reduction of our medical margin. The current rate environment is stable and rational. We continue to believe that the risk-sharing corridors previously introduced are related to the declared PHE and will likely be eliminated as the COVID pandemic subsides. However, the risk corridors continue to contribute an added level of variability to our results of operations. In the three and nine months ended September 30, 2022, we recognized approximately $34 million and $156 million, respectively, for the impact of these risk corridors, compared to $17 million and $183 million, respectively, recognized in the three and nine months ended September 30, 2021. The decrease in 2022 is due to the elimination of most of the COVID-19 risk corridors.

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 25~~

~~Table of Contents~~

~~Medical Care Costs~~

We expect ~~continued uncertainty regarding utilization trends as~~to retain approximately half the ~~pandemic continues. The speed and extent to which utilization rebounds will be greatly impacted by the economy and consumer behavior, provider capacity, and the potential resurgence~~membership gained since March 31, 2020 through a variety of COVID-19 infection rates. We believe that some portion of the utilization curtailment experienced in the nine months ended September 30, 2022 is likely the result of service deferrals, and so these services will likely be provided to members over the remainder of the year.well-established operational protocols where allowed.

~~Capital and Financial Resources~~

OTHER RECENT DEVELOPMENTS

~~New York Acquisition—~~Indiana Procurement—Medicaid. ~~On October 1, 2022, we closed on our acquisition of the Medicaid Managed Long Term Care business of AgeWell New York.~~

~~California Procurement—Medicaid.~~ In August 2022, we announced that our California health plan had been notified by the California Department of Health Care Services of its intent to award a Medi-Cal contract in each of Los Angeles, Riverside, San Bernardino, Sacramento, and San Diego Counties. The 5 Medi-Cal contracts are expected to commence on January 1, 2024, which enables us to continue serving Medi-Cal members in our existing counties and expand footprintterm, with the ~~addition of the Los Angeles County contract.~~

~~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~~potential 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 early 2023.

~~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 on December 10, 2021. The four-year contract is expected to begin on July 1, 2023, and may be extended for an additional two ~~years. The award enables us to continue serving Medicaid members across the state.~~

~~Texas Acquisition—Medicaid and Medicare.~~ ~~On January 1, 2022, we closed on our acquisition of Cigna Corporation’s Texas Medicaid and Medicare-Medicaid Plan (“MMP”) contracts, along with certain operating assets.~~

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 26~~

~~Table of Contents~~

~~Marketplace Enrollment.~~ We expect to end 2022 with approximately 315,000 members, reflecting normal attrition over the remainder of the year and limited special enrollment period growth based on revised eligibility rules and our product design and distribution strategy.

~~Infosys.~~ On September 29, 2022, we amended each of the master service agreements governing our relationship with our managed information technology (“IT”) services provider, Infosys Limited (collectively, the “Infosys Agreements”). Significant changes to the Infosys Agreements include (i) the extension of the expiration date of each Infosys Agreement to September 30, 2029 (extended from prior expiration dates in 2024), (ii) expansions in the scope of certain support services, and (iii) changes to the pricing model for certain services. As a result of these changes, we expect improvements in certain service level objectives, as well as a reduction in our IT spend.

~~Pharmacy.~~ ~~We have entered into an early~~one-year renewal of our long-standing pharmacy benefit management (“PBM”) agreement with CVS Caremark (“Caremark”). Under the renewal, Caremark will continue to be the exclusive PBM provider to us and our health plan subsidiaries through December 31, 2026. The renewal includes improvements to network rates and administrative costs as well as improved terms around performance standards. Caremark’s services to Molina include, among other things, pharmacy network management, mail order, specialty pharmacy, pharmacy claims processing, and pharmaceutical rebate management.

~~Real Estate.~~ We intend to move permanently to a remote work environment, a model we have been working under successfully for over two years. As a result, we expect to complete a plan to reduce our real estate footprint by the end of the year, which we expect will yield substantial and sustainable G&A expense savings.terms.

For a discussion of additional segment trends, uncertainties and other developments, refer to our ~~2021~~2022 Annual Report on Form 10-K, “Item 1. Business—Our Business,” and “—Legislative and Political Environment.”

