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 ~~June 30, 2020~~March 31, 2021


☐			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 ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ 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 Section13(a) of the Exchange Act. ☐

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

The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of ~~July 24, 2020,~~April 23, 2021, was approximately ~~59,300,000.~~58,400,000.

Table of Contents

MOLINA HEALTHCARE, INC. FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2020~~MARCH 31, 2021

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

3.	3.	Quantitative and Qualitative Disclosures About Market Risk	40	3.	Quantitative and Qualitative Disclosures About Market Risk		33

4.	4.	Controls and Procedures	41	4.	Controls and Procedures		34

PART II	PART II					PART II

1.	1.	Legal Proceedings	41	1.	Legal Proceedings		34

1A.	1A.	Risk Factors	41	1A.	Risk Factors		34

2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	42	2.	Unregistered Sales of Equity Securities and Use of Proceeds		34

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	43	6.	Exhibits		35

		Signatures	44		Signatures		36

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(In millions, except per-share amounts)
(Unaudited)
Revenue:
Premium revenue $ 4,372 $ 4,049 $ 8,676 $ 8,001
Premium tax revenue 157 110 307 248
Health insurer fees reimbursed 71 — 137 —
Investment income and other revenue 18 34 47 63
Total revenue 4,618 4,193 9,167 8,312
Operating expenses:
Medical care costs 3,598 3,466 7,314 6,837
General and administrative expenses 345 328 662 630
Premium tax expenses 157 110 307 248
Health insurer fees 71 — 139 —
Depreciation and amortization 21 22 41 47
Other 2 2 6 5
Total operating expenses 4,194 3,928 8,469 7,767
Operating income 424 265 698 545
Other expenses, net:
Interest expense 24 22 45 45
Other expense (income), net 5 (14) 5 (17)
Total other expenses, net 29 8 50 28
Income before income tax expense 395 257 648 517
Income tax expense 119 61 194 123
Net income $ 276 $ 196 $ 454 $ 394
Net income per share - Basic $ 4.72 $ 3.15 $ 7.65 $ 6.34
Net income per share - Diluted $ 4.65 $ 3.06 $ 7.54 $ 6.04


	Three Months Ended March 31,
	2021		2020

	(In millions, except per-share amounts) (Unaudited)
Revenue:
Premium revenue	$	6,306	$	4,304
Premium tax revenue	187		150
Health insurer fees reimbursed	0		66
Investment income	9		25
Other revenue	20		4
Total revenue	6,522		4,549
Operating expenses:
Medical care costs	5,474		3,716
General and administrative expenses	473		317
Premium tax expenses	187		150
Health insurer fees	0		68
Depreciation and amortization	33		20
Other	20		4
Total operating expenses	6,187		4,275
Operating income	335		274
Other expenses, net:
Interest expense	30		21

Total other expenses, net	30		21
Income before income tax expense	305		253
Income tax expense	77		75
Net income	$	228	$	178

Net income per share - Basic	$	3.95	$	2.95
Net income per share - Diluted	$	3.89	$	2.92

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

		(In millions) (Unaudited)														(In millions) (Unaudited)
Net income	Net income	$	276	$	196	$	454	$	394	Net income	$	228	$	178
Other comprehensive income:
Unrealized investment income		62		10		37		17
Other comprehensive loss:										Other comprehensive loss:
Unrealized investment loss										Unrealized investment loss	(15)		(25)
Less: effect of income taxes	Less: effect of income taxes	15		2		9		4		Less: effect of income taxes	(4)		(6)
Other comprehensive income, net of tax		47		8		28		13
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	(11)		(19)
Comprehensive income	Comprehensive income	$	323	$	204	$	482	$	407	Comprehensive income	$	217	$	159

See accompanying notes.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 3

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CONSOLIDATED BALANCE SHEETS


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020

		(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	$	3,303	$	2,452	Cash and cash equivalents	$	4,431	$	4,154
Investments	Investments	1,906		1,946		Investments	1,938		1,875
Receivables	Receivables	1,580		1,406		Receivables	1,776		1,672
Prepaid expenses and other current assets	Prepaid expenses and other current assets	273		163		Prepaid expenses and other current assets	163		175
Total current assets	Total current assets	7,062		5,967		Total current assets	8,308		7,876
Property, equipment, and capitalized software, net	Property, equipment, and capitalized software, net	399		385		Property, equipment, and capitalized software, net	378		391
Goodwill and intangible assets, net		164		172
Goodwill, and intangible assets, net						Goodwill, and intangible assets, net	923		941
Restricted investments	Restricted investments	87		79		Restricted investments	138		136
Deferred income taxes	Deferred income taxes	65		79		Deferred income taxes	66		69
Other assets	Other assets	99		105		Other assets	137		119
Total assets	Total assets	$	7,876	$	6,787	Total assets	$	9,950	$	9,532

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	$	1,960	$	1,854	Medical claims and benefits payable	$	2,839	$	2,696
Amounts due government agencies	Amounts due government agencies	865		664		Amounts due government agencies	1,718		1,253
Accounts payable, accrued liabilities and other	Accounts payable, accrued liabilities and other	876		502		Accounts payable, accrued liabilities and other	695		641
Deferred revenue	Deferred revenue	54		249		Deferred revenue	71		375
Total current liabilities	Total current liabilities	3,755		3,269		Total current liabilities	5,323		4,965
Long-term debt	Long-term debt	1,812		1,237		Long-term debt	2,128		2,127
Finance lease liabilities	Finance lease liabilities	229		231		Finance lease liabilities	223		225
Other long-term liabilities	Other long-term liabilities	84		90		Other long-term liabilities	112		119
Total liabilities	Total liabilities	5,880		4,827		Total liabilities	7,786		7,436
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 59 million shares at June 30, 2020, and 62 million shares at December 31, 2019		—		—
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at March 31, 2021, and 59 million shares at December 31, 2020						Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at March 31, 2021, and 59 million shares at December 31, 2020	0		0
Preferred stock, $0.001 par value; 20 million shares authorized, 0 shares issued and outstanding	Preferred stock, $0.001 par value; 20 million shares authorized, 0 shares issued and outstanding	—		—		Preferred stock, $0.001 par value; 20 million shares authorized, 0 shares issued and outstanding	0		0
Additional paid-in capital	Additional paid-in capital	166		175		Additional paid-in capital	170		199
Accumulated other comprehensive income	Accumulated other comprehensive income	32		4		Accumulated other comprehensive income	26		37
Retained earnings	Retained earnings	1,798		1,781		Retained earnings	1,968		1,860
Total stockholders’ equity	Total stockholders’ equity	1,996		1,960		Total stockholders’ equity	2,164		2,096
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	7,876	$	6,787	Total liabilities and stockholders’ equity	$	9,950	$	9,532

See accompanying notes.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 4

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


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

		(In millions)																								(In millions)
		(Unaudited)																								(Unaudited)
Balance at December 31, 2019		62	$	—	$	175	$	4	$	1,781	$	1,960
Balance at December 31, 2020													Balance at December 31, 2020	59		$	0	$	199	$	37			$	1,860			$	2,096
Net income	Net income	—	—		—		—		178		178		Net income	—		—		—		—		228				228
Common stock purchases	Common stock purchases	(3)	—		(9)		—		(437)		(446)		Common stock purchases	(1)		—		(2)		—		(120)				(122)
Termination of warrants		—	—		(30)		—		—		(30)
Other comprehensive loss, net		—	—		—		(19)		—		(19)
Share-based compensation		—	—		4		—		—		4
Balance at March 31, 2020		59	—		140		(15)		1,522		1,647
Net income		—	—		—		—		276		276
Other comprehensive income, net		—	—		—		47		—		47
Share-based compensation		—	—		26		—		—		26
Balance at June 30, 2020		59	$	—	$	166	$	32	$	1,798	$	1,996

Other comprehensive loss, net													Other comprehensive loss, net	—		—		—		(11)		—				(11)
Share-based compensation													Share-based compensation	—		—		(27)		—		—				(27)
Balance at March 31, 2021													Balance at March 31, 2021	58		$	0	$	170	$	26	$	1,968			$	2,164

Common Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Total
Outstanding Amount
(In millions)
(Unaudited)
Balance at December 31, 2018 62 $ — $ 643 $ (8) $ 1,012 $ 1,647
Net income — — — — 198 198
Adoption of new accounting standard — — — — 85 85
Partial termination of warrants — — (103) — — (103)
Other comprehensive income, net — — — 5 — 5
Share-based compensation 1 — 3 — — 3
Balance at March 31, 2019 63 — 543 (3) 1,295 1,835
Net income — — — — 196 196
Partial termination of warrants — — (321) — — (321)
Other comprehensive income, net — — — 8 — 8
Share-based compensation — — 18 — — 18
Balance at June 30, 2019 63 $ — $ 240 $ 5 $ 1,491 $ 1,736


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

	(In millions)
	(Unaudited)
Balance at December 31, 2019	62	$	0	$	175	$	4	$	1,781	$	1,960
Net income	—	—		—		—		178		178
Common stock purchases	(3)	—		(9)		—		(437)		(446)
Termination of warrants	—	—		(30)		—		—		(30)







Other comprehensive loss, net	—	—		—		(19)		—		(19)
Share-based compensation	—	—		4		—		—		4
Balance at March 31, 2020	59	$	0	$	140	$	(15)	$	1,522	$	1,647

See accompanying notes.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 5

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CONSOLIDATED STATEMENTS OF CASH FLOWS


		Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020

		(In millions) (Unaudited)							(In millions) (Unaudited)
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	454	$	394	Net income	$	228	$	178
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	41		47		Depreciation and amortization	33		20
Deferred income taxes	Deferred income taxes	6		19		Deferred income taxes	6		14
Share-based compensation	Share-based compensation	28		19		Share-based compensation	24		12

Loss (gain) on debt repayment		5		(17)

Other, net	Other, net	(1)		7		Other, net	12		(3)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	(174)		91		Receivables	(98)		(197)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(157)		18		Prepaid expenses and other current assets	(15)		(229)
Medical claims and benefits payable	Medical claims and benefits payable	106		(194)		Medical claims and benefits payable	168		127
Amounts due government agencies	Amounts due government agencies	201		17		Amounts due government agencies	432		113
Accounts payable, accrued liabilities and other	Accounts payable, accrued liabilities and other	251		(61)		Accounts payable, accrued liabilities and other	16		254
Deferred revenue	Deferred revenue	(195)		(181)		Deferred revenue	(304)		(206)
Income taxes	Income taxes	184		(3)		Income taxes	66		60
Net cash provided by operating activities	Net cash provided by operating activities	749		156		Net cash provided by operating activities	568		143
Investing activities:	Investing activities:					Investing activities:
Purchases of investments	Purchases of investments	(670)		(1,162)		Purchases of investments	(388)		(578)
Proceeds from sales and maturities of investments	Proceeds from sales and maturities of investments	750		791		Proceeds from sales and maturities of investments	308		493

Purchases of property, equipment and capitalized software	Purchases of property, equipment and capitalized software	(45)		(20)		Purchases of property, equipment and capitalized software	(16)		(21)
Other, net	Other, net	3		(2)		Other, net	9		3
Net cash provided by (used in) investing activities		38		(393)
Net cash used in investing activities						Net cash used in investing activities	(87)		(103)
Financing activities:	Financing activities:					Financing activities:
Proceeds from senior notes offering, net of issuance costs		789		—
Repayment of term loan facility		(600)		—

Common stock purchases	Common stock purchases	(453)		—		Common stock purchases	(128)		(453)
Common stock withheld to settle employee tax obligations						Common stock withheld to settle employee tax obligations	(51)		(7)
Contingent consideration liabilities settled						Contingent consideration liabilities settled	(20)		0
Proceeds from borrowings under term loan facility	Proceeds from borrowings under term loan facility	380		220		Proceeds from borrowings under term loan facility	0		380
Cash paid for partial termination of warrants		(30)		(424)
Cash paid for partial settlement of conversion option		(27)		(473)
Cash received for partial settlement of call option		27		473
Repayment of principal amount of convertible senior notes		(12)		(185)

Other, net	Other, net	(3)		27		Other, net	(8)		(45)
Net cash provided by (used in) financing activities		71		(362)
Net cash used in financing activities						Net cash used in financing activities	(207)		(125)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	858		(599)		Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	274		(85)
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	2,508		2,926		Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	4,223		2,508
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	$	3,366	$	2,327	Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	4,497	$	2,423

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 6

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~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(continued)~~

Six Months Ended June 30,
2020 2019
(In millions)
(Unaudited)
Supplemental cash flow information:
Schedule of non-cash investing and financing activities:
Common stock used for share-based compensation $ (8) $ (7)
Details of change in fair value of derivatives, net:
(Loss) gain on call option $ (2) $ 166
Gain (loss) on conversion option 2 (166)
Change in fair value of derivatives, net $ — $ —

~~See accompanying notes.~~

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 7~~

~~Table of Contents~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE 30, 2020~~MARCH 31, 2021

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 2~~In the first quarter of 2021, we realigned our reportable ~~segments: the Health Plans segment~~operating segments to reflect recent changes in our internal operating and ~~the Other segment. Our~~reporting structure, which is now organized by government program. These reportable segments ~~are consistent with how we currently manage the business~~consist of: 1) Medicaid; 2) Medicare; 3) Marketplace; and ~~view the markets we serve.~~4) Other. For further information, refer to Note 10, “Segments.”

