![]() Investor Day 2014B September 18, 2014 New York, New York Exhibit 99.1 |
![]() 2 © 2014 Molina Healthcare, Inc. Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This slide presentation and our accompanying oral remarks contain numerous “forward-looking statements” regarding, without limitation to: our 2014 financial guidance; our revenue, revenue mix, and membership projections; our business strategy; duals demonstration projects and their expected implementation start dates; the annual Health Insurer Fee or excise tax and its reimbursement by states on a grossed-up basis; the 2014 rate environment; the hepatitis C drug Sovaldi; our recent acquisitions in the State of Florida; and various other matters. All of our forward-looking statements are subject to numerous risks, uncertainties, and other factors that could cause our actual results to differ materially. Anyone viewing or listening to this presentation is urged to read the risk factors and cautionary statements found under Item 1A in our annual report on Form 10-K, as well as the risk factors and cautionary statements in our quarterly reports and in our other reports and filings with the Securities and Exchange Commission and available for viewing on its website at www.sec.gov. Except to the extent otherwise required by federal securities laws, we do not undertake to address or update forward-looking statements in future filings or communications regarding our business or operating results. |
![]() © 2014 Molina Healthcare, Inc. 3 Approx. Time Topic Speaker 12:30pm-12:35pm Opening Remarks Juan José Orellana, SVP Investor Relations 12:35pm-1:10pm Business Overview Dr. J. Mario Molina, Chief Executive Officer 1:10pm-1:45pm Operations Discussion Terry Bayer, Chief Operating Officer 1:45pm-2:00pm Q&A 2:00pm-2:15pm Break 2:15pm-2:45pm Recent Financing Transactions Joseph White, Chief Accounting Officer 2:45pm-3:05pm Q&A 3:05pm-3:50pm Finance Discussion John Molina, Chief Financial Officer 3:50pm-4:30pm Q&A 4:30pm End of Program Today |
![]() Business Overview J. Mario Molina, M.D. President & Chief Executive Officer September 18, 2014 New York, New York |
![]() © 2014 Molina Healthcare, Inc. 5 Presence in Key Medicaid Markets 2.3 million members WA 461K CA 455K FL 58K NM 195K TX 247K WI 85K MI 244K SC 119K IL 6K UT 83K Health Plan Enrollment as of June 2014 Health Plan footprint includes 4 of 5 largest Medicaid Markets Health Plan Enrollment by Product Medicare 2% 80% TANF 14% CHIP 3% Aged, Blind Marketplace 1% ID WV ME NJ VA Molina Health Plan Molina Medicaid Solutions Direct Delivery USVI OH 302K or Disabled |
![]() © 2014 Molina Healthcare, Inc. 6 2014 Update – Short Term Medicare-Medicaid plan (MMP) program delay – Michigan TX Quality Revenue not yet recognized Delays in recognition and collection of Health Insurer Fee (HIF) reimbursement Medicaid expansion enrollment higher than anticipated Florida Medicaid Managed Medical Assistance (MMA) program launch Washington dispute settlements Convertible Senior Note transactions in September 2014 MMP enrollment on track Please refer to the Company’s cautionary statements. |
![]() © 2014 Molina Healthcare, Inc. 7 Affordable Care Act – Effect on MOH after 6 Months Medicaid Expansion Enrollment Enrollment from Molina States participating in Medicaid Expansion TANF & Welcome Mat Effect Medicaid TANF Enrollment from Molina States participating in Medicaid Expansion Marketplace Enrollment Enrollment in California, Florida, Michigan, New Mexico, Ohio, Texas, Utah, Washington and Wisconsin $20M 1 Half Revenue Not Materialized Charts presented with varying scales. 133K 232K 4Q2013 1Q2014 2Q2014 8K 18K 4Q2013 1Q2014 2Q2014 1,148K 1,156K 1,179K 4Q2013 1Q2014 2Q2014 $500M 1 Half Revenue st st |
![]() © 2014 Molina Healthcare, Inc. 8 Medicaid Expansion TANF Enrollment 1.5 Million Average age: 14 Seniors & Persons with Disabilities Enrollment: 227K Average age: 42 Medicaid Expansion Enrollment 241K Average age: 40 age age age Gender Mix Female Male Gender Mix Female Male Gender Mix Female Male Enrollment Demographic Profile 1. Molina internal analytics. Most recent data available. 78% 5% 9% 8% 1% 0% 0% 15% 25% 41% 19% 0% 17% 7% 12% 30% 24% 9% 45% 55% 46% 54% 50% 50% 1 |