REPORTABLE SEGMENTS

As of ~~September 30, 2022,~~March 31, 2023, we served approximately ~~5.2~~5.3 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~~4 reportable segments consisting of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other.

HOW WE ASSESS PERFORMANCE

We derive our revenues primarily from health insurance premiums. Our primary customers are state Medicaid agencies and the federal government.

Management’s discussion and analysis of the change in medical margin is discussed below under “Segment Financial Performance.” For more information, see Notes to Consolidated Financial Statements, Note ~~10,~~8, “Segments.”

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 2724

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SEGMENT MEMBERSHIP

The following table sets forth our membership by segment as of the dates indicated:


		September 30,	December 31,	September 30,		March 31,	December 31,	March 31,
		2022	2021	2021		2023	2022	2022
Medicaid	Medicaid	4,667,000	4,329,000	3,981,000	Medicaid	4,834,000	4,754,000	4,566,000
Medicare	Medicare	155,000	142,000	138,000	Medicare	161,000	156,000	148,000
Marketplace	Marketplace	353,000	728,000	719,000	Marketplace	271,000	348,000	371,000
Total	Total	5,175,000	5,199,000	4,838,000	Total	5,266,000	5,258,000	5,085,000

SEGMENT FINANCIAL PERFORMANCE

The following ~~tables summarize~~table summarizes premium revenue, medical margin, and MCR by segment for the periods indicated (dollars in millions):

Three Months Ended September 30,
2022 2021
Premium
Revenue Medical
Margin MCR Premium
Revenue Medical
Margin MCR
Medicaid $ 6,125 $ 703 88.5 % $ 5,146 $ 532 89.6 %
Medicare 947 108 88.7 875 151 82.8
Marketplace 564 77 86.3 779 68 91.3
Total $ 7,636 $ 888 88.4 % $ 6,800 $ 751 88.9 %


		Nine Months Ended September 30,																			Three Months Ended March 31,
		2022										2021									2023								2022
		Premium Revenue				Medical Margin		MCR				Premium Revenue		Medical Margin				MCR			Premium Revenue		Medical Margin		MCR				Premium Revenue			Medical Margin			MCR

Medicaid	Medicaid			$	18,406					$	2,168					88.2	%				$	15,020	$	1,687	88.8	%	Medicaid	$	6,349		$	734		88.4		%		$	5,980	$	710	88.1	%
Medicare	Medicare	2,847				360		87.4				2,488		329				86.8		Medicare	1,046		126		88.0				943			128			86.5
Marketplace	Marketplace	1,713				255		85.1				2,181		331				84.8		Marketplace	490		154		68.6				608			130			78.6
Total	Total	$	22,966			$	2,783	87.9	%			$	19,689	$	2,347			88.1	%	Total	$	7,885	$	1,014	87.1	%			$	7,531		$	968		87.1		%

Medicaid

Medicaid premium revenue increased ~~$979~~$369 million, or ~~19%~~6%, in the ~~third~~first quarter of ~~2022,~~2023, when compared with the ~~third~~first quarter of ~~2021. Medicaid premium revenue increased $3.4 billion, or 23% in the nine months ended September 30, 2022, when compared with the nine months ended September 30, 2021.~~2022. The ~~increases in both periods were~~increase was mainly due to organic membership growth ~~including our entry into Nevada,~~and the impact from the ~~Affinity and Cigna acquisitions~~AgeWell acquisition that closed in the fourth quarter of ~~2021~~2022, partially offset by the impact of minimum MLR and ~~in January 2022, respectively, and state directed payments in our Texas health plan. The organic~~medical cost corridors. Excluding the AgeWell acquisition, membership growth was across several states and was mainly driven ~~mainly~~ by the extension of the PHE period and the associated suspension of membership redeterminations due to COVID-19.

As described above in “Trends and Uncertainties,” we recognized approximately $34 million and $156 million in the third quarter and nine months ended September 30, 2022, respectively, for the impact of risk corridors enacted in several states since the second quarter of 2020, in response to the lower utilization of medical services resulting from COVID-19. We recognized approximately $17 million and $183 million, respectively, for the impact of such risk corridors in the third quarter and nine months ended September 30, 2021. The decrease was due to the elimination of most of the COVID-19 risk corridors.