~~The Health Plans segment consists of health plans operating in 14 states and the Commonwealth of Puerto Rico.~~ As of ~~June 30, 2020, these health plans~~March 31, 2021, we served approximately ~~3.6~~4.6 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. ~~The health plans are generally operated by our respective wholly owned subsidiaries in those states, each of which is licensed as a health maintenance organization (“HMO”).~~

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;~~disabled (“ABD”); and regions or service areas.

Recent Developments ~~– Health Plans Segment~~

~~New York.~~Texas Acquisition—Medicaid and Medicare. On ~~July 1, 2020,~~April 22, 2021, we ~~completed the acquisition of certain assets of YourCare Health Plan, Inc. The purchase price of $42 million was funded with cash on hand.~~

~~Kentucky.~~ In May 2020, our Kentucky health plan was selected as an awardee pursuant to the statewide Medicaid managed care RFP issued by the Kentucky Cabinet for Health and Family Services, Department for Medicaid Services. The contract is expected to begin on January 1, 2021, and runs through December 31, 2024, with six additional two-year renewal options.

~~In addition, on July 17, 2020, we entered into~~announced a definitive agreement to acquire Cigna Corporation’s Texas Medicaid and Medicare-Medicaid Plan (“MMP”) contracts, along with certain ~~assets~~operating assets. As of ~~Passport Health Plan~~December 31, 2020, Cigna served approximately 48,000 members in ~~Kentucky.~~the Texas ABD program, also known as “STAR+PLUS,” in the Hidalgo, Tarrant and Northeast service areas, and approximately 2,000 MMP members in the Hidalgo service area, with full year 2020 premium revenue of approximately $1.0 billion. The purchase price for the transaction is approximately $20 million, plus contingent consideration that is payable in 2021 based on our Kentucky health plan’s open enrollment results for the 2021 plan year. We intend to fund this purchase with cash on hand. The transaction is subject to federal and state regulatory approvals, and other customary closing conditions, and is expected to close before the end of 2020.

~~Acquisition of Magellan Complete Care.~~ On April 30, 2020, we entered into a definitive agreement to acquire the Magellan Complete Care (“MCC”) line of business of Magellan Health, Inc. Net of certain tax benefits, the purchase price for the transaction is approximately $820$60 million, which we intend to fund with cash on hand. The transaction is subject to receipt of applicable federal and state regulatory approvals and satisfaction of other customary closing ~~conditions, and~~conditions. We currently expect the transaction to close in the second half of 2021.

Ohio Procurement—Medicaid. On April 13, 2021, we announced that our Ohio health plan subsidiary was selected as an awardee in all three regions across the state pursuant to the Medicaid managed care request for award issued on September 30, 2020, by the Ohio Department of Medicaid. This new contract is expected to begin in early 2022, and will offer health care coverage to Medicaid beneficiaries through the state of Ohio’s Covered Family and Children, Expansion, and ABD programs.

New York Acquisition—Medicaid. In September 2020, we entered into a definitive agreement to acquire substantially all of the assets of Affinity Health Plan, Inc., a Medicaid health plan in New York. The net purchase price for the transaction is approximately $380 million, subject to various adjustments at closing, which we intend to fund with cash on hand. We currently expect the transaction to close byin the ~~first~~third quarter of 2021. ~~In connection with this transaction, Magellan Health, Inc. has agreed to provide certain transition services following the closing.~~

~~Texas.~~ In March 2020, the Texas Health and Human Services Commission (“HHSC”) notified our Texas health plan that HHSC had upheld our protest and had canceled all previously awarded contracts associated with the re-procurement awards announced in October 2019 for the ABD program (known in Texas as “STAR+PLUS”). In addition, HHSC canceled the pending re-procurement associated with the TANF and CHIP programs (known in Texas as “STAR/CHIP”). HHSC further indicated that it was deliberating next steps with respect to both re-procurements.

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 8~~

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~~Puerto Rico~~. We are exiting Puerto Rico’s Medicaid program when our current contract expires in October 2020. We will work closely with the regulatory authorities and the provider community in a manner designed to ensure that our members in Puerto Rico are cared for and have reliable continuity of care.

~~Illinois~~. In March 2020, we terminated our agreement to acquire all of the capital stock of NextLevel Health Partners, Inc. due to the seller’s stated unwillingness to close pursuant to the terms of the acquisition agreement.

Consolidation and Interim Financial Information

The consolidated financial statements include the accounts of Molina Healthcare, Inc., and its subsidiaries. In the opinion of management, all adjustments considered necessary for a fair presentation of the results as of the date and for the interim periods presented have been included; such adjustments consist of normal recurring adjustments. All significant intercompany balances and transactions have been eliminated. The consolidated results of operations for the ~~six months ended June 30, 2020,~~first quarter of 2021 are not necessarily indicative of the results for the entire year ending December 31, ~~2020.~~2021.

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, ~~2019.~~2020. Accordingly, certain disclosures that would substantially duplicate the disclosures contained in our December 31, ~~2019,~~2020, audited consolidated financial statements have been omitted. These

Molina Healthcare, Inc. March 31, 2021 Form 10-Q | 7

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unaudited consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the fiscal year ended December 31, ~~2019.~~2020.

Reclassifications

Consistent with the change in reportable segments described above, certain prior year disclosures in Note 7, “Medical Claims and Benefits Payable,” and Note 10, “Segments,” have been recast to conform to the current year presentation.

Certain immaterial amounts presented in the accompanying consolidated statement of cash flows for the three months ended March 31, 2020, have been reclassified to conform to the current year presentation.

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. Principal areas requiring the use of estimates include:

•The determination of medical claims and benefits ~~payable of our Health Plans segment;~~payable;

•~~Health Plans segment contractual~~Contractual provisions that may limit revenue recognition based upon the costs incurred or the profits realized under a specific contract;

•~~Health Plans segment quality~~Quality incentives that allow us to recognize incremental revenue if certain quality standards are met;

•Settlements under ~~risk~~risk- or ~~savings sharing~~savings-sharing programs;

•Purchase price allocations relating to business combinations, including the determination of contingent consideration;

•The assessment of long-lived and intangible assets, and goodwill for impairment;

•The determination of reserves for potential absorption of claims unpaid by insolvent providers;

•The determination of reserves for the outcome of litigation;

•The determination of valuation allowances for deferred tax assets; and

•The determination of unrecognized tax benefits.

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~~reconciles cash, cash equivalents, and restricted cash and cash equivalents reported within the accompanying consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying consolidated statements of cash flows. The restricted cash and cash equivalents presented below are included in “Restricted investments” in the accompanying consolidated balance sheets.


		June 30,							March 31,
		2020		2019			2021		2020

		(In millions)							(In millions)
Cash and cash equivalents	Cash and cash equivalents	$	3,303	$	2,253	Cash and cash equivalents	$	4,431	$	2,365
Restricted cash and cash equivalents	Restricted cash and cash equivalents	63		74		Restricted cash and cash equivalents	66		58
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	3,366	$	2,327	Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	4,497	$	2,423

Receivables

Receivables consist primarily of premium amounts due from government agencies, which may be subject to potential retroactive adjustments. Because substantially all 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.

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~~Investments~~

Our investments are principally held in debt securities, which are grouped into two separate categories for accounting and reporting purposes: available-for-sale securities, and held-to-maturity securities. Available-for-sale (“AFS”) securities are recorded at fair value and unrealized gains and losses, if any, are recorded in stockholders’ equity as other comprehensive income (loss), net of applicable income taxes. Held-to-maturity (“HTM”) securities are recorded at amortized cost, which approximates fair value, and unrealized holding gains or losses are not generally recognized. Realized gains and losses, and unrealized losses arising from credit-related factors with respect to AFS and HTM securities are included in the determination of net income. The cost of securities sold is determined using the specific-identification method.

Our investment policy requires that all our investments have final maturities of less than 10 years, or less than 10 years average life for structured securities. Investments and restricted investments are subject to interest rate risk and will decrease in value if market rates increase. Declines in interest rates over time will reduce our investment income.

In general, our AFS securities are classified as current assets without regard to the securities’ contractual maturity dates because they may be readily liquidated. We monitor our investments for credit-related impairment. For comprehensive discussions of the fair value and classification of our investments, see Note 4, “Fair Value Measurements,” and Note 5, “Investments.”

Accrued interest receivable relating to our AFS and HTM securities is presented within “Prepaid expenses and other current assets” in the accompanying consolidated balance sheets, and amounted to $10 million and $12 million at June 30, 2020, and December 31, 2019, respectively. We do not measure an allowance for credit losses on accrued interest receivable. Instead, we write off accrued interest receivable that has not been collected within 90 days of the interest payment due date. We recognize such write offs as a reversal of interest income. No accrued interest was written off during the six months ended June 30, 2020.


	March 31, 2021		December 31, 2020

	(In millions)
Government receivables	$	1,332	$	969
Pharmacy rebate receivables	200		178
Health insurer fee reimbursement receivables	54		104
Other	190		255
Magellan Complete Care acquisition opening balance	0		166
Total	$	1,776	$	1,672

Premium Revenue Recognition and ~~Premiums Receivable~~Amounts Due Government Agencies

Premium revenue is generated from our ~~Health Plans segment~~ contracts ~~related to~~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. ~~The state~~State Medicaid programs and the federal Medicare program periodically adjust ~~premiums. Additionally, many~~premium rates.

Certain components of premium revenue are subject to accounting estimates and are described in further detail below, and in our 2020 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.”

Contractual Provisions That May Adjust or Limit Revenue or Profit

Many of our contracts contain provisions that may adjust or limit revenue or profit, aswhich include those provisions with significant interim period balances described in further detail below. ~~Consequently, we~~We recognize premium revenue as it is earned under such provisions. Liabilities accrued for premiums to be returned under such provisions are ~~recognized~~reported in the aggregate as “Amounts due government agencies,” in the accompanying consolidated balance sheets. Categorized by segment, such amounts due government agencies ~~in our consolidated balance sheets.~~included the following:

~~A summary of the categories of amounts due government agencies is as follows:~~

June 30,
2020 December 31,
2019
(In millions)
Medicaid program:
Minimum MLR and profit sharing $ 85 $ 92
Other 105 95
Medicare program:
Risk adjustment and Part D risk sharing 38 14
Minimum MLR and profit sharing 16 36
Other 24 21
Marketplace program:
Risk adjustment 529 368
Minimum MLR 41 15
Other 27 23
Total amounts due government agencies $ 865 $ 664

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~~Table of Contents~~

~~Contractual Provisions That May Adjust or Limit Revenue or Profit~~


	March 31, 2021		December 31, 2020

	(In millions)
Medicaid:
Minimum MLR and profit sharing	$	735	$	513
Other	167		76
Medicare:
Risk adjustment and Part D risk sharing	75		45
Minimum MLR and profit sharing	105		62
Other	42		30
Marketplace:
Risk adjustment	520		326
Minimum MLR	47		37
Other	27		21
Magellan Complete Care acquisition opening balance	0		143
Total amounts due government agencies	$	1,718	$	1,253

Medicaid ~~Program~~

Minimum MLR and ~~Medical Cost Corridors.~~ A portion of our premium revenue may be returned if certain minimum amounts are not spent on defined medical care costs. Under certain medical cost corridor provisions, the health plans may receive additional premiums if amounts spent on medical care costs exceed a defined maximum threshold.