![]() © 2014 Molina Healthcare, Inc. 9 Medicaid Expansion TANF Enrollment 1.5 Million Average age: 14 Seniors & Persons with Disabilities Enrollment: 227K Average age: 42 Medicaid Expansion Enrollment 241K Average age: 40 Medical Spending Profile by Service Category 1. Molina internal analytics. Most recent data available. IP = Inpatient OP = Outpatient ER = Emergency Room MAT = Maternity Related BH = Behavioral Health LTC = Long Term Care RX = Pharmacy PROF = Professional Services 19% 12%12% 11% 2% 1% 16% 28% 32% 14% 12% 4% 1% 0% 10% 26% 25% 10% 7% 1% 2% 12% 24% 18% 1 |
![]() © 2014 Molina Healthcare, Inc. 10 Medicaid Expansion TANF Enrollment 1.5 Million Average age: 14 Seniors & Persons with Disabilities Enrollment: 227K Average age: 42 Medicaid Expansion Enrollment 241K Average age: 40 Pharmacy Spending Profile Top 10 Drugs by Spend 1. Molina internal analytics. Most recent data available. 1 Abilify ProAir HFA QVAR Synagis Vyvanse Methylphenidate Hydrochloride Budesonide Tamiflu Lantus Humira 7% 3% 2% 2% 2% 2% 2% 1% 1% 1% Abilify Lantus Humalog QVAR Humira ProAir HFA Enbrel Gabapentin Novolog Atripla 5% 3% 2% 2% 2% 2% 1% 1% 1% 1% Lantus Abilify Invega Sustenna Spiriva Nexium Truvada Lantus Solostar ProAir HFA QVAR Humira 3% 3% 2% 2% 2% 2% 2% 2% 2% 1% |
![]() © 2014 Molina Healthcare, Inc. 11 ACA Medicaid Expansion Demographics vs. Actual Experience Seniors & Persons with Disabilities Molina actual enrollment of Seniors and Persons with Disabilities adjusted by removing age bands 0-18 and 65+. age age age Gender Mix Female Male Gender Mix Female Male Gender Mix Female Male Urban Institute Demographic expectations prior to implementation 1. Urban Institute. August 2012. http://www.urban.org/UploadedPDF/412630-opting-in-medicaid.pdf 2. Molina internal analytics. Most recent data available Medicaid Expansion Actual enrollment experience Enrollment 241K Average age: 40 of the Affordable 1 2 2 0% 26% 26% 36% 13% 0% 0% 15% 25% 41% 19% 0% 0% 10% 16% 41% 33% 0% 47% 53% 46% 54% 47% 53% Care Act |
![]() © 2014 Molina Healthcare, Inc. 12 2014 Update – Long Term Molina is transforming from an acute care company to a chronic care company. Business requirements are changing as we take on more complex patients. Please refer to the Company’s cautionary statements. |
![]() © 2014 Molina Healthcare, Inc. 13 Molina Footprint Please refer to the Company’s cautionary statements. 2014: Molina launches MMP Demos in three states… MMP Demonstrations CA NM MI WA UT TX OH FL WI ID LA WV NJ ME SC IL Direct Delivery Service Areas: Molina Health Plan Molina Medicaid Solutions Total Revenue $794M 1.2M $3.1B $3.9B $6.6B 560K Members 1.5M 1.9M 2010: Molina offers services through Molina Medicaid Solutions… $9.9B 2.6M 1 1. Constitutes forward-looking guidance issued on February 2014. Amounts are estimates and subject to change. Actual results may differ materially. See our risk factors as discussed in our Form 10-K and other periodic filings. USVI VA 2008: Molina offers Medicare services… 2003: Molina becomes publicly traded on the New York Stock Exchange… 1980: Molina Healthcare is born… |
![]() © 2014 Molina Healthcare, Inc. 14 Medicaid Enrollment and Spending While most Enrollees are in Managed Care, most Medicaid Spending is still in Fee-for-Service Medicaid Enrollment and Spending FY 2011 1. Managed care includes only risk based MCOs. CMS-64 data for 2012, and: MACPAC, ‘Report to Congress on Medicaid and CHIP’, June 2013. FFS MCOs $407B 57M 26% 74% 77% 23% Managed Care Organizations (MCOs) and Fee-For-Service (FFS) $92B $315B Medicaid Spend 2011 42M 15M Medicaid Enrollment 2011 |
![]() © 2014 Molina Healthcare, Inc. 15 Home & Community-Based Care Institutional-Based Care Growing Long-Term Care Needs Medicaid Long-Term Services and Supports Expenditures 2007-2012 1 $113B $123B $131B $139B $140B $140B 1. Truven Health Analytics. ‘Medicaid Expenditures for Long-Term Services and Supports in FFY 2012’, April 28, 2014. 59% 57% 55% 52% 52% 50% 41% 43% 45% 48% 48% 50% 2007 2008 2009 2010 2011 2012 |
![]() © 2014 Molina Healthcare, Inc. 16 Medicaid Long-Term Services and Supports (LTSS) Older People & People with Physical Disabilities People with Developmental Disabilities 61% 30% People with Serious Mental Illness 6% Other/Multiple Populations 3% Full Medicaid LTSS spend in 2012: $140B 1. Truven Health Analytics. ‘Medicaid Expenditures for Long-Term Services and Supports in FFY 2012’, April 28, 2014. |