The medical margin in our Medicaid program increased ~~$171~~$24 million, or ~~32%~~3%, in the ~~third~~first quarter of ~~2022~~2023 when compared with the ~~third~~first quarter of ~~2021, and increased $481 million, or 29%, in the nine months ended September 30, 2022 when compared with the nine months ended September 30, 2021.~~2022. The increase ~~in margin in both periods~~ was driven by increased premium revenues and margin associated with the ~~increased~~ membership growth ~~and premium revenues~~ discussed above, ~~and~~partially offset by an increase in the ~~MCR decrease discussed below.~~MCR.

The Medicaid MCR ~~decreased 110 basis points~~increased to ~~88.5%~~88.4% in the ~~third~~first quarter of 2023, from 88.1% in the first quarter of 2022, ~~from 89.6% in the third quarter of 2021, and decreased 60~~or 30 basis ~~points to 88.2% in the nine months ended September 30, 2022, from 88.8% in the~~

~~Molina Healthcare, Inc. September 30, 2022 Form 10-Q | 28~~

~~Table of Contents~~

~~nine months ended September 30, 2021.~~points. The ~~decrease for both periods is~~increase was mainly attributable to ~~medical cost management, lower utilization~~certain state rate actions and ~~the year-over-year change~~retrospective premium adjustments, and changes in ~~the net effect of COVID,~~business mix, partially offset by ~~the impact of state directed payments in our Texas health plan.~~improved operations, including medical cost management. The ~~year-over-year change in the net effect of COVID~~Medicaid MCR for the ~~third~~first quarter of ~~2022 reflects lower COVID inpatient costs, partially offset by lower COVID-related utilization curtailment. The 2022 Medicaid MCR~~2023 is ~~at the lower end of~~consistent with our long-term target ~~despite the net effect of COVID and other impacts.~~range.

Medicare

Medicare premium revenue increased ~~$72~~$103 million, or 8%11%, in the ~~third~~first quarter of ~~2022~~2023 when compared to the ~~third~~first quarter of ~~2021, and increased $359 million, or 14%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.~~2022. The increase was primarily due to the impact of ~~product~~MAPD and D-SNP membership expansion, ~~and~~including organic membership growth in existing ~~states, partially offset by lower premium revenue PMPM from the change in business mix.~~states.

The medical margin for Medicare decreased ~~$43~~$2 million in the ~~third~~first quarter of 2023, when compared with the first quarter of 2022, ~~and increased $31 million in the nine months ended September 30, 2022, when compared to the same periods in 2021. The decrease in the third quarter is~~mainly due to the increase in MCR discussed below, partially offset by the increase in premium revenues. ~~The year-over-year increase for the nine months is mainly due to the increase in premium revenues, partially offset by the increase in the MCR discussed below.~~

The Medicare MCR increased to ~~88.7%~~88.0% in the ~~third~~first quarter of 2023, from 86.5% in the first quarter of 2022, ~~from 82.8% in the third quarter of 2021,~~ or ~~590~~150 basis points. The ~~Medicare MCR increased to 87.4% in the nine months ended September 30, 2022, compared to 86.8% in the nine months ended September 30, 2021, or 60 basis points. The MCR~~ increase ~~in both periods~~ was primarily driven by the year-over-year change in the net effect of COVID. COVID-related utilization curtailment and corridor adjustments drove a lower MCR for the 2021 periods. Additionally, the increase in MCR was driven by higher non-COVID utilization and the impact of lower risk-adjusted premiums associated with first year MAPD members, partially offset by higher risk scores on renewing members that more closely reflect the acuity of our membership, and strong medical cost management. The ~~2022 year-to-date~~ Medicare MCR for the first quarter of 2023 is ~~in line with~~within our long-term ~~target.~~target range.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 25