~~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.

Retroactive Premium Adjustments. State Medicaid programs periodically adjust premium rates on a retroactive basis. In these cases, we adjust our premium revenue in the period in which we determine that the adjustment is probable and reasonably estimable, and is based on our best estimate of the ultimate premium we expect to realize for the period being adjusted.

~~Various~~Beginning in 2020, through March 31, 2021, various states ~~are implementing or proposing~~enacted temporary ~~premium rate refunds, profit~~risk corridors ~~and related actions~~ in response to the reduced demand for medical services stemming from COVID-19, which ~~are resulting~~have resulted in a reduction of our medical margin. In some cases, these ~~premium refunds and related actions are~~risk corridors were retroactive to earlier periods in 2020, or as early as the beginning

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of the states’ fiscal years in 2019. ~~We have accrued approximately $75 million~~Beginning in the second quarter of 2020, ~~for certain of these~~we have recognized retroactive ~~premium refunds and related actions~~risk corridors that we believe to be probable, and where the ultimate premium amount is reasonably estimable. ~~There is potential for additional near-term premium actions, however, these proposals have not yet been finalized or enacted,~~In the ~~outcomes are subject~~first quarter of 2021, we recognized approximately $110 million related to ~~significant uncertainties, and there are still wide variations~~such risk corridors, primarily in the ~~formulas~~Medicaid segment.

It is possible that certain states could increase the level of existing risk corridors, and ~~methodologies to be potentially employed.~~other states could implement some form of retroactive risk corridors in the future. Due to these uncertainties, the ~~probability and~~ ultimate impact of the changes cannot be reasonably estimated at this time. We do not expect the uncertainties related to these proposals to become known until the third or fourth quarter of 2020. The facts for one or more of these pending matters could subsequently change as a result of further developments, and the ultimate outcomeoutcomes 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.

~~Medicare Program~~

~~Risk Adjustment.~~ Our Medicare premiums are subject to retroactive increase or decrease based on the health status of our Medicare members (as measured by member risk score). We estimate our members’ risk scores and the related amount of Medicare revenue that will ultimately be realized for the periods presented based on our knowledge of our members’ health status, risk scores and Centers for Medicare & Medicaid Services (“CMS”) practices.

~~Minimum MLR.~~ The Affordable Care Act (“ACA”) has established a minimum annual medical loss ratio (“Minimum MLR”) of 85% for Medicare. The medical loss ratio represents medical costs as a percentage of premium revenue. Federal regulations define what constitutes medical costs and premium revenue. If the Minimum MLR is not met, we may be required to pay rebates to the federal government. We recognize estimated rebates under the Minimum MLR as an adjustment to premium revenue in our consolidated statements of income.

Marketplace ~~Program~~

~~Risk Corridor Settlement.~~ ~~On April 27, 2020, the United States Supreme Court issued its opinion in~~ ~~Maine Community Health Options v. United States~~. The Supreme Court held that §1342 of the Affordable Care Act obligated the federal government to pay participating insurers the full Marketplace risk corridor amounts calculated by that statute, that such payment obligations survived Congress’ appropriations riders, and that impacted insurers may sue the federal government in the U.S. Court of Federal Claims to recover damages for breach of that obligation. On June 18, 2020, the Claims Court granted us judgment in the amount of $128.1 million for our 2014, 2015, and 2016 Marketplace risk corridor claims. This favorable judgment does not create additional minimum MLR rebates. We had not recognized the judgment as of June 30, 2020, because the timing of collection of the judgment award is uncertain.

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 (risk adjustment payable), and will receive a risk adjustment payment from the pool if their composite risk scores are above the average risk score (risk adjustment receivable). We estimate our ultimate premium based on insurance policy year-to-date experience,

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~~Table of Contents~~

and recognize estimated premiums relating to the risk adjustment program as an adjustment to premium revenue in our consolidated statements of income. As of ~~June 30,~~March 31, 2021, Marketplace risk adjustment payables amounted to $520 million and related receivables amounted to $20 million, for a net payable of $500 million, of which $211 million related to 2021, and $289 million related primarily to 2020. As of December 31, 2020, Marketplace risk adjustment payables amounted to ~~$529~~$326 million and related receivables amounted to ~~$72~~$20 million, for a net payable of $457 million, of which $160 million relates to 2020 and $297 million relates primarily to 2019. As of December 31, 2019, Marketplace risk adjustment payables amounted to $368 million and related receivables amounted to $63 million, for a net payable of $305 million, which relates primarily to 2019 and prior periods.

~~Minimum MLR.~~ The ACA has established a Minimum MLR of 80% for the Marketplace. If the Minimum MLR is not met, we may be required to pay rebates to our Marketplace policyholders. The Marketplace risk adjustment program is taken into consideration when computing the Minimum MLR. We recognize estimated rebates under the Minimum MLR as an adjustment to premium revenue in our consolidated statements of income.$306 million.

~~Quality Incentives~~

At many of our health plans, revenue ranging from approximately 1% to 4% of certain health plan premiums is earned only if certain performance measures are met. Such performance measures are generally found in our Medicaid and MMP contracts. As described in Note 1, “Organization and Basis of Presentation–~~Use of Estimates,” recognition of quality incentive premium revenue is subject to the use of estimates.~~

~~The following table quantifies the quality incentive premium revenue recognized for the periods presented, including the amounts earned in the periods presented and prior periods.~~

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(In millions)
Maximum available quality incentive premium - current period $ 65 $ 46 $ 126 $ 91
Quality incentive premium revenue recognized in current period:
Earned current period $ 58 $ 37 $ 102 $ 63
Earned prior periods 7 10 19 30
Total $ 65 $ 47 $ 121 93
Quality incentive premium revenue recognized as a percentage of total premium revenue 1.5 % 1.2 % 1.4 % 1.2 %

~~Receivables~~

Receivables consist primarily of amounts due from government agencies, which may be subject to potential retroactive adjustments. Because substantially all our receivable amounts are readily determinable and substantially all of our creditors are governmental authorities, our allowance for credit losses is insignificant.

June 30,
2020 December 31,
2019
(In millions)
Government receivables $ 1,056 $ 1,056
Pharmacy rebate receivables 161 150
Health insurer fee reimbursement receivables 137 5
Other 226 195
Total $ 1,580 $ 1,406

~~Reinsurance~~

We bear underwriting and reserving risks associated with our health plan subsidiaries. Until the second quarter of 2020, we limited our risk of catastrophic losses solely by maintaining high deductible reinsurance coverage with a highly-rated, unaffiliated insurance company (the “third-party reinsurer”). Beginning in the second quarter of 2020, we now retain certain of these risks through our wholly-owned, captive insurance subsidiary (the “captive”). We continue to reduce our exposure to significant catastrophic losses by insuring levels of coverage, with the third-party reinsurer, for losses in excess of what we retain with the captive. Because we remain liable to our policyholders in the event the third-party reinsurer is unable to pay its portion of the losses, we continually monitor the third-party

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~~Table of Contents~~

reinsurer’s financial condition, including its ability to maintain high credit ratings. We report reinsurance premiums as a reduction to premium revenue, while related reinsurance recoveries are reported as a reduction to medical care costs. Intercompany transactions with our captive are eliminated in consolidation.

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 10 years, or less than 10 years average life for structured securities. Restricted investments are invested principally in cash, cash equivalents, and U.S. Treasury securities. Concentration of credit risk with respect to accounts receivable is limited because our payors consist principally of the federal government, and the local governments of ~~each state or commonwealth~~the states in which our health plan subsidiaries operate.

~~Health Insurer Fee~~

Under the Affordable Care Act, the federal government imposes an annual fee, or excise tax, on health insurers for each calendar year (the “HIF”). Public Law No. 115-120 provided for a HIF moratorium in 2019; therefore, there was no HIF incurred or reimbursed in that year. The HIF is reinstated in 2020, but the Further Consolidated Appropriations Act, 2020, repealed the HIF effective for years after 2020. The HIF is allocated to health insurers based on each health insurer's share of net premiums for all U.S. health insurers in the year preceding the assessment. Our estimated HIF liability for 2020 is $277 million, of which $271 million was accrued as of January 1, 2020 and an additional $6 million was accrued in the second quarter, with a corresponding deferred expense asset that will be amortized to expense through December 31, 2020, on a straight-line basis. The HIF is not deductible for income tax purposes, and is payable by September 30, 2020. Due to the reinstatement of the HIF in 2020, our effective tax rate is higher in 2020 compared with 2019.

Under the Medicaid program, we must secure additional reimbursement from our state partners for this added cost. We have obtained a contractual commitment or are receiving payments from all states in which we operate Medicaid programs to reimburse us for the HIF, and such HIF revenue is being recognized ratably throughout the year.

Income Taxes

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

~~Credit Losses.~~ ~~In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which was subsequently modified by several ASUs issued in 2018 and 2019. We adopted Topic 326 effective January 1, 2020, using the modified retrospective approach. Under this method we recognized the cumulative effect of adopting the standard as an adjustment to the opening balance of retained earnings on January 1, 2020, which was immaterial.

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~Reference Rate Reform.~~ ~~In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~, which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by a change in the reference rate from the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued, if certain conditions are met. ASU 2020-04 is effective

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~~Table of Contents~~

~~immediately and expires after December 31, 2022. We are evaluating the effect of reference rate reform and this guidance on our contracts and other transactions.~~

~~Other~~Various 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.

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3. Net Income per Share

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

		(In millions, except net income per share)														(In millions, except net income per share)
Numerator:	Numerator:									Numerator:
Net income	Net income	$	276	$	196	$	454	$	394	Net income	$	228	$	178
Denominator:	Denominator:									Denominator:
Shares outstanding at the beginning of the period	Shares outstanding at the beginning of the period	58.6		62.1		61.9		62.1		Shares outstanding at the beginning of the period	58.0		61.9
Weighted-average number of shares issued:	Weighted-average number of shares issued:									Weighted-average number of shares issued:
Stock purchases	Stock purchases	—		—		(2.5)		—		Stock purchases	(0.4)		(1.7)
Stock-based compensation										Stock-based compensation	0.1		0
Denominator for basic net income per share	Denominator for basic net income per share	58.6		62.1		59.4		62.1		Denominator for basic net income per share	57.7		60.2
Effect of dilutive securities: ⁽¹⁾	Effect of dilutive securities: ⁽¹⁾									Effect of dilutive securities: (1)
Warrants		—		1.3		—		2.4
Stock-based compensation	Stock-based compensation	0.8		0.6		0.8		0.6		Stock-based compensation	0.9		0.7
Other										Other	0		0.1
Denominator for diluted net income per share	Denominator for diluted net income per share	59.4		64.0		60.2		65.1		Denominator for diluted net income per share	58.6		61.0

Net income per share - Basic ⁽²⁾	Net income per share - Basic ⁽²⁾	$	4.72	$	3.15	$	7.65	$	6.34	Net income per share - Basic (2)	$	3.95	$	2.95
Net income per share - Diluted ⁽²⁾	Net income per share - Diluted ⁽²⁾	$	4.65	$	3.06	$	7.54	$	6.04	Net income per share - Diluted (2)	$	3.89	$	2.92

(1) The dilutive effect of all potentially dilutive common shares is calculated using the treasury stock method. ~~All warrants outstanding as of December 31, 2019, were settled in the first quarter of 2020. For more information refer to Note 8, “Stockholders' Equity.”~~

(2) Source data for calculations in thousands.