![]() © 2014 Molina Healthcare, Inc. 17 Medicaid Home and Community-Based Services (HCBS) as % of LTSS Spending Medicaid HCBS as Percent of Total Medicaid LTSS Expenditures 1 FY 1995 – FY 2012 1. Truven Health Analytics. ‘Medicaid Expenditures for Long-Term Services and Supports in FFY 2012’, April 28, 2014. Medicaid spend on Long-Term Care has been shifting toward Community-Based Care 18% 19% 24% 25% 26% 27% 30% 30% 33% 36% 37% 39% 41% 43% 45% 48% 48% 50% 0% 10% 20% 30% 40% 50% 60% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 |
![]() © 2014 Molina Healthcare, Inc. 18 Medicaid Home and Community-Based Services (HCBS) People with Serious Mental Illness 4% Other/Multiple Populations 6% Medicaid HCBS total spend in 2012: $69B 1. Truven Health Analytics. ‘Medicaid Expenditures for Long-Term Services and Supports in FFY 2012’, April 28, 2014. Older People & People with Physical Disabilities People with Developmental Disabilities 48% 42% |
![]() © 2014 Molina Healthcare, Inc. 19 Medicaid Home and Community-Based Services (HCBS) Medicaid expenditures for long-term care services have gradually shifted from institutional-based care to home and community-based care. Medicaid HCBS total spend in 2012: $69B Medicaid HCBS Expenditures FY 2010 1 Mental Health 3% Case Management 4% Group living, mental health services: 34% Round-the-clock services, unspecified: 28% Group living, other: 11% Shared living, other: 9% In-home residential habilitation: 5% In-home round-the-clock services, other: 5% Group living, residential habilitation: 4% Shared living, residential habilitation: 3% In-home round-the-clock mental health services: 1% Home-based habilitation Home health aide Personal care Companion Homemaker Chore Prevocational services Day habilitation Education services Day treatment/partial hospitalization Adult day health Adult day services Community integration Medical day care for children Round-the-Clock 46% Home-Based 18% Day Services 15% Other 2 14% 1. Mathematica Policy Research. ‘The HCBS Taxonomy: A New Language for Classifying Home- and Community-Based Services’, August 2013. 2. Other includes expenses related to goods and services, interpreters, housing consultation, and claims where the procedure code could not be interpreted. |
![]() © 2014 Molina Healthcare, Inc. 20 Molina Long Term Services & Support (LTSS) Footprint – as of September 2014 Service Areas: MMP Demonstrations LTSS ”Stand Alone” LTSS and Acute Care Home and Community-Based Services (HCBS) CA NM OH FL IL TX |
![]() © 2014 Molina Healthcare, Inc. 21 Long Term Services & Supports Continuum of Care Management Model LTSS Medical Health Services Behavioral Health Services |
![]() © 2014 Molina Healthcare, Inc. 22 Molina Long Term Model of Care Functional Elements |
![]() © 2014 Molina Healthcare, Inc. 23 Manage our growth Organic growth Medicaid expansion Dual eligible population RFPs Leverage our business portfolio Health plan business MMS Direct delivery Strive for operational excellence Quality care STAR ratings Strategic Priorities Our mission is to provide quality health services to financially vulnerable families and individuals covered by government programs. Mission Priorities |
![]() 24 © 2014 Molina Healthcare, Inc. |
![]() Operations Discussion Terry Bayer Chief Operating Officer September 18, 2014 New York, New York |
![]() © 2014 Molina Healthcare, Inc. 26 Molina Healthcare of Florida: Service Areas Yesterday Pre-Florida Medicaid Managed Care (MMA) and Long Term Care… Pre-Florida MMA Long Term Care Service Areas: Hillsborough Polk Osceola Palm Beach Broward Miami- Dade Highlands Monroe Seminole Hardee Manatee Pasco Pinellas |
![]() © 2014 Molina Healthcare, Inc. 27 Molina Healthcare of Florida: Service Areas Long Term Care Today Long Term Care, Florida MMA and Healthy Palm Beaches Acquisition… Service Areas: Pasco Hillsborough Polk Osceola Palm Beach Miami- Dade Pinellas Manatee Hardee Highlands Monroe Seminole Region 7 Region 9 Region 11 Healthy Palm Beaches Asset Acquisition 1 Florida MMA – Orange Brevard Indian River St. Lucie Martin 1. Molina acquired Medicaid assets of Healthy Palm Beaches, with an effective date of August 1, 2014. |
![]() © 2014 Molina Healthcare, Inc. 28 Molina Healthcare of Florida: Closed Acquisition On August 1 st , Molina acquired Medicaid business assets of a Florida health plan, Healthy Palm Beaches Approximately 11,500 members in Palm Beach County transferred over effective August 1, 2014 Members transitioned into Molina as part of the Florida Managed Medical Assistance (MMA) program implementation |