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Marketplace

Marketplace premium revenue ~~decreased $215 million~~ in the ~~third~~first quarter of 2023 decreased $118 million, compared with the first quarter of 2022, ~~compared to the third quarter of 2021, and decreased $468 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in both periods was~~ mainly due to an expected ~~attrition of~~reduction in membership, partially offset by an increase in premium revenue PMPM. Our Marketplace membership as of ~~September 30, 2022,~~March 31, 2023 amounted to ~~353,000~~271,000 members, representing a ~~decrease~~decline of ~~366,000~~77,000 members compared to ~~September 30, 2021.~~December 31, 2022, which is in line with our product and pricing strategy to achieve our target margins in this segment. The increase in premium revenue PMPM is consistent with the product and pricing strategy, reflecting an increase of members in the silver metal tier and a decrease of members in the bronze metal tier, partially offset by an increase in the 2021 risk adjustment payable that was finalized in June 2022.strategy.

The Marketplace medical margin increased $9$24 million in the ~~third~~first quarter of ~~2022~~2023, when compared with the ~~third~~first quarter of ~~2021, and decreased $76 million in the nine months ended September 30,~~ 2022, ~~when compared with the nine months ended September 30, 2021. The improvement in the third quarter is~~primarily due ~~mainly~~ to the decrease in the MCR discussed below, partially offset by the decrease in ~~premium revenue. The decrease in year to date results is primarily due to the net decrease in~~ membership and ~~premiums, and the increase in the MCR described below.~~premiums.

The Marketplace MCR decreased to ~~86.3%~~68.6% in the ~~third~~first quarter of ~~2022, compared to 91.3%~~2023, from 78.6% in the ~~third~~first quarter of ~~2021, or 500 basis points, and increased to 85.1% in the nine months ended September 30, 2022, compared to 84.8% in the nine months ended September 30, 2021, or 30 basis points.~~2022. The decrease ~~in MCR for the third quarter was driven~~resulted mainly ~~by the year-over-year~~from our product and pricing strategy to achieve our target margins and a favorable change in the ~~net effect of COVID,~~2022 risk adjustment payable, partially offset by changes in membership mix that includes higher acuity members. The increase for the nine-month period reflects changes in membership mix that includes higher acuity members and the unfavorable change in the 2021 risk adjustment payable recognized in the seconddiscussed above. Our first quarter ~~of 2022, partially offset by the year-over-year change in the net effect of COVID. We are also incurring~~Marketplace MCR was significantly below full year expectations, but consistent with seasonality patterns. Silver metal tier products incur less MCR seasonality ~~relative to the prior year,~~than bronze metal tier products due to ~~the~~ lower ~~deductibles in the silver metal tier product.~~deductibles.

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 operations ~~for~~in the ~~third~~first quarters of 2023 and ~~nine months ended September 30,~~ 2022, ~~and 2021,~~ respectively.

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LIQUIDITY AND FINANCIAL CONDITION

LIQUIDITY

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. In the first half of 2022, we did not experience noticeable delays to, or changes in, the timing or level of premium receipts as a result of the COVID-19 pandemic, but there can be no assurances that we will not experience such delays in the future. See further discussion below in “Future Sources and Uses of Liquidity—Future Uses—~~Potential Impact of COVID-19 Pandemic~~.”

A majority of the assets held by our 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 ~~third quarter and nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the parent company received ~~$120~~$100 million ~~and $400 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 ~~third quarter and nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the parent company contributed capital in the aggregate amount of ~~$116~~$16 million, ~~and $145 million, respectively,~~ to certain of the regulated health plan subsidiaries.

Cash, cash equivalents and investments at the parent company amounted to ~~$298~~$283 million and ~~$348~~$375 million as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The decrease as of ~~September 30, 2022,~~March 31, 2023, was primarily due to ~~our share repurchase program and~~ the timing of corporate payments and capital contributions to regulated health plan subsidiaries, partially offset by dividends received from 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 which conform to applicable state laws and regulations.

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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.

~~We believe that the risks of the COVID-19 pandemic, as they relate to our investments, are minimal.~~ The overall rating of our portfolio remains strong and is rated A+. Our investment policy has directives in conjunction with state guidelines to minimize risks and exposures in volatile markets. Additionally, our portfolio managers assist us in navigating volatility in the capital markets.