4. Business Combinations

On December 31, 2020, we closed on our acquisition of 100% of the outstanding equity interests of the Magellan Complete Care line of business of Magellan Health, Inc., for total purchase consideration of approximately $1,037 million. In the first quarter of 2021, we recorded various measurement period adjustments, including an increase of $6 million to “Receivables,” a decrease of $25 million to “Medical claims and benefits payable,” and an increase of $33 million to “Amounts due government agencies.” In the aggregate, we recorded a net decrease of $6 million to goodwill for these measurement period adjustments and various purchase price adjustments.

Refer to Note 10, “Segments” for further information regarding the allocation of goodwill and intangible assets, net, by reportable segment.

5. Fair Value Measurements

We generally 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 ~~that we use to~~used to: a) estimate the fair value; and b) determine the classification according to the fair value hierarchy for each financial instrument, refer to our ~~2019~~2020 Annual Report on Form 10-K, Note 4,5, “Fair Value Measurements.”

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Our financial instruments measured at fair value on a recurring basis at ~~June 30, 2020,~~March 31, 2021, 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	$	1,139	$	—	$	1,139	$	—	Corporate debt securities	$	1,188	$	0	$	1,188	$	0
Mortgage-backed securities	Mortgage-backed securities	439		—		439		—		Mortgage-backed securities	429		0		429		0
Asset-backed securities										Asset-backed securities	152		0		152		0
U.S. Treasury notes										U.S. Treasury notes	97		0		97		0
Municipal securities	Municipal securities	176		—		176		—		Municipal securities	72		0		72		0
Asset-backed securities		139		—		139		—
Certificates of deposit		7		—		7		—
U.S. Treasury notes		4		—		4		—
Government-sponsored enterprise securities (“GSEs”)		2		—		2		—

Total		$	1,906	$	—	$	1,906	$	—

Total assets										Total assets	$	1,938	$	0	$	1,938	$	0

Contingent consideration liabilities										Contingent consideration liabilities	$	31	$	0	$	0	$	31
Total liabilities										Total liabilities	$	31	$	0	$	0	$	31

Our financial instruments measured at fair value on a recurring basis at December 31, ~~2019,~~2020, 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	$	1,178	$	—	$	1,178	$	—	Corporate debt securities	$	1,256	$	0	$	1,256	$	0
Mortgage-backed securities	Mortgage-backed securities	420		—		420		—		Mortgage-backed securities	392		0		392		0
Asset-backed securities										Asset-backed securities	132		0		132		0
U.S. Treasury notes										U.S. Treasury notes	27		0		27		0
Municipal securities	Municipal securities	78		—		78		—		Municipal securities	68		0		68		0
Asset-backed securities		127		—		127		—
Certificates of deposit		1		—		1		—
U.S. Treasury notes		86		—		86		—
GSEs		49		—		49		—
Other		7		—		7		—
Subtotal		1,946		—		1,946		—
Call option derivative asset		29		—		—		29

Total assets	Total assets	$	1,975	$	—	$	1,946	$	29	Total assets	$	1,875	$	0	$	1,875	$	0

Conversion option derivative liability		$	29	$	—	$	—	$	29
Contingent consideration liabilities										Contingent consideration liabilities	$	46	$	0	$	0	$	46
Total liabilities	Total liabilities	$	29	$	—	$	—	$	29	Total liabilities	$	46	$	0	$	0	$	46

The net changes in fair value of Level 3 financial instruments ~~were insignificant to~~are reported in “Other” operating expenses in our ~~results~~consolidated statements of ~~operations~~income. In the first quarter of 2021, we recognized a loss of $8 million for the ~~six months ended June 30, 2020.~~

~~Derivatives~~

~~The following table summarizes~~increase in the fair ~~values~~value of the contingent consideration liabilities described below.

Contingent Consideration Liabilities

As of March 31, 2021, our Level 3 financial instruments recorded at fair value on a recurring basis included contingent consideration liabilities of $31 million, in connection with our 2020 acquisition of certain assets of Passport Health Plan, Inc., a Medicaid health plan in Kentucky. In the first quarter of 2021, the contingent purchase consideration relating to 2021 member enrollment was finalized and half the ~~presentation~~consideration due, or $23 million, was paid to the seller. We expect to pay the remaining balance of ~~our derivative financial instruments~~the liabilities, reported in “Accounts payable, accrued liabilities and other” in the accompanying consolidated balance ~~sheets:~~


	~~Balance Sheet Location~~	June 30, 2020		December 31, 2019

		~~(In millions)~~
~~Derivative asset:~~
~~Call option~~	~~Current assets: Prepaid expenses and other current assets~~	$	—	$	29
~~Derivative liability:~~
~~Conversion option~~	~~Current liabilities: Accounts payable, accrued liabilities and other~~	$	—	$	29

sheets, later in 2021 and in the first quarter of 2022. The portion of the contingent purchase consideration paid in the first quarter 2021 has been presented primarily in “Financing activities” in the accompanying consolidated statements of cash flows, with the balance reflected in “Operating activities.”

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 1512

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For additional description of our derivative financial instruments, see Note 11, “Debt,” and Note 12, “Derivatives,” in our 2019 Annual Report on Form 10-K. Our derivative financial instruments did not qualify for hedge treatment; therefore, the change in fair value of these instruments is recognized immediately in our consolidated statements of income, and reported in “Other expense (income), net.” Gains and losses for our derivative financial instruments are presented individually in the accompanying consolidated statements of cash flows, “Supplemental cash flow information.”

In the first quarter of 2020, we received $27 million for the settlement of the call option derivative asset, and we paid $39 million to settle the outstanding $12 million principal amount of the 1.125% Convertible Notes, and settle the related conversion option. For more information, refer to Notes 7, “Debt,” and 8, “Stockholders' Equity.”

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.

June 30, 2020 December 31, 2019
Carrying
Amount Fair Value Carrying
Amount Fair Value
(In millions)
4.375% Notes $ 789 $ 802 $ — $ —
5.375% Notes 696 723 696 745
4.875% Notes 327 333 327 340
Term loan facility ⁽¹⁾
— — 220 220
1.125% Convertible Notes ⁽¹⁾
— — 12 42
Total $ 1,812 $ 1,858 $ 1,255 $ 1,347

~~______________________~~

~~(1)For more information on debt repayments, refer to Note 7, “Debt.”~~


	March 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
4.375% Notes	$	790	$	822	$	789	$	843
5.375% Notes	697		736		697		742
3.875% Notes	641		665		641		691
Total	$	2,128	$	2,223	$	2,127	$	2,276

5.6. Investments

Available-for-Sale

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


		June 30, 2020																	March 31, 2021
		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	$	1,108	$	33		$	2		$	1,139	Corporate debt securities	$	1,162	$	27	$	1	$	1,188
Mortgage-backed securities	Mortgage-backed securities	433		9			3			439		Mortgage-backed securities	424		6		1		429
Asset-backed securities												Asset-backed securities	150		2		0		152
U.S. Treasury notes												U.S. Treasury notes	97		0		0		97
Municipal securities	Municipal securities	174		2			—			176		Municipal securities	71		1		0		72
Asset-backed securities		136		3			—			139
Certificates of deposit		7		—			—			7
U.S. Treasury notes		4		—			—			4
GSEs		2		—			—			2

Total	Total	$	1,864	$	47		$	5		$	1,906	Total	$	1,904	$	36	$	2	$	1,938


	December 31, 2020
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses

	(In millions)
Corporate debt securities	$	1,220	$	36	$	0	$	1,256
Mortgage-backed securities	383		10		1		392
Asset-backed securities	130		2		0		132
U.S. Treasury notes	27		0		0		27
Municipal securities	66		2		0		68



Total	$	1,826	$	50	$	1	$	1,875

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 1613

Table of Contents

December 31, 2019
Amortized Cost Gross Unrealized Estimated Fair Value
Gains Losses
(In millions)
Corporate debt securities $ 1,174 $ 5 $ 1 $ 1,178
Mortgage-backed securities 420 1 1 420
Municipal securities 78 — — 78
Asset-backed securities 126 1 — 127
Certificates of deposit 1 — — 1
U.S. Treasury notes 86 — — 86
GSEs 49 — — 49
Other 7 — — 7
Total $ 1,941 $ 7 $ 2 $ 1,946

The contractual maturities of our available-for-sale investments as of ~~June 30, 2020~~March 31, 2021 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	$	263	$	265	Due in one year or less	$	428	$	429
Due after one year through five years	Due after one year through five years	979		1,009		Due after one year through five years	948		974
Due after five years through ten years	Due after five years through ten years	172		176		Due after five years through ten years	167		169
Due after ten years	Due after ten years	450		456		Due after ten years	361		366
Total	Total	$	1,864	$	1,906	Total	$	1,904	$	1,938

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 in the three months ended March 31, 2021, and amounted to $1$5 million ~~and $6 million for~~in the three ~~and six~~ months ended ~~June 30, 2020, respectively.~~March 31, 2020. Gross realized investment losses were insignificant in the three ~~and six~~ months ended ~~June 30,~~March 31, 2021, and 2020. ~~Gross realized investment gains and losses were insignificant for the three and six months ended June 30, 2019.~~

We have determined that unrealized losses at ~~June 30, 2020,~~March 31, 2021, and December 31, ~~2019, have~~2020, primarily resulted from fluctuating interest rates, rather than a deterioration of the creditworthiness of the issuers. Therefore, we ~~have~~ determined that an allowance for credit losses iswas 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~~summarizes those available-for-sale investments that have been in a continuous loss position for less than 12 ~~months, and those that~~months. No investments have been in a continuous loss position for 12 months or more as of ~~June 30, 2020:~~

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 $ 63 $ 2 29 $ — $ — —
Mortgage-backed securities 53 3 34 — — —
Total $ 116 $ 5 63 $ — $ — —

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 17~~

~~Table of Contents~~

~~The following table segregates those available-for-sale investments that have been in a continuous loss position for less than 12 months,~~March 31, 2021, and ~~those that have been in a continuous loss position for 12 months or more as of~~ December 31, ~~2019:~~2020.


		In a Continuous Loss Position for Less than 12 Months									In a Continuous Loss Position for 12 Months or More									March 31, 2021			December 31, 2020
		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	$	222	$	1	167	$	—	$	—	—	Corporate debt securities	$	175	$	1	78	$	0	$	0	0
Mortgage-backed securities												Mortgage-backed securities	101		1		34	77		1		21

Mortgage-backed securities		143		1		72	—		—		—

Total	Total	$	365	$	2	239	$	—	$	—	—	Total	$	276	$	2	112	$	77	$	1	21

Held-to-Maturity

Pursuant to the regulations governing our ~~Health Plans segment~~state health plan subsidiaries, we maintain statutory deposits and deposits required by government authorities primarily in cash, cash equivalents, and U.S. Treasury 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 ~~$87~~$138 million at ~~June 30, 2020,~~March 31, 2021, of which ~~$83~~$122 million will mature in one year or less, and $4$16 million will mature in after one through five years.

Molina Healthcare, Inc. March 31, 2021 Form 10-Q | 14

Table of Contents

6.7. Medical Claims and Benefits Payable

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


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020

		(In millions)							(In millions)
Fee-for-service claims incurred but not paid (“IBNP”)	Fee-for-service claims incurred but not paid (“IBNP”)	$	1,432	$	1,406	Fee-for-service claims incurred but not paid (“IBNP”)	$	2,008	$	1,647
Pharmacy payable	Pharmacy payable	132		126		Pharmacy payable	217		157
Capitation payable	Capitation payable	74		55		Capitation payable	93		70
Other	Other	322		267		Other	521		528
Magellan Complete Care acquisition opening balance						Magellan Complete Care acquisition opening balance	0		294
Total	Total	$	1,960	$	1,854	Total	$	2,839	$	2,696

“Other” medical claims and benefits payable includes 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 ~~$86~~$222 million and ~~$132~~$235 million as of ~~June 30, 2020,~~March 31, 2021, and December 31, ~~2019,~~2020, respectively.