![]() © 2014 Molina Healthcare, Inc. 29 Molina Healthcare of Florida: Service Areas Long Term Care Tomorrow Long Term Care, Florida MMA, and New Acquisitions 1,2 … Service Areas: Pasco Hillsborough Polk Osceola Palm Beach Miami- Dade Pinellas Manatee Hardee Highlands Monroe Seminole Region 7 Region 9 Region 11 Region 4 (through acquisition) 1 Healthy Palm Beaches Asset Acquisition 2 Florida MMA – Orange Brevard Nassau Baker Duval Clay Flage r Volusia Indian River St. Lucie Martin 1. New Florida MMA region added through the First Coast Advantage asset acquisition, with an effective date of December 1, 2014 pending AHCA approval. 2. Molina acquired Medicaid assets of Healthy Palm Beaches, with an effective date of August 1, 2014. |
![]() © 2014 Molina Healthcare, Inc. 30 Molina Healthcare of Florida: Pending Acquisition On August 8 th , Molina agreed to acquire certain assets of a Florida health plan, First Coast Advantage Approximately 65,500 individuals eligible for transfer to Molina Anticipated effective date of December 1, 2014 1 Will assume First Coast Advantage’s Medicaid contract and certain provider agreements for Region 4 of the Florida MMA program Region 4 is in Northeast Florida and includes Baker, Clay, Duval, Flagler, Nassau, St. Johns and Volusia counties 1. Pending state approvals and satisfaction or waiver of customary closing conditions. |
![]() © 2014 Molina Healthcare, Inc. 31 Molina Healthcare of Florida: Program Implementations Region 4 Region 5 Region 6 Region 7 Region 9 Region 9 Region 11 Region 11 Program Type Florida MMA (through acquisition) 2 Long Term Care Long Term Care Florida MMA Florida MMA Florida MMA (through acquisition) 3 Florida MMA 4 Long Term Care 4 Implementation Date 12/1/14 2/1/14 2/1/14 8/1/14 8/1/14 8/1/14 7/1/14 12/1/13 Covered Lives 1 65K 1.6K 1.3K 11K 57K 11.5K 24K 3 3K 1. Membership is based on August data and rounded to nearest hundred. 2. New Florida MMA region added through the First Coast Advantage asset acquisition, with an anticipated effective date of 12/1/14 (pending AHCA approval and satisfaction or waiver of customary closing conditions). 3. Molina acquired assets of Healthy Palm Beaches in Palm Beach County, with an effective date of 08/01/14. 4. In Region 11 there are approximately 1,200 members that are included in both LTC and MMA. Covered lives and implementation dates |
![]() © 2014 Molina Healthcare, Inc. Molina Healthcare of Florida: Medical Care Ratio YoY Comparison Same Store MCR remains consistent through first half of 2014. Higher MCR attributed to new Long Term Care enrollment. Molina Healthcare of Florida Medical Care Ratio _ Excluding Long Term Care Molina Healthcare of Florida Medical Care Ratio _ All Products 84.4% 90.2% 2Q YTD 2013 2Q YTD 2014 84.4% 84.8% 2Q YTD 2013 2Q YTD 2014 32 |
![]() © 2014 Molina Healthcare, Inc. 33 Molina Medicare-Medicaid Plan (MMP) Update Enrollment in MMP demos 15K 1 California opt-out rate 50% Enrollment tracking with expectations 33 1. Enrollment figure as of September 5 th , 2014. |
![]() © 2014 Molina Healthcare, Inc. 34 MMP Demonstrations – National View as of June 2014 Over two dozen states submitted applications, with ten states participating in the MMP demonstration Capitated model – No MOU Capitated Demo – Started 2014 Capitated Demo – Starts in 2015 MFFS model – Started 2014 Withdrawn CA NM OH IL AZ OK CO ID OR WA MN WI IA MO MI VA NC SC VT MA RI CT TN Hybrid Capitated and FFS model TX MFFS model – No MOU |
![]() © 2014 Molina Healthcare, Inc. 35 Molina MMP Footprint Contracts awarded to MOH Demonstration is ‘Live’ CA TX SC IL OH MI |
![]() © 2014 Molina Healthcare, Inc. 36 The MMP Opaque Crystal Ball… |
![]() © 2014 Molina Healthcare, Inc. 37 MMP – Lessons Learned from “Go Live” Enrollment Files Lack of common data elements Contact Centers Call volume trending lower than expected Provider and members call to clarify benefits Average talk time 10 minutes Contract Management Team (CMT) Weekly or monthly and vary by state Includes representatives from CMS and State Effective way to mange early operational issues Opportunity to Listen, Learn & Adjust |
![]() © 2014 Molina Healthcare, Inc. 38 MMP – Lessons Learned from “Go Live” Health Risk Assessments & Initial Care Plans Member Contact and Engagement Reaching Members Opportunity to Listen, Learn & Adjust Mining claims data, prior auth/referral data to identify places to find members Working with providers and pharmacies Leveraging Community Connectors Passive enrollment limits opportunity to engage member Difficult to schedule assessment Bad phone numbers and addresses Large numbers and compressed time frames 38 |