Our restricted investments are invested principally in cash, cash equivalents, U.S. Treasury securities, and corporate debt securities; we have the ability to hold such restricted investments until maturity. All of our unrestricted investments are classified as current assets.

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Cash Flow Activities

Our cash flows are summarized as follows:


		Nine Months Ended September 30,							Three Months Ended March 31,
		2022		2021		Change			2023		2022		Change

		(In millions)							(In millions)
Net cash provided by operating activities	Net cash provided by operating activities	$	985	$	1,522	$	(537)	Net cash provided by operating activities	$	916	$	363	$	553
Net cash used in investing activities		(938)		(1,106)		168
Net cash (used in) provided by investing activities								Net cash (used in) provided by investing activities	(302)		74		(376)
Net cash used in financing activities	Net cash used in financing activities	(258)		(204)		(54)		Net cash used in financing activities	(65)		(77)		12
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents		$	(211)	$	212	$	(423)
Net increase in cash, cash equivalents, and restricted cash and cash equivalents								Net increase in cash, cash equivalents, and restricted cash and cash equivalents	$	549	$	360	$	189

Operating Activities

We typically receive capitation payments monthly, in advance of payments for medical claims; however, government payors may adjust their payment schedules, positively or negatively impacting 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.

Net cash provided by operations for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$985~~$916 million, compared with ~~$1,522~~$363 million in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~$537~~$553 million ~~decrease~~increase in cash flow was due to the net impact of timing differences in government receivables and payables and ~~partially offset by an increase~~the growth in operations and net earnings.

Investing Activities

Net cash used in investing activities was ~~$938~~$302 million in the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared with ~~$1,106~~$74 million ~~used in~~cash provided by investing activities in the ~~nine~~three months ended ~~September 30, 2021, an increase~~March 31, 2022, a decrease in cash flow of ~~$168~~$376 million. This ~~increase~~decrease in cash flow was primarily due to the net activity of proceeds and purchases of investments ~~partially, offset by funding of the AgeWell acquisition,~~ in the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Financing Activities

Net cash used in financing activities was ~~$258~~$65 million in the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared with ~~$204~~$77 million used in the ~~nine~~three months ended ~~September 30, 2021, a decrease~~March 31, 2022, an increase in cash flow of ~~$54~~$12 million. In the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, financing cash outflows included ~~common stock purchases of $200 million and $53~~$58 million for common stock withheld to settle employee tax obligations. In the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, financing cash outflows included ~~common stock purchases of $128 million and~~ $52 million for common stock withheld to settle employee tax obligations. Additionally, we paid $20 million in ~~each of~~ the ~~nine~~three months ended ~~September 30,~~March 31, 2022, ~~and 2021~~ to settle contingent consideration ~~liabilities relating to our Kentucky Passport acquisition that closed in 2020.~~liabilities.

FINANCIAL CONDITION

We believe that our cash resources, borrowing capacity available under the Credit Agreement as discussed further below in “Future Sources and Uses of Liquidity—Future Sources,” and internally generated funds will be sufficient to support our operations, regulatory requirements, debt repayment obligations and capital expenditures for at least the next 12 months.

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On a consolidated basis, at ~~September 30, 2022,~~March 31, 2023, our working capital was ~~$3.3~~$3.5 billion, compared with ~~$3.0~~$3.2 billion at December 31, ~~2021.~~2022. At ~~September 30, 2022,~~March 31, 2023, our cash and investments amounted to ~~$8.1~~$8.6 billion, compared with ~~$7.9~~$7.7 billion at December 31, ~~2021.~~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 $164 million at March 31, 2023 compared to $210 million at December 31, 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 $2.2 billion at ~~September 30, 2022,~~March 31, 2023, compared with ~~$2.1~~$2.3 billion at December 31, ~~2021.~~2022. The aggregate capital and surplus of our regulated, wholly owned subsidiaries was in excess of these minimum capital requirements as of both dates.

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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 ~~September 30, 2022,~~March 31, 2023, was approximately ~~$170~~$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 ~~September 30, 2022,~~March 31, 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

Each of our senior notes is rated “BB-” by Standard & Poor’s, and “Ba3” by Moody’s Investor Service, Inc. A downgrade in our ratings could adversely affect our borrowing capacity and increase our future borrowing costs.