The following table presents the components of the change in our medical claims and benefits payable for the periods ~~indicated.~~indicated, with the prior period recast to conform to the current year presentation. The amounts presented for “Components of medical care costs related to: Prior years” represent the amounts by which our original ~~estimate~~estimates of medical claims and benefits payable at the beginning of the year were more than the actual ~~amount of the liability,~~liabilities, based on information (principally the payment of claims) developed since ~~that liability was~~those liabilities were first reported.


	Three Months Ended March 31, 2021
	Medicaid		Medicare		Marketplace		Consolidated

	(In millions)
Medical claims and benefits payable, beginning balance	$	2,129	$	392	$	175	$	2,696
Components of medical care costs related to:
Current year	4,394		738		536		5,668
Prior years	(158)		(16)		(20)		(194)
Total medical care costs	4,236		722		516		5,474
Payments for medical care costs related to:
Current year	2,790		410		313		3,513
Prior years	1,364		304		113		1,781
Total paid	4,154		714		426		5,294
Change in acquired balances	8		(33)		0		(25)
Change in non-risk and other provider payables	(11)		(1)		0		(12)
Medical claims and benefits payable, ending balance	$	2,208	$	366	$	265	$	2,839

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 1815

Table of Contents


		Six Months Ended June 30,							Three Months Ended March 31, 2020
		2020		2019			Medicaid		Medicare		Marketplace		Consolidated

		(In millions)							(In millions)
Medical claims and benefits payable, beginning balance	Medical claims and benefits payable, beginning balance	$	1,854	$	1,961	Medical claims and benefits payable, beginning balance	$	1,465	$	267	$	122	$	1,854
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	7,372		7,069		Current year	2,991		543		283		3,817
Prior years	Prior years	(58)		(232)		Prior years	(70)		(26)		(5)		(101)
Total medical care costs	Total medical care costs	7,314		6,837		Total medical care costs	2,921		517		278		3,716
Change in non-risk and other provider payables		(34)		4
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	5,688		5,585		Current year	1,786		324		164		2,274
Prior years	Prior years	1,486		1,450		Prior years	1,014		205		86		1,305
Total paid	Total paid	7,174		7,035		Total paid	2,800		529		250		3,579
Change in non-risk and other provider payables						Change in non-risk and other provider payables	(10)		0		0		(10)
Medical claims and benefits payable, ending balance	Medical claims and benefits payable, ending balance	$	1,960	$	1,767	Medical claims and benefits payable, ending balance	$	1,576	$	255	$	150	$	1,981

Our estimates of medical claims and benefits payable recorded at December 31, ~~2019,~~2020, and ~~2018~~2019 developed favorably by approximately ~~$58~~$194 million and ~~$232~~$101 million as of ~~June 30,~~March 31, 2021, and 2020, ~~and 2019,~~ respectively.

InThe favorable prior period development recognized in the ~~six months ended June 30, 2020, medical care costs related~~first quarter of 2021 was primarily due to ~~the prior year reflect the release of additional reserves for moderately adverse conditions included in our prior year estimates, partially offset by higher~~lower than expected utilization of medical services by our Medicaid members and improved operating performance. Consequently, the ultimate costs ~~for settling certain~~recognized in 2021, as claims ~~with certain providers. The differences between~~payments were processed, were lower than our original estimates ~~for such claims~~ in 2019, and the ultimate costs in 2020, were not discernible until additional information was provided to us in 2020 and the effect became clearer over time as claim payments were processed. The release of additional reserves for moderately adverse conditions included in our prior year estimates was substantially offset by the replenishment of the reserve recorded in medical care costs related to the current year.

2020.

7.8. Debt

All ~~our~~long-term debt is held at the parent, which is reported in the Other segment. The following table summarizes our outstanding debt obligations, ~~and their classification in~~all of which are non-current as of the ~~accompanying consolidated balance sheets:~~dates reported below:

June 30,
2020 December 31,
2019
(In millions)
Current portion of long-term debt: ⁽¹⁾
Term loan facility $ — $ 6
1.125% Convertible Notes, net of unamortized discount — 12
Total $ — $ 18
Non-current portion of long-term debt:
4.375% Notes due 2028 $ 800 $ —
5.375% Notes due 2022 700 700
4.875% Notes due 2025 330 330
Term loan facility — 214
Deferred debt issuance costs (18) (7)
Total $ 1,812 $ 1,237

~~______________________~~

~~(1)Reported in “Accounts payable, accrued liabilities and other.”~~


	March 31, 2021		December 31, 2020

	(In millions)





4.375% Notes due 2028	$	800	$	800
5.375% Notes due 2022	700		700
3.875% Notes due 2030	650		650
Deferred debt issuance costs	(22)		(23)
Total	$	2,128	$	2,127

Credit Agreement

~~In June 2020, we entered into~~We are party to a credit agreement ~~(the “Credit~~(“Credit Agreement”) that replaced our prior credit agreement. The terms of the Credit Agreement are substantially similar to the terms of the prior agreement. Among various provisions, significant changes incorporated to the Credit Agreement included:

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 19~~

~~Table of Contents~~

•~~An increase of the~~which includes a revolving credit facility ~~(the “Credit~~(“Credit Facility”) ~~from $500 million to~~of $1.0 ~~billion;~~

•~~A $15 million swingline sub-facility and a $100 million letter of credit sub-facility;~~

•An increase of incremental term loans available to finance certain acquisitions from $150 million to $500 million, plus an unlimited amount as long as our consolidated net leverage ratio is not greater than 3:1;

•~~The ability to engage in acquisitions where the consummation of such acquisitions is not conditioned on the availability of, or on obtaining, third-party financing;~~

•~~Termination of the term loan facility under the prior credit agreement, which was repaid as described below; and~~

•~~LIBOR succession~~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.

The Credit Agreement contains customary non-financial and financial covenants. As of ~~June 30, 2020,~~March 31, 2021, we were in compliance with all financial and non-financial covenants under the Credit Agreement and other long-term debt. As of ~~June 30, 2020,~~March 31, 2021, 0 amounts were outstanding under the Credit Facility.

In the second quarter and six months ended June 30, 2020, we recognized losses on debt repayment of $5 million, in connection with repayment of our term loan facility and other financing transactions. In the second quarter and six months ended June 30, 2019, we recognized gains on debt repayment of $14 million and $17 million, respectively, in connection with convertible senior notes repayment transactions.

High-Yield Senior Notes

Our high-yield senior notes are described below. Each of these notes are senior unsecured obligations of Molina Healthcare, and rank equally in right of payment with all existing and future senior debt, and senior to all existing and future subordinated debt of ~~Molina.~~Molina Healthcare. In addition, each of the notes contain customary non-financial covenants and change of control provisions.

Molina Healthcare, Inc. March 31, 2021 Form 10-Q | 16

Table of Contents

The indentures governing the high-yield 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. ~~On June 2, 2020, we completed the private offering of~~We had $800 million aggregate principal amount of senior notes (the “4.375% Notes”) outstanding as of March 31, 2021, which are due June 15, 2028, unless earlier redeemed. ~~The 4.375% Notes contain optional early redemption provisions, with redemption prices in excess of par.~~ Interest, at a rate of 4.375% per annum, is payable semiannually in arrears on June 15 and December 15 of each year, commencing December 15, 2020. The proceeds from the 4.375% Notes offering was used to repay $600 million principal amount outstanding under the term loan facility of the prior credit agreement, and for general corporate purposes. Deferred issuance costs amounted to $11 million.15.

5.375% Notes due 2022. We had $700 million aggregate principal amount of senior notes (the “5.375% Notes”) outstanding as of ~~June 30, 2020,~~March 31, 2021, which are due November 15, 2022, unless earlier redeemed. Interest, at a rate of 5.375% per annum, is payable semiannually in arrears on May 15 and November 15.

~~4.875%~~3.875% Notes due ~~2025.~~2030. We had ~~$330~~$650 million aggregate principal amount of senior notes (the ~~“4.875%~~“3.875% Notes”) outstanding as of ~~June 30, 2020,~~March 31, 2021, which are due ~~June~~November 15, ~~2025,~~2030, unless earlier redeemed. Interest, at a rate of ~~4.875%~~3.875% per annum, is payable semiannually in arrears on ~~June~~May 15 and ~~December 15.~~

~~1.125% Cash Convertible Senior Notes due 2020~~

~~For a description~~November 15 of ~~the 1.125% cash convertible senior notes due January~~each year, commencing on May 15, 2020 (the “1.125% Convertible Notes”), see Note 11, “Debt,” in our 2019 Annual Report on Form 10-K. In January 2020, we paid $39 million to settle the outstanding $12 million principal amount of the 1.125% Convertible Notes, and settle the related conversion option.2021.

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 20~~

~~Table of Contents~~

8.9. Stockholders' Equity

~~Stock Purchase Program~~

In ~~early December 2019,~~September 2020, our board of directors authorized the purchase of up to $500 million, in the aggregate, of our common stock. This program ~~was~~is funded ~~by existing~~with cash on hand and ~~was completed~~extends through December 31, 2021. The exact timing and amount of any repurchase is determined by management based on market conditions and share price, in ~~March 2020.~~

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 ~~3.4 million~~577,000 shares ~~of our common stock~~ for ~~$446~~$122 million in ~~the first quarter of 2020~~January and February 2021 (average cost of ~~$132.45 per share)~~$211.65). In the first quarter of ~~2020,~~2021, we also paid $7$6 million to settle shares purchased in late December ~~2019.~~2020.

~~1.125% Warrants~~

For a description of the 1.125% Warrants, refer to our 2019 Annual Report on Form 10-K, Note 12, “Derivatives,” and Note 14, “Stockholders’ Equity.” Approximately 310,000 of the 1.125% Warrants were outstanding at December 31, 2019.

10. Segments

In the first quarter of ~~2020,~~2021, we ~~entered into privately negotiated termination agreements under~~realigned our reportable operating segments to reflect recent changes in our internal operating and reporting structure, which ~~we paid $30 million~~is now organized by government program. The revised reporting structure reflects the reporting and review process used by our chief executive officer (who is our chief operating decision maker) to ~~the Counterparties for the termination of the remaining 1.125% Warrants outstanding, which resulted in a reduction of additional paid-in-capital for the same amount.~~

~~Share-Based Compensation~~

In connection with our employee stock plans, approximately 188,000 shares of common stock vested or were purchased, net of shares used to settle employees’ income tax obligations, during the six months ended June 30, 2020.

~~Share-based compensation~~assess performance and allocate resources, and is recorded to “General and administrative expenses” in the accompanying consolidated statements of income. Total share-based compensation expense amounted to $16 million and $10 million, respectively, in the second quarter of 2020 and 2019. Total share-based compensation expense amounted to $28 million and $19 million, respectively, in the six months ended June 30, 2020 and 2019.

As of June 30, 2020, there was approximately $85 million of total unrecognized compensation expense related to unvested restricted stock awards (“RSAs”), and performance stock units (“PSUs”), which we expect to recognize over remaining weighted-average periods of 2.7 years and 1.7 years, respectively. This unrecognized compensation cost assumes an estimated forfeiture rate of 11.3% for non-executive employees as of June 30, 2020.

As of June 30, 2020, there was also $1 million of total unrecognized compensation expense related to unvested stock options, which will be recognized by the end of 2020. NaN stock options were granted or exercised in the six months ended June 30, 2020.