![]() © 2014 Molina Healthcare, Inc. 39 What Else is New Beyond the 2 nd Quarter? Ohio Medicaid expansion Michigan Medicaid expansion Illinois new TANF members effective August 2014 |
![]() © 2014 Molina Healthcare, Inc. 40 More continuous eligibility Chronic illnesses Behavioral health More likely to have greater limitations in activities of daily living (ADL) Require more focused care including home care Caring for the Dual Eligible Shift from Acute Care company to a Chronic Care company Two Ends of the Continuum Duals TANF Breaks in eligibility Episodic care Pregnancy Greater ethnic diversity Larger support system at clinic visits 1. KFF.org Under Age 65 38% Over Age 65 62% Under Age 65 75% Over Age 65 25% Demographics 1 TANF ABDs Duals TANF Duals |
![]() © 2014 Molina Healthcare, Inc. 41 Shift of Care Model from Inpatient Care to Home-Based Outpatient Care |
![]() © 2014 Molina Healthcare, Inc. 42 Improving the Member Experience – Case Study 54 year-old woman, homeless with behavioral health issues, unreachable for health risk assessment. Image for illustrative purposes only. Not actual patients. |
![]() © 2014 Molina Healthcare, Inc. 43 Improving the Member Experience – Case Study Image for illustrative purposes only. Not actual patients. 52 year-old woman, with COPD, diabetes, high blood pressure, stroke with paralysis. |
![]() © 2014 Molina Healthcare, Inc. 44 Long Term Services & Supports Continuum of Care Management Model LTSS Medical Health Services Behavioral Health Services |
![]() © 2014 Molina Healthcare, Inc. 45 Q&A |
![]() September 18, 2014 New York, New York Recent Financing Transactions Joseph White Chief Accounting Officer |
![]() © 2014 Molina Healthcare, Inc. 47 Please refer to the Company’s cautionary statements. Convertible Note Exchange and Issuance $301,551,000 September 2014 1.625% Convertible Senior Notes due 2044 Interest payable February 15 and August 15 $302M Convertible Debt ($177M+$125M) Underlying shares 5.2 million 1.625% coupon 30% conversion premium ($58.09 per share) No call spread Net share settlement Maturity 8/15/2044 Call / put at 8/19/2018 GAAP interest rate 5% $0.12 diluted EPS (annualized); $0.05 cash/ $0.07 non-cash diluted EPS |
![]() © 2014 Molina Healthcare, Inc. 48 $176.6M of 2044 Notes 2044 Convertible Notes- Summary of Execution Please refer to the Company’s cautionary statements. 2014 Convertible Investors $187.0M of 2014 Notes $10.4M Cash 1.8M Shares 1. $176.6M of the 2014 notes exchanged, maturing in 2044 2. 2014 note holders exchanging their notes for 2044 notes received: a. Shares of MOH stock as if they had held the 2014 notes to maturity b. Interest payments on the 2014 notes as if they had held those notes to maturity 3. Remaining $10.4M of 3.75% convertible notes will mature on October 1, 2014 as planned Molina Healthcare New Convertible Investors $125M Cash $125M of 2044 Notes Interest paid through 2014 note maturity 1. An additional $125M of 2044 notes were issued to new investors Exchange New Issuance Molina Healthcare |
![]() © 2014 Molina Healthcare, Inc. 49 MOH Convertible Debt Exchange 2020 Notes 2044 Notes Principal Amount $550.0M $301.6M Coupon rate 1.125% 1.625% GAAP Interest rate 6% 5% Call spread Yes No Contingent interest No Yes Maturity date 1/15/2020 8/15/2044 Settlement Cash Net shares Conversion ratio 24.5277 17.2157 Conversion price $ 40.77 $ 58.09 High strike $ 53.85 N/A Put / call options No Yes – put and call at year 4 Conversion premium 32.5% / 75% (high strike) 30% Basic terms summary – 1.125% 2020 notes vs. 1.625% 2044 notes Please refer to the Company’s cautionary statements. |
![]() © 2014 Molina Healthcare, Inc. 50 Cost of Capital Comparison Molina CPDI convertible due 2044 After Tax Cost of Capital 1 1 Assumes a 40% tax rate, $44.68 stock price at issuance. Convertible vs Straight Debt Break-even Stock price: $70.60 CAGR: 11.8% Please refer to the Company’s cautionary statements. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% $44.68 $49.35 $54.44 $59.98 $66.02 $72.57 Stock Price Straight Debt (6.00% coupon area, pre-tax) CPDI Convertible (1.625% up 30%) |