Financial Covenants

The Credit Agreement contains customary non-financial and financial covenants, including a net leverage ratio and an interest coverage ratio. Such ratios are computed as defined by the terms of the Credit Agreement.

In addition, the indentures governing each of our outstanding senior notes contain cross-default provisions that are triggered upon default by us or any of our subsidiaries on any indebtedness in excess of the amount specified in the applicable indenture. As of ~~September 30, 2022,~~March 31, 2023, we were in compliance with all financial and non-financial covenants under the Credit Agreement and the indentures governing our senior notes.

FUTURE SOURCES AND USES OF LIQUIDITY

Future Sources

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.

Potential Impact of COVID-19 Pandemic. Excluding acquisitions and our exit from Puerto Rico, we added ~~over 750,000~~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. ~~We expect~~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, Medicaid enrollment ~~to continue~~continued to benefit from the ~~extension of the PHE period, and the associated~~ pause on membership redeterminations ~~at least~~ through ~~mid-January~~March 31, 2023, and then is expected to decline as states resume normal enrollment and renewal operations on April 1, 2023. We expect to retain approximately half the membership gained since March 31, 2020 through a variety of well-established operational protocols where allowed.

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. ~~As a result~~

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Table of the COVID-19 pandemic, state regulators could further restrict the ability of our regulated health plan subsidiaries to pay dividends to the parent company, which would reduce the liquidity of the parent company.Contents

Credit Agreement Borrowing Capacity. As of ~~September 30, 2022,~~March 31, 2023, we had available borrowing capacity of $1 billion under the revolving credit facility of our Credit Agreement. In addition, the Credit Agreement provides for a $15 million swingline sub-facility and a $100 million letter of credit sub-facility, as well as incremental term loans available to finance certain acquisitions up to $500 million, plus an unlimited amount of such term loans as long as our consolidated net leverage ratio is not greater than a defined maximum. See further discussion in the Notes to Consolidated Financial Statements, Note 8,7, “Debt.”

Future Uses

Common Stock Purchases. In ~~September 2021,~~November 2022, our board of directors authorized the purchase of up to $500 million, in the aggregate, of our common stock. This new program, which superseded the stock purchase program approved by our board of directors in September ~~2020, is~~2021, will be funded with cash on hand and extends through December 31, ~~2022.~~2023. The exact timing and amount of any repurchase is determined by management based on market conditions and share price, in addition to other factors, and subject to the restrictions relating to volume, price, and timing under applicable law. As of ~~October 26, 2022,~~March 31, 2023, $300 million remained available to purchase our common stock under this program through December 31, ~~2022.~~2023.

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Acquisitions. 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 ~~early 2023.~~mid-2023.

~~Potential Impact of COVID-19 Pandemic~~. As described above in “Trends and Uncertainties,” we have been subject to Medicaid risk corridors as a result of the pandemic. Beginning in 2020, various states enacted temporary risk corridors in response to the reduced demand for medical services stemming from COVID-19, which have resulted in a reduction of our medical margin. In some cases, these risk corridors were retroactive to earlier periods in 2020, or as early as the beginning of the states’ fiscal years in 2019. Since the second quarter of 2020, we have recognized risk corridors that we believe to be probable, and where the ultimate premium amount is reasonably estimable. For the three and nine months ended September 30, 2022, we recognized approximately $34 million and $156 million, respectively, related to such risk corridors, primarily in the Medicaid segment.

Regulatory Capital 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.

CONTRACTUAL OBLIGATIONS

A summary of future obligations under our various contractual obligations and commitments as of December 31, ~~2021,~~2022, was disclosed in our ~~2021~~2022 Annual Report on Form 10-K.

There were no significant changes to our contractual obligations and commitments outside the ordinary course of business during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

CRITICAL ACCOUNTING ESTIMATES

When we prepare our consolidated financial statements, we use estimates based on assumptions that may affect reported amounts and disclosures; actual results could differ from these estimates. Our critical accounting estimates relate to:

•Medical claims and benefits payable. Refer to Notes to Consolidated Financial Statements, Note 7,6, “Medical Claims and Benefits Payable,” for a table that presents the components of the change in medical 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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 there were no significant changes to our disclosure reported in “Critical Accounting Estimates” in our ~~2021~~2022 Annual Report on Form 10-K.