~~Activity for RSAs and PSUs is summarized below:~~

RSAs PSUs Total Weighted
Average
Grant Date
Fair Value
Unvested balance, December 31, 2019 447,680 324,078 771,758 $ 102.01
Granted 318,299 185,422 503,721 123.07
Vested (160,927) (7,368) (168,295) 93.34
Forfeited (20,073) (26,096) (46,169) 103.65
Unvested balance, June 30, 2020 584,979 476,036 1,061,015 $ 113.31

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 21~~

~~Table of Contents~~

~~The aggregate fair values of RSAs and PSUs granted and vested are presented in the following table:~~

Six Months Ended June 30,
2020 2019
(In millions)
Granted:
RSAs $ 39 $ 30
PSUs 23 19
Total granted $ 62 $ 49
Vested:
RSAs $ 20 $ 18
PSUs 1 2
Total vested $ 21 $ 20

~~9. Segments~~

~~We currently have 2 reportable segments: the Health Plans segment and the Other segment. Our reportable segments are~~ consistent with how we currently manage the business and view the markets we serve.

~~Margin is the appropriate earnings measure for our~~ These reportable segments ~~based~~consist of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other.

The Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which we offer managed healthcare services. The Other segment, which is insignificant to our consolidated results of operations, includes 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 now provide in Wisconsin, as a result of the Magellan Complete Care acquisition on ~~how our chief operating decision maker currently reviews results, assesses performance, and allocates resources.~~December 31, 2020.

The key metrics used to assess the performance of our ~~Health Plans segment~~Medicaid, Medicare, and Marketplace segments are premium revenue, medical margin and 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 ~~Health Plans segment~~Medicaid, Medicare, and Marketplace segments after medical costs are deducted from premium revenue, isrepresents the most important measure of earnings reviewed by ~~management. Margin for~~management, and is used by our ~~Health Plans~~chief executive officer to review results, assess performance, and allocate resources. The key metric used to assess the performance of our Other segment is ~~referred~~service margin. The service margin is equal to ~~as “Medical Margin.”~~service revenue minus cost of service revenue. We do not report total assets by segment since this is not a metric used to assess segment performance or allocate resources.

For all tables presented below, the prior period disclosures have been recast to conform to the current period segment presentation.

Molina Healthcare, Inc. March 31, 2021 Form 10-Q | 17

Table of Contents

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

		(In millions)														(In millions)
Total revenue:	Total revenue:									Total revenue:
Health Plans		$	4,616	$	4,190	$	9,161	$	8,307
Medicaid										Medicaid	$	5,020	$	3,517
Medicare										Medicare	805		639
Marketplace										Marketplace	680		393
Other	Other	2		3		6		5		Other	17		0
Consolidated		$	4,618	$	4,193	$	9,167	$	8,312
Total										Total	$	6,522	$	4,549

The following table presents goodwill and intangibles assets, net by segment. For the Magellan Complete Care acquisition completed on December 31, 2020, the total purchase price was preliminarily allocated to tangible and intangible assets acquired, and liabilities assumed, based on their fair values as of the acquisition date. We expect to complete the final determination of the purchase price allocation no later than December 31, 2021, which may result in adjustments to the related goodwill and intangible assets, net.


	March 31,		December 31,
	2021		2020

	(In millions)
Goodwill:
Medicaid	$	372	$	378
Medicare	247		247
Other	67		67
Intangibles assets, net:
Medicaid	150		157
Medicare	72		76
Other	15		16
Total	$	923	$	941

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

		(In millions)														(In millions)
Margin:	Margin:									Margin:
Health Plans		$	774	$	583	$	1,362	$	1,164

Medicaid										Medicaid	$	604	$	365
Medicare										Medicare	77		117
Marketplace										Marketplace	151		106
Other										Other	4		0
Total margin										Total margin	836		588
Add: other operating revenues ⁽¹⁾	Add: other operating revenues ⁽¹⁾	246		144		491		311		Add: other operating revenues (1)	199		245

Less: other operating expenses ⁽²⁾	Less: other operating expenses ⁽²⁾	(596)		(462)		(1,155)		(930)		Less: other operating expenses (2)	(700)		(559)
Operating income	Operating income	424		265		698		545		Operating income	335		274
Other expenses, net	Other expenses, net	29		8		50		28		Other expenses, net	30		21
Income before income tax expense	Income before income tax expense	$	395	$	257	$	648	$	517	Income before income tax expense	$	305	$	253

______________________

(1)Other operating revenues include premium tax revenue, health insurer fees reimbursed, ~~and~~ investment income, and other revenue.

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(2)Other operating expenses include general and administrative expenses, premium tax expenses, health insurer fees, depreciation and amortization, and other ~~costs.~~operating expenses.

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~~10.~~11. Commitments and Contingencies

COVID-19 Pandemic

We continue to monitor and assess the estimated operating and financial impact of the COVID-19 ~~pandemic. As the~~ pandemic, 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 continue to 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, and the repayment of previously collected revenues.

InWe are involved in legal actions in the ordinary course of business ~~we are involved in~~including, but not limited to, various employment claims, vendor disputes and provider claims. Some of these legal actions ~~some of which~~ seek monetary damages, including claims for punitive damages, which ~~are~~may not be covered by insurance. We review legal matters and update our estimates of reasonably possible losses and related disclosures, as necessary. We have accrued liabilities for ~~certain~~legal matters for which we deem the loss to be both probable and reasonably ~~estimable, but the outcome of legal actions is inherently uncertain and our~~estimable. These liability estimates ~~of such losses~~ could ~~be understated, and could also subsequently~~ change as a result of further developments of ~~these~~the matters. For certain pending matters, accruals have not been established because we believe we are not liable or because such matters have not progressed sufficiently through discovery or factual development to enable us to reasonably estimate a rangeThe outcome of ~~possible loss.~~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.

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 winning bidder health plans, including Molina Healthcare of Kentucky, Inc., Civil Action No. 20-CI-00719. On October 23, 2020, the court issued a temporary injunction directing that open enrollment for 2021 proceed with six health plans, including both Molina Healthcare and Anthem. The new Medicaid contracts commenced on January 1, 2021. On March 2, 2021, the court heard oral argument on multiple motions for partial summary judgment filed by all parties in the consolidated action. On April 28, 2021, the court issued its Opinion and Order. Under the Order, the court granted Molina’s motion for partial summary judgment, upheld the validity of the RFP award to Molina, and also upheld the validity of Molina’s acquisition of the assets of Passport in September 2020. Due to various perceived scoring irregularities, however, the court ordered a new RFP, with the status quo of six health plans to continue in the interim. This matter remains subject to potential additional legal proceedings, and no assurances can be given regarding the ultimate outcome. Under the court’s April 28, 2021 Order, Molina Healthcare of Kentucky will continue to operate for the foreseeable future under its current Medicaid contract and provide care to Kentucky Medicaid members.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 2319

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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 oftitled “Risk Factors” in our 2020 Annual Report on Form 10-K, ~~for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, Current Reports on Form 8-K, and in this Form 10-Q, titled “Risk Factors,”~~ including without limitation the following:

•the impact of the COVID-19 pandemic and its associated or indirect effects on our business, operations, and financial results;

•the numerous political, judicial, and market-based uncertainties associated with the Affordable Care Act (the “ACA”) ~~or “Obamacare,”~~, including the ultimate outcome of the California et al. v Texas et al. ~~v. U.S. et al.~~ matter ~~now~~currently pending for decision before the ~~U.S.~~United States Supreme Court;

•significant budget pressures on state governments from diminished tax revenues incidental to the COVID-19 pandemic and their efforts to ~~curtail current~~reduce rates ~~to implement expected~~or limit rate increases, to impose profit caps or risk corridors, or to ~~maintain existing benefit packages or membership eligibility thresholds or criteria;~~

•~~our expected exit from Puerto Rico, including the successful transfer of our members to alternative health plans, the effective run-out of claims, and the return of our capital;~~recoup previously paid premium amounts on a retroactive basis;

•the market dynamics surrounding the ACA Marketplaces, including ~~but not limited to uncertainties associated with the elasticity of demand for our products based on our pricing,~~issues impacting enrollment, risk adjustment estimates and results, the potential for disproportionate enrollment of higher acuity members, and the discontinuation of premium tax credits;

•the ~~uncertainties associated~~outcome of the legal proceedings in Kentucky with regard to the ~~November 2020 Presidential~~Medicaid contract award to our Kentucky health plan and ~~Congressional election;~~our acquisition of certain assets of Passport;

•the success of our efforts to retain existing or awarded government contracts, and the success of any bid submissions in response to requests for proposal, including our contracts in California and Texas;

•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;

•~~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;~~

•our ability to consummate, integrate, and realize benefits from acquisitions, including the ~~announced~~completed acquisitions of Magellan Complete Care and Passport, and announced acquisitions of ~~Passport;~~Affinity and of the Medicaid assets of Cigna in Texas;

•effective management of our medical costs;

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

•~~the full reimbursement~~cyber-attacks, ransomware attacks, or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of ~~the ACA health insurer fee, or HIF;~~

•~~the success of our efforts to retain existing or awarded government contracts, and the success of any requests for proposal, including our contracts in Ohio, California, Texas, and Kentucky;~~protected information;

•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;

•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, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment ~~provisions;~~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;

•~~cyber-attacks, ransomware attacks, or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;~~

•the success and renewal of our ~~duals demonstration~~Medicare-Medicaid Plan (“MMP”) programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;

•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;

•complications, member confusion, eligibility ~~re-determinations,~~redeterminations, or enrollment backlogs related to the renewal of Medicaid ~~coverage, as well as the chilling effect of the new so-called public charge rule;~~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 of our outstanding accounts receivable, the effective run-out of claims, and the return of our capital;

•changes with respect to our provider contracts and the loss of providers;

•approval by state regulators of dividends and distributions by our health plan subsidiaries;

•changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;

•high dollar claims related to catastrophic illness;

•the favorable resolution of litigation, arbitration, or administrative ~~proceedings, including litigation involving the ACA to which we are not a direct party;~~proceedings;

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

•the failure to comply with the financial or other covenants in the Credit Agreement or the indentures governing our outstanding 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;

•increases in government surcharges, taxes, and assessments;

•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 ~~this Quarterly Report on Form 10-Q, Current Reports on Form 8-K, the Quarterly Report on Form 10-Q for the quarter ended March 31,~~our 2020 ~~and in our~~ Annual Report on Form 10-K, ~~for the year ended December 31, 2019,~~ 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 2020 Annual Report on Form ~~10-K for the year ended December 31, 2019.~~

10-K.

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OVERVIEW

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed healthcare services under the Medicaid and Medicare programs, and through the state insurance marketplaces (the “Marketplace”). Through our locally operated health plans, ~~in 14 states and the Commonwealth of Puerto Rico,~~ we served approximately ~~3.6~~4.6 million members as of ~~June 30, 2020. The health plans are generally operated by our respective wholly owned subsidiaries in those states, each of which is licensed as a health maintenance organization (“HMO”).~~March 31, 2021.

~~SECOND~~FIRST QUARTER ~~2020~~2021 HIGHLIGHTS

We reported net income per diluted share of ~~$4.65~~$3.89 for the ~~second~~first quarter of ~~2020,~~2021, with net income of ~~$276 million. This result was supported by:~~$228 million, which included the following:

•Membership increase of 1.2 million, or 35%, compared with March 31, 2020.

•Premium revenue of ~~$4.4~~$6.3 billion, which increased ~~8.0%.~~47% compared with the first quarter of 2020, reflecting increased membership consistent with our expectations in Medicaid and Medicare, and exceeding our expectations in Marketplace;

•~~A consolidated~~Consolidated medical care ratio (“MCR”) of ~~82.3%~~86.8%, which ~~decreased by 330 basis points~~increased compared with ~~85.6% in~~86.3% for the ~~second~~first quarter of ~~2019.~~2020, but demonstrated strong fundamentals of cost management, particularly in light of the various pressure points caused by the COVID-19 pandemic, and was consistent with our expectations;

•~~A general~~General and administrative expense (“G&A”) ratio of ~~7.5%~~7.3%, which increased compared with 7.0% in the first quarter of 2020, but was ~~30 basis points lower than 2019.~~consistent with our expectations; and

•~~An after-tax~~After-tax margin of ~~6.0%, which~~3.5%.