![]() © 2014 Molina Healthcare, Inc. 51 Cost of Capital Comparison Molina Convertible & Call Spread Due 2020 After Tax Cost of Capital 1 Convertible vs Straight Debt Break-even Stock price: $62.91 CAGR: 15.4% 1 Assumes a 40% tax rate, $30.77 stock price at issuance. Please refer to the Company’s cautionary statements. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% $30.77 $34.16 $37.54 $40.93 $44.31 $47.70 $51.08 $54.47 $57.86 $61.24 $64.63 Stock Price 1.125% Convertible + Call Spread + 75% Straight Debt (6.00% coupon area, pre-tax) |
![]() © 2014 Molina Healthcare, Inc. Incremental Interest Impact of New Convert Interest expense for the 2044 notes exchanged for 2014 notes began accruing effective 9/5/2014 Interest expense for the additional 2044 notes issued began accruing effect 9/16/2014 Cash Non-cash EPS Please refer to the Company’s cautionary statements. $0.01 $0.03 3Q 4Q Annualized 52 $0.1 $0.07 $0.05 Note: (1) Approximately $1M that had previously been categorized as interest expense in the guidance issued February, 2014 will be reported as “Other expense” in the Company’s Consolidated Statements of Income for the quarter ended September 30, 2014. This amount represents interest paid and discount amortized for the 2014 notes exchanged for the period September 5, 2014 through September 30, 2014. |
![]() © 2014 Molina Healthcare, Inc. 53 Estimated Shares Outstanding – 2 nd half 2014 Bridge from 12/31/2013 to 12/31/2014 (In thousands) Year ended 12/31/2014 Shares outstanding at the beginning of the period 45,871 Shares issued: 3.75% Senior Notes 1,784 Employee equity incentives and other 945 Subtotal, estimated shares outstanding 12/31/2014 48,600 Adjustments for Weighted Shares Outstanding, Diluted: Common stock equivalents - employee equity incentives 500 Weighting of shares issued - 3.75% Senior Notes (160) Weighting of shares issued - employee equity incentives and other (440) Weighted shares outstanding, Diluted (estimate) 48,500 Weighted shares outstanding, Diluted (estimate) - Guidance Issued Feb 2014 47,700 Estimated diluted shares for Q3 2014 EPS 48,700 Estimated diluted shares for Q4 2014 EPS 48,900 |
![]() © 2014 Molina Healthcare, Inc. 54 Q&A |
![]() Financial Discussion John Molina Chief Financial Officer September 18, 2014 New York, New York |
![]() © 2014 Molina Healthcare, Inc. 56 Base Rate Update State FINAL Effective Date Rate Change Notes California Jul-14 +5.5% Normalized for -3% benefit change Excludes Medicaid Expansion 1 Florida Jul-14 NA MMA New Rates / Regions Illinois Jul-14 +2.5% Michigan Oct-14 -2.5% to +3.5% Rate Ranges (Low / High) New Mexico Jul-14 +0.0% Normalized for +6% fee schedule & benefit changes Ohio Jan-14 +2.0% Excludes new product and benefit expansions and risk adjustment South Carolina Jul-14 +1.5% Texas Sep-14 +0.5% Utah Jul-14 +0.0% Washington Jan-14 +0.0% Wisconsin Jan-14 +1.0% Excludes new product and benefit expansions 1. Medicaid Expansion rates will be adjusted retroactively back to 7/1/2014 (CA) and 1/1/2014 (WA). Excludes new product and benefit expansions; net of fee schedule adjustments; excludes risk adjustment 1 |
![]() WA Overpayment and Member Assignment Settlements September 2014 Item 1 - Molina agrees to pay $19M to the state to adjust premiums for two rate-related issues for the period 7/1/2012 to 12/31/2013 Item 2 - State agrees to pay Molina $8M to adjust premiums for member assignment issues for the period 7/1/2012 – 12/31/2013 Two separate one-time items to be recorded in the 3 quarter of 2014; reducing pre-tax income by approximately $11M Amounts are not included in guidance issued February 2014 Both matters had been resolved previously on a go-forward basis effective January 1, 2014 No impact on premiums or membership related to January 1, 2014 and later 57 © 2014 Molina Healthcare, Inc. rd |
![]() Total Health Insurer Fee (HIF) on Medicaid revenue approximately $80M due September 30th, 2014 Lack of tax deductibility requires revenue of $130M Contractual agreements in hand representing approximately 50% of required revenue Payment has not yet been received from any state Health Insurer Fee (HIF) Reimbursement Update Please refer to the Company’s cautionary statements. 58 © 2014 Molina Healthcare, Inc. |
![]() © 2014 Molina Healthcare, Inc. 59 Texas Quality Revenue $35M of 2014 revenue based on quality measures Many quality measures are new this year Calculation of performance is complex and subject to interpretation State has not released its calculation of 2013 performance Molina will compare its 2013 calculations to those released by state and adjust its 2014 calculations accordingly If Molina’s 2014 calculations support achievement of the measurements, revenue will be recorded |