•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 Accounting Policies.”

•Quality incentives. In the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, there were no significant changes to our disclosure reported in “Critical Accounting Estimates” in our ~~2021~~2022 Annual Report on Form 10-K.

•Business combinations, goodwill, and intangible assets, net. In the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, there were no significant changes to our disclosure reported in “Critical Accounting Estimates” in our ~~2021~~2022 Annual Report on Form 10-K.

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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 ~~September 30, 2022,~~March 31, 2023, the fair value of our fixed income investments would decrease by approximately ~~$85~~$95 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 5,4, “Fair Value Measurements,” and Note 6,5, “Investments.”

Borrowings under the Credit Agreement bear interest based, at our election, on a base rate or other defined rate, plus in each case, the applicable margin. For further information, see Notes to Consolidated Financial Statements, Note 8,7, “Debt.”

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and our chief financial officer, has concluded, based upon its evaluation as of the end of the period covered by this report, that the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act), are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

LEGAL PROCEEDINGS

For information regarding legal proceedings, see Notes to Consolidated Financial Statements, Note ~~11,~~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 with respect to our securities. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed under the caption “Risk Factors,” in our ~~2021~~2022 Annual Report on Form 10-K. The risk factors described in our ~~2021~~2022 Annual Report on Form 10-K are not the only risks that we face. Additional risks and 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.

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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 ~~third~~first quarter of ~~2022,~~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 that May Yet Be Purchased Under the Plans or Programs (2)
July 1 - July 31 2,000 $ 282.90 — $ 300,000,000
August 1 - August 31 — $ — — $ 300,000,000
September 1 - September 30 — $ — — $ 300,000,000
Total 2,000 $ 282.90 —


	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 that May Yet Be Purchased Under the Plans or Programs (2)
January 1 - January 31	1,000	$	329.36	—	$	300,000,000
February 1 - February 28	—	$	—	—	$	300,000,000
March 1 - March 31	211,000	$	273.80	—	$	300,000,000
Total	212,000	$	273.94	—

_______________________

(1)During the ~~third~~first quarter of ~~2022,~~2023, we withheld approximately ~~2,000~~212,000 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 ~~the accompanying Notes to Financial Statements,~~our 2022 Annual Report on Form 10-K, Note 9,13, “Stockholders' Equity.”

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INDEX TO EXHIBITS

Exhibit No.

Title

Method of Filing

+10.1

~~Change Request #7~~First Amendment to ~~the Master Services~~Credit Agreement, dated ~~February 4, 2019,~~as of April 26, 2023, by and between Molina Healthcare, Inc. and ~~Infosys Limited~~Truist Bank, in its capacity as Administrative Agent, including the amended and restated Credit Agreement attached as Exhibit A thereto, and the amended and restated Exhibits 2.3 and 2.7 to the Credit Agreement, each attached as Exhibit B thereto.

Filed herewith.

31.1

Section 302 Certification of Chief Executive Officer

Filed herewith.

31.2

Section 302 Certification of Chief Financial Officer

Filed herewith.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

101.INS

Inline XBRL Taxonomy Instance 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

Inline XBRL Taxonomy Extension Schema Document.

Filed herewith.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Filed herewith.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

Filed herewith.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.

Filed herewith.

104

Cover Page Interactive Data file (formatted as Inline XBRL and embedded within Exhibit 101)

Filed herewith.

Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been excluded because the information is not material and is the type that the registrant treats as confidential. The location of the redacted confidential information is indicated in the exhibit as “[redacted]”.

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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:	~~October~~April 27, ~~2022~~2023	/s/ JOSEPH M. ZUBRETSKY
		Joseph M. Zubretsky
		Chief Executive Officer
		(Principal Executive Officer)

Dated:	~~October~~April 27, ~~2022~~2023	/s/ MARK L. KEIM
		Mark L. Keim
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Molina Healthcare, Inc. ~~September 30, 2022~~March 31, 2023 Form 10-Q | 3733