We note the following factors impacting first quarter of 2021 financial results:

•The net effect of COVID had a negligible impact on the first quarter of 2021, as the COVID-related utilization curtailment was offset by the states’ COVID-related risk corridors and direct COVID medical costs;

•While the net effect of COVID was in-line with our expectations and net negligible to the quarter in total, the impacts were varied by segment; and

•We experienced higher than ~~our expectations.~~

~~The COVID-19 pandemic impacted many aspects of our quarterly results. Some of these impacts increased earnings, while others served~~expected membership increases in Marketplace, due to ~~decrease earnings. Our medical margin in the second quarter of 2020 was impacted by two significant~~strong open enrollment. This improvement resulted from several factors, including strong product design and ~~conflicting impacts related to the COVID-19 pandemic.~~

~~On the one hand, we had lower~~competitive pricing, better than expected ~~medical costs due to COVID-related curtailment of utilization, a phenomenon that may or may not recur during~~natural attrition rates, and the ~~balance of the year. On the other hand, we had lower than expected Medicaid revenue related to retroactively applicable Medicaid premium refunds payable in a number of our states.~~

We estimate that, in combined effect, all the COVID-related impacts resulted in an increase in net income in a range of approximately $65 million to $100 million, or $1.10 to $1.65 in net income per diluted share.

Also impacting our second quarter results was the performance of our Marketplace business, where results were slightly lower than expected due to risk scores that were not commensurate with the higher acuity of some new members we now serve.

In summary, the core earnings and growth trajectory of our business have not been disrupted by the short-term impacts of COVID. We continue to perform well across the many fundamentals of managed care, which has been our hallmark, and we are continuing to increase our revenues as a result of our focus on top-line growth.

~~Balance Sheet~~

On June 2, 2020, we completed the private offering of $800 million aggregate principal amount of senior notes (the “4.375% Notes”) due June 15, 2028. The proceeds from the 4.375% Notes offering was used to repay $600 million principal amount outstanding under the term loan facility of the prior credit agreement, and for general corporate purposes. In addition, on June 8, 2020, we entered into a $1 billion credit agreement (the “Credit Agreement”) that replaced our prior credit agreement. The terms of the Credit Agreement are substantially similar to the terms of the prior credit agreement, exceptextended open enrollment period, as described in ~~Notes to Consolidated Financial Statements, Note 7, “Debt.~~further detail below in “Trends and Uncertainties.”

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CONSOLIDATED FINANCIAL SUMMARY


		Three Months Ended June 30,									Six Months Ended June 30,										Three Months Ended March 31,
		2020			2019			2020			2019				2021			2020

		(Dollars in millions, except per-share amounts)																				(In millions, except per-share amounts)
Premium revenue	Premium revenue	$	4,372		$	4,049		$	8,676		$	8,001		Premium revenue	$	6,306		$	4,304
Less: medical care costs														Less: medical care costs	5,474			3,716
Medical margin														Medical margin	832			588
MCR (1)														MCR (1)	86.8		%	86.3		%

Other revenues:														Other revenues:
Premium tax revenue	Premium tax revenue	157			110			307			248			Premium tax revenue	187			150
Health insurer fees reimbursed	Health insurer fees reimbursed	71			—			137			—			Health insurer fees reimbursed	—			66
Investment income and other revenue		18			34			47			63

Medical care costs		$	3,598		$	3,466		$	7,314		$	6,837
Investment income														Investment income	9			25
Other revenue														Other revenue	20			4

General and administrative expenses	General and administrative expenses	345			328			662			630			General and administrative expenses	473			317
G&A ratio (2)														G&A ratio (2)	7.3		%	7.0		%

Premium tax expenses	Premium tax expenses	157			110			307			248			Premium tax expenses	187			150
Health insurer fees	Health insurer fees	71			—			139			—			Health insurer fees	—			68

Depreciation and amortization														Depreciation and amortization	33			20
Other														Other	20			4
Operating income	Operating income	$	424		$	265		$	698		$	545		Operating income	335			274
Interest expense	Interest expense	24			22			45			45			Interest expense	30			21
Other expense (income), net		5			(14)			5			(17)

Income before income tax expense	Income before income tax expense	395			257			648			517			Income before income tax expense	305			253
Income tax expense	Income tax expense	119			61			194			123			Income tax expense	77			75
Net income	Net income	276			196			454			394			Net income	$	228		$	178

Net income per share - Diluted	Net income per share - Diluted	$	4.65		$	3.06		$	7.54		$	6.04		Net income per share - Diluted	$	3.89		$	2.92

Operating Statistics:
Ending total membership		3,555,000			3,370,000			3,555,000			3,370,000
MCR ⁽¹⁾		82.3		%	85.6		%	84.3		%	85.5		%
G&A ratio ⁽²⁾		7.5		%	7.8		%	7.2		%	7.6		%
Premium tax ratio ⁽¹⁾		3.5		%	2.6		%	3.4		%	3.0		%
Diluted weighted average shares outstanding														Diluted weighted average shares outstanding	58.6			61.0

Other Key Statistics														Other Key Statistics
Ending membership														Ending membership	4.6			3.4
Effective income tax rate	Effective income tax rate	30.0		%	24.0		%	29.9		%	23.9		%	Effective income tax rate	25.2		%	29.8		%
After-tax margin ⁽²⁾		6.0		%	4.7		%	5.0		%	4.7		%
After-tax margin (3)														After-tax margin (3)	3.5		%	3.9		%

________________________

(1) MCR represents medical care costs as a percentage of premium ~~revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax~~ revenue.

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

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

CONSOLIDATED RESULTS

NET INCOME AND OPERATING INCOME

Net income in the ~~second~~first quarter of ~~2020~~2021 amounted to ~~$276~~$228 million, or ~~$4.65~~$3.89 per diluted share, compared with ~~$196~~$178 million, or ~~$3.06~~$2.92 per diluted share, in the ~~second~~first quarter of ~~2019.~~2020. Operating income of ~~$424~~$335 million in the ~~second~~first quarter of ~~2020,~~2021, was higher compared with ~~$265~~$274 million in the ~~second~~first quarter of ~~2019.~~

Net income in the six months ended June 30, 2020, amounted to $454 million, or $7.54 per diluted share, compared with $394 million, or $6.04 per diluted share, in the six months ended June 30, 2019. Operating income of $698 million in the six months ended June 30, 2020, was higher compared with $545 million in the six months ended June 30, 2019.2020.

The improvement in operating income ~~for both periods~~ was mainly due to ~~a reduction~~membership growth and higher premium revenues in Medicaid and Marketplace, partially offset by increases in the ~~MCR.~~Medicare and Marketplace MCRs.

Net income per share in the ~~second~~first quarter ~~and six months ended June 30, 2020,~~of 2021 was favorably impacted by the reduction in common shares outstanding as a result of our share ~~repurchase program that began~~repurchases in late ~~2019~~2020 and ~~concluded in the first quarter of 2020.~~early 2021. See further discussion in “Liquidity and Financial Condition,” below.

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PREMIUM REVENUE

Premium revenue increased ~~$323~~$2 billion in the first quarter of 2021, when compared with the first quarter of 2020.

In the first quarter of 2021, membership increased by 1.2 million compared with the first quarter of 2020, which mainly reflected increases in the Medicaid and Marketplace segments and included the impact from the Magellan Complete Care and other acquisitions that closed in the second half of 2020. The increase in premium revenue was net of COVID-related risk corridors that have been enacted in several states beginning in the second quarter of 2020, when compared with the second quarter of 2019, primarily due to increases in the Medicaid and Medicare programs, resulting mainly from an increase in member months. The increase was net of COVID-related premium refunds we expect to pay in certain markets.

~~Premium revenue increased $675 million in the six months ended June 30, 2020, when compared with the six months ended June 30, 2019, primarily due to increases in the Medicaid and Medicare programs.~~2020.

MEDICAL CARE RATIO

The consolidated MCR ~~for~~in the ~~second~~first quarter of 2021 was 86.8%, compared with 86.3% in the first quarter of 2020. Our overall medical margin performance and MCR were consistent with expectations. The net effect of COVID had a negligible impact on the first quarter of 2021; however, the impacts were varied by segment. The Medicaid MCR benefited from lower utilization due to modest COVID-related curtailment, severe winter weather in several states, and the absence of a typical flu season, which was mostly offset by COVID-related risk corridors enacted in several states. The Medicare and Marketplace MCRs both increased compared with the first quarter of 2020, ~~decreased to 82.3%, compared to 85.6% for~~as both segments experienced a disproportionately negative impact from the ~~second~~net effect of COVID.

The prior year reserve development in the first quarter of ~~2019, reflecting~~2021 was modestly favorable, but its impact on earnings was absorbed by the ~~impact of reduced demand for medical services across all programs due to the COVID-19 pandemic, partially offset by~~ COVID-related premium refunds and related actions, and the impact of lower premiums in the Marketplace program. In the second quarter of 2020, the lower medical costs and the retroactive rate refunds combined reduced our reported MCR by an estimated 300 to 400 basis points.

The consolidated MCR for the six months ended June 30, 2020, decreased to 84.3%, compared to 85.5% for the six months ended June 30, 2019. Reserve development for the first six months of 2020 was not material. The comparable period in the prior year was positively impacted by 110 basis points of favorable reserve development, primarily in the Medicaid program.risk corridors.

PREMIUM TAX REVENUE AND EXPENSES

The premium tax ratio (premium tax expense as a percentage of premium revenue plus premium tax revenue) was ~~3.5% in~~2.9% and 3.4% for the ~~second~~first quarter of ~~2020, compared with 2.6% the second quarter of 2019;~~2021 and ~~3.4% compared with 3.0% for the six months ended June 30,~~ 2020, ~~and 2019,~~ respectively. The current year ratio ~~increases are~~decrease was mainly due to changes in business mix resulting from the ~~state of Illinois’ implementation of a managed care organization provider assessment~~Magellan Complete Care and other acquisitions closed in the ~~third quarter~~second half of ~~2019.~~2020.

INVESTMENT INCOME ~~AND OTHER REVENUE~~

Investment income ~~and other revenue~~ decreased to ~~$18~~$9 million in the first quarter of 2021, compared with $25 million in the first quarter of 2020, due to the continued low interest rate environment and a temporarily higher allocation in shorter-term invested assets during the COVID-19 pandemic, which has been rescinded effective for the second quarter of ~~2020, compared with $34~~2021.

OTHER REVENUE

Other revenue increased to $20 million in the ~~second~~first quarter of ~~2019, and decreased to $47~~2021, compared with $4 million in the ~~six months ended June 30, 2020, compared~~first quarter of 2020. Beginning in the first quarter of 2021, other revenue includes service revenue associated with ~~$63~~the long-term services and supports consultative services we now provide in Wisconsin, as a result of our Magellan Complete Care acquisition. Such service revenue amounted to $17 million in the ~~six months ended June 30, 2019. We expect investment income to decline in 2020 compared with 2019, due to the low interest rate environment.~~first quarter of 2021.

G&A EXPENSES

The G&A expense ratio ~~decreased~~increased to ~~7.5%~~7.3% in the first quarter of 2021, compared with 7.0% in the first quarter of 2020, mainly reflecting integration and other costs associated with the Magellan Complete Care and other acquisitions closed in the second ~~quarter~~half of 2020, from 7.8% in the second quarter of 2019, and decreased to 7.2% in the six months ended June 30, 2020, compared with the 7.6% in the six months ended June 30, 2019. These decreases were mainly due to increased revenues. The second quarter and six months ended June 30, 2020 also reflect approximately $25 million and $31 million, respectively, of incremental expense associated with a variety of new COVID-related operational protocols, technology implementations, and benefits for our employees.2020.