![]() © 2014 Molina Healthcare, Inc. 60 What Admin Leverage May Do for MOH in Q3 and Q4 of 2014 G&A Expense 1 Note(s): 1. G&A ratio computed as a percentage of total revenue. 2. Constitutes forward-looking guidance. Amounts are estimates and subject to change. Actual results may differ materially. See our risk factors as discussed in our Form 10-K and other periodic filings. 2014 Guidance G&A Ratio 1H14 2H14 2 Total revenue $4.4B $5.5B G&A expenses $381M $430M G&A ratio 8.7% 7.7% 2 nd half admin at 1 st half G&A ratio $480M 2 nd half admin at projected G&A ratio $430M 2 nd half benefit from lower ratio $50M Guidance Actual 1Q14 8.9% 9.1% 2Q14 8.6% 8.4% 3Q14 7.9% - 4Q14 7.5% - Please refer to the Company’s cautionary statements. |
![]() 61 © 2014 Molina Healthcare, Inc. Delays in Revenue Recognition Distort Normal Seasonality Please refer to the Company’s cautionary statements. Q2 YTD reported Adjusted EPS $1.35 + HIF revenue we haven’t recognized $0.29 + TX Quality Revenue we haven’t recognized $0.12 Total YTD Adjusted EPS with HIF and TX Quality Revenue add-backs $1.76 Adjusted Net Income Per Diluted Share, Continuing Operations, with Health Insurer Fee (HIF) and TX Quality Revenue Reimbursement Add-Backs Note(s): 1. See Appendix for reconciliation of adjusted net income per diluted share, continuing operations, to GAAP net income per diluted share, continuing operations. 1 |
![]() © 2014 Molina Healthcare, Inc. 62 Delayed recognition of the Health Insurer Fee (HIF) reimbursement may reduce third quarter GAAP & Adjusted EPS by (~$0.14) Substantial uncertainty around Q3 results Delays in recognition of Texas quality revenue may reduce third quarter GAAP & Adjusted EPS by (~$0.06) Expected Financial Performance – Q3 2014 vs. Q4 2014 Delays in revenue recognition may continue $0.00 $0.00 ($0.14) ($0.43) Q3 Q3 YTD ($0.06) ($0.18) Q3 Q3 YTD |
![]() © 2014 Molina Healthcare, Inc. 63 Excludes 2014 Guidance – What’s In and What’s Out Includes Full Reimbursement of ACA Health Insurer Fee (HIF) Full Reimbursement of TX Quality Revenue Increased dilution from convertible debt due to higher than anticipated share price Washington settlements and other agreements on contractual disputes Higher interest expense due to the issuance of 2044 convertible notes Sovaldi Please refer to the Company’s cautionary statements. |
![]() © 2014 Molina Healthcare, Inc. 64 Levers for Improved Profitability Please refer to the Company’s cautionary statements. Rate increases that reach the mid-point of actuarial ranges Rates that adequately compensate health plans for new drugs/ new procedures / new technologies More cost effective delivery of medical care and other member services through care coordination Administrative cost leverage Reimbursement of the Health Insurer Fee (HIF) Ability of health plans to share in the savings they generate – fair sharing of profits AND losses through caps and floors on medical care costs |
![]() © 2014 Molina Healthcare, Inc. 65 Please refer to the Company’s cautionary statements. Convertible Note Exchange and Issuance Update $301,551,000 September 2014 1.625% Convertible Senior Notes due 2044 Interest payable February 15 and August 15 $302M Convertible Debt ($177M+$125M) Underlying shares 5.2 million 1.625% coupon 30% conversion premium ($58.09 per share) No call spread Net share settlement Maturity 8/15/2044 Call / put at 8/19/2018 GAAP interest rate 5% $0.12 diluted EPS (annualized); $0.05 cash/ $0.07 non-cash diluted EPS |
![]() © 2014 Molina Healthcare, Inc. 66 Capital and Revenue Capacity Estimated Net Worth Revenue Capacity 12/31/14 Parent Cash $0.4B Excess Net Worth (Plans) $0.2B Required Net Worth (Plans) $0.6B Expected Revenue $9.7B Excess Revenue Capacity (Plans) $3.3B Excess Revenue Capacity (Parent) $5.0B Caveats: Regulators may require maintenance of net worth in excess of minimum requirements Capital demands on health plans in the event of losses Costs of acquisitions and other expansions Costs of MMS implementations in new and existing states Costs of infrastructure $1.2B $18.0B 12/31/14 1. Based upon minimum required net worth. Regulators may require maintenance of net worth in excess of minimum requirements. Please refer to the Company’s cautionary statements. 1 |