HEALTH INSURER FEES (“HIF”)

~~In the second quarter of 2020 and the six months ended June 30, 2020,~~There were no HIF expense amounted to $71 million and $139 million, respectively, and HIF reimbursements amounted to $71 million and $137 million, respectively. Public Law No. 115-120 provided for a HIF moratorium in 2019; therefore, there was no HIFfees incurred or reimbursed in ~~that year. The~~2021, because the HIF ~~is reinstated in 2020, but the Further Consolidated Appropriations Act, 2020,~~was repealed ~~the HIF~~ effective for years after 2020.

~~INTEREST EXPENSE~~DEPRECIATION AND AMORTIZATION

~~Interest expense~~Depreciation and amortization increased to ~~$24~~$33 million in the ~~second~~first quarter of 2021, compared with $20 million in the first quarter of 2020, ~~compared~~due primarily to amortization associated with ~~$22 million~~acquisitions completed in the second ~~quarter~~half of ~~2019. Additional interest expense relating~~2020. Refer to the 4.375% Notes issued in the second quarter of 2020, was partially offset by the decrease in interest expense resulting from the settlement of the convertible senior notes. Interest expense was $45 million in the six months ended June 30, 2020, and was unchanged compared with the six months ended June 30, 2019. As further described below in “Liquidity,” a portion of the proceeds from the 4.375% Notes offering was used to repay $600 million principal amount outstanding under the term loan facility of the prior credit agreement. See further discussion in Notes to Consolidated Financial Statements, Note ~~7, “Debt.~~10, “Segments,” for further information.

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OTHER ~~EXPENSE (INCOME), NET~~OPERATING EXPENSES

~~In the second quarter and six months ended June 30, 2020, we recognized losses on debt repayment of $5~~Other operating expenses increased to $20 million in ~~connection~~the first quarter of 2021, compared with ~~repayment~~$4 million in the first quarter of 2020. Beginning in the first quarter of 2021, other operating expenses included service costs associated with the long-term services and supports consultative services we now provide in Wisconsin, as noted above. Such service costs amounted to $13 million in the first quarter of 2021.

INTEREST EXPENSE

Interest expense increased to $30 million in the first quarter of 2021, compared with $21 million in the first quarter of 2020, mainly due to the issuance of $650 million principal amount of 3.875% Notes issued in the fourth quarter of 2020. See further details of our ~~term loan facility~~financing transactions in Notes to Consolidated Financial Statements, Note 8, “Debt,” and ~~other financing transactions. In the second quarter~~below in “Liquidity and ~~six months ended June 30, 2019, we recognized gains on debt repayment of $14 million and $17 million, respectively, in connection with convertible senior notes repayment transactions.~~Financial Condition.”

INCOME TAXES

Income tax expense amounted to ~~$119~~$77 million in the ~~second~~first quarter of ~~2020,~~2021, or ~~30.0%~~25.2% of pretax income, compared with income tax expense of ~~$61~~$75 million, or ~~24.0%~~29.8% of pretax income in the ~~second~~first quarter of 2019. Income tax expense amounted to $194 million in the six months ended June 30, 2020, or 29.9% of pretax income, compared with income tax expense of $123 million, or 23.9% of pretax income in the six months ended June 30, 2019.2020. The effective tax rate ~~is higher~~was lower in ~~2020 due to higher nondeductible expenses in 2020, primarily related to~~2021 mainly because the nondeductible ~~HIF. The~~ HIF was ~~not applicable in 2019 due to the moratorium as noted above.~~repealed for years after 2020.

~~REPORTABLE SEGMENTS~~

We currently have two reportable segments: the Health Plans segment and the Other segment. Our reportable segments are consistent with how we currently manage the business and view the markets we serve.

~~HOW WE ASSESS PERFORMANCE~~

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

The key metrics used to assess the performance of our Health Plans segment are premium revenue, margin and MCR. MCR represents the amount of medical care costs as a percentage of premium revenue. Therefore, the underlying margin, or the amount earned by the Health Plans segment after medical costs are deducted from premium revenue, is the most important measure of earnings reviewed by management.

Margin for our Health Plans segment is referred to as “Medical Margin.” Medical Margin amounted to $774 million in the second quarter of 2020, and $583 million in the second quarter of 2019. Medical Margin amounted to $1,362 million in the six months ended June 30, 2020, and $1,164 million in the six months ended June 30, 2019. Management’s discussion and analysis of the changes in the individual components of Medical Margin follows.

~~See Notes to Consolidated Financial Statements, Note 9, “Segments,” for more information on our reportable segments.~~

~~HEALTH PLANS~~

The Health Plans segment consists of health plans operating in 14 states and the Commonwealth of Puerto Rico. As of June 30, 2020, these health plans served approximately 3.6 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.

TRENDS AND UNCERTAINTIES

COVID-19 ~~Pandemic~~PANDEMIC

As the COVID-19 pandemic continues to evolve, its ~~ultimate~~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 ~~Health Plans segment~~Medicaid, Medicare, and Marketplace segments follow.

Federal Economic Stabilization and Other Programs

~~As a result~~In addition to various programs enacted in 2020 and described in our 2020 Annual Report on Form 10-K, the $1.9 trillion American Rescue Plan Act of 2021 was enacted on March 11, 2021. This legislation includes several components to assist in COVID-19 vaccine testing and deployment, as well as provisions relating to the opening of schools; direct immediate relief to working families; and additional support for communities struggling the most in the wake of the ~~pandemic, various stabilization programs were enacted beginning in March 2020, which may impact our business directly or indirectly, including the following:~~pandemic. Among its specific provisions:

~~Phase 1 - Coronavirus Preparedness and Response Supplemental Appropriations Act.~~ •~~Enacted on March 6, 2020, this legislation provided $8.3~~$350 billion in state and local funding;

•Funding for Medicaid and CHIP COVID-19 ~~response funding for developing a vaccine~~vaccines and ~~preventing further spread~~treatment to be matched at 100% of the ~~virus.~~

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~~Phase 2~~ - ~~Families First Coronavirus Response Act. Enacted on March 18, 2020, this legislation provided $100 billion in worker assistance, temporarily increased each qualifying state and territory’s~~ federal medical assistance percentage (“FMAP”) by 6.2% beginning January 1, 2020, and waived cost sharing for COVID-19 testing. The federal government guarantees matching funds to states for qualifying Medicaid expenditures based on each state’s FMAP.;

~~Phase 3 - Coronavirus Aid, Relief,~~•Incentives for states that have not expanded Medicaid to do so;

•State flexibility to extend Medicaid eligibility to women for 12 months postpartum;

•A temporary 10% FMAP increase for states to improve Medicaid home- and ~~Economic Security Act (the “CARES Act”)~~community-based services for one year; and

•~~. Enacted on March 27, 2020,~~An increase to the ~~CARES Act provided an estimated $2 trillion to fight~~ACA Marketplace premium subsidies for 2021 and 2022.

In addition, the Biden Administration has extended the COVID-19 ~~pandemic~~related Public Health Emergency Declaration (“PHE”). The Biden Administration has indicated the PHE will likely remain in place throughout 2021, and ~~stimulate~~that states will receive 60 days’ notice before the ~~U.S. economy. This assistance included loans and support~~end of the PHE to ~~major industries including airlines and small businesses, direct payments to individuals and families, and $175 billion in relief funds to hospitals and other healthcare providers.~~

~~Phase 3b - Paycheck Protection Program and Health Care Enhancement Act. Enacted on April 24, 2020, this legislation provided $310 billion~~prepare for the ~~depleted Paycheck Protection Program,~~end of emergency authorities and ~~additional funding~~the resumption of pre-PHE rules. This extension of the PHE will continue the suspension in state Medicaid eligibility redeterminations.

Also, President Biden’s January 2021 executive order providing for ~~hospitals and testing.~~

~~The Phase 4 stimulus package is currently under consideration by Congress.~~a three-month Marketplace special enrollment period from February 15, 2021, to May 15, 2021, was extended through August 15, 2021.

Due to the uncertainty as to the duration and breadth of the ~~COVID-19~~ 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 at this time.~~

~~Health Plan Operations~~

~~The pandemic has impacted our business, and we currently expect it to further impact our business in the following areas:~~

~~Member Enrollment~~. In the second quarter of 2020, we enrolled 151,000 additional members, primarily in the Medicaid program, and mainly due to the suspension of member redeterminations. As of June 30, 2020, we believe that newly unemployed individuals have not yet enrolled in Medicaid managed care in material numbers. While Medicaid eligibility and enrollment are likely to increase due to increased unemployment, it remains unclear how high the membership peak will be, how quickly it will be attained, how quickly it will fall as the economy recovers, and where it will ultimately settle. Therefore, we are currently unable to predict the timing or amount of the expected increases in enrollment. Increased membership would increase our premium revenue, but would also likely result in a significant increase in medical care claims and related costs. We believe that we have the scalability necessary to serve the wave of new membership enrollment, and be an able partner to our state customers.

~~Demand for Healthcare Services~~. The pandemic, along with the related quarantine and social distancing measures, has reduced demand for certain routine and non-critical medical services, while at the same time increased demand for other medical services, such as COVID-19 testing and emergency services. Early in the second quarter, we experienced significantly lower utilization in a variety of cost categories, representing approximately two-thirds of our total spend, with utilization levels increasing slowly as the quarter progressed. By the end of the quarter, utilization in these categories was still approximately 10% percent lower than we would have normally expected. The medical cost categories most impacted were elective surgeries, services in ambulatory settings, ER visits, behavioral services and wellness and preventive services. We also have incurred the direct costs to care for COVID patients, with just over 4,100 hospitalizations, which represents an average in-patient episode cost of $9,000, plus the cost of outpatient and other professional services. The cost per COVID episode varies widely depending on the acuity of the patient. Since our book of business is heavily weighted towards Medicaid; the effect on us of elective procedure curtailment is therefore less pronounced.

~~Medicaid Premium Actions~~. Due to the reduced demand for medical services described above, the level of utilization that was expected when capitation rates were developed has not occurred. Consequently, various states are implementing or proposing temporary premium rate refunds, profit corridors, and related actions in response to the reduced demand for medical services stemming from COVID-19, which are resulting in a reduction of our medical margin. In some cases, these premium refunds and related actions are retroactive to earlier periods in 2020, or as early as the beginning of the states’ fiscal years in 2019. We have accrued approximately $75 million in the second quarter of 2020 for certain of these retroactive premium refunds and related actions that we believe to be probable, and where the ultimate premium amount is reasonably estimable. There is potential for additional near-term premium actions, however, these proposals have not yet been finalized or enacted, the outcomes are subject to significant uncertainties, and there are still wide variations in the formulas and methodologies to be potentially employed. Due to these uncertainties, the probability and ultimate impact of the changes cannot be reasonably estimated at this time. We do not expect the uncertainties related to these proposals to become known until the third or fourth quarter of 2020. The facts for one or more of these pending matters could subsequently change as a resultresults.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 3025

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Operations

Enrollment and Premium Revenue

Excluding acquisitions and our exit from Puerto Rico, we have added nearly 500,000 new Medicaid members since March 31, 2020, when we first began to report on the impacts of ~~further developments,~~the pandemic. We believe this membership increase was mainly due to the suspension of redeterminations for Medicaid eligibility. We expect Medicaid enrollment to continue to benefit from the extension of the PHE period, and the associated pause on membership redeterminations, through the end of the third quarter of 2021. We estimate that for each month the PHE is extended, it could increase our full-year revenue estimate by $150 million.

Marketplace revenue growth is now expected to be over 50% in 2021, and we expect to end 2021 with slightly more than 500,000 members.

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 first quarter of 2021, we recognized approximately $110 million for the impact of risk corridors enacted in several states beginning in the second quarter of 2020, in response to the lower utilization of medical services resulting from COVID-19.

It is possible that certain states could increase the level of existing risk corridors, and other states could implement some form of retroactive risk corridors in the future. Due to these uncertainties, the ultimate ~~outcome~~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.

Medical