![]() © 2014 Molina Healthcare, Inc. 67 Q&A |
![]() © 2014 Molina Healthcare, Inc. 68 Appendix |
![]() © 2014 Molina Healthcare, Inc. 69 Glossary of Long Term Care Terminology Long Term Care Services & Supports (LTSS) Refers to services and supports that assist individuals with performing activities of daily living and instrumental activities of daily living. These range from providing assistance with eating, dressing, and toileting, to assisting with managing a home and medication management. Home and Community-Based Services (HCBS) Refers to a range of services that help the individual to live independently, outside of an institutional setting, including adult day care and services, respite care, homemaker services, training in activities of daily living skills, transportation, provision of equipment, and group living. Institutional-Based Care Refers to care in institutional facilities, such as nursing homes, licensed by the state that offer 24-hour room and board, supervision, and nursing care. These serve not only long-stay residents, but also short-stay residents who receive rehabilitation or post-hospital recuperation. |
![]() ![]() ![]() ![]() © 2014 Molina Healthcare, Inc. 70 GAAP reconciliation to Adjusted EPS Please refer to the Company’s cautionary statements. The following table reconciles net income per diluted share, continuing operations, to adjusted net income per diluted share, continuing operations, with Health Insurer Fee (HIF) and Texas Quality Revenue add-backs for six months ended June 30, 2014. Net income per diluted share, continuing operations 0.26 $ Adjustments, net of tax: Depreciation, and amortization of capitalized software 0.58 Stock-based compensation 0.19 Amortization of convertible senior notes and lease financing obligations 0.18 Amortization of intangible assets 0.14 Adjusted net income per diluted share, continuing operations 1.35 $ Change in fair value of derivatives, net — HIF revenue not recognized 0.29 Texas Quality Revenue not recognized 0.12 Adjusted net income per diluted share, continuing operations with HIF and Texas Quality add-backs 1.76 $ Ended June 30, 2014 |
![]() ![]() ![]() © 2014 Molina Healthcare, Inc. 71 Status of Reimbursement – ACA Health Insurer Fee (HIF) in Molina States Our guidance assumes the HIF and related tax effects will be fully reimbursed in all states. Note: Constitutes forward-looking guidance. Amounts are estimates and subject to change. Actual results may differ materially. See our risk factors as discussed in our Form 10-K and other periodic filings. Numbers may not add up due to rounding Please refer to the Company’s cautionary statements. Comments ACA Fee Gross Up Revenue Revenue Recognized 06/30/14 California Health plan has received letter from state committing to reimbursement of fee and tax impact upon CMS approval. State is collecting information needed from health plans to process payment. $7.3M $4.4M $11.6M No Florida Contract amendment specifically calls for reimbursement of fee and tax impact. $3.6M $2.2M $5.8M Yes Illinois Contract amendment specifically calls for reimbursement of fee and tax impact. $0.1M $0.1M $0.2M Yes Michigan State legislature has appropriated funds for ACA fee and tax reimbursement. Awaiting supplemental legislation approving reimbursement. $10.7M $6.8M $17.5M No New Mexico Health plan has received letter from state committing to reimbursement of fee and tax impact upon CMS approval. Mercer is working on approach now. Molina has shared information with the state. $7.1M $4.3M $11.3M No Ohio Contract specifically calls for reimbursement of fee and tax impact. $18.2M $12.2M $30.4M Yes South Carolina No revenue in 2013; We have contract amendment for reimbursement of fee and tax impact $0.0M $0.0M $0.0M No Texas Informal support from state Medicaid agency. Molina has shared information as requested by the state. $11.8M $6.7M $18.5M No Utah State has proposed rates effective July 1, 2014 that partially reimburses Molina for financial impact of the ACA fee. $3.3M $2.0M $5.3M No Washington Contract specifically calls for reimbursement of fee and tax impact. $16.1M $9.2M $25.2M Yes Wisconsin Contract specifically calls for reimbursement of fee and tax impact. State has committed to reimbursement by Sept. 26. $2.9M $1.9M $4.8M Yes Medicare Included in bid pricing $7.7M $4.5M $12.2M Yes TOTAL FY 2014 $88.6M $54.3M $142.9M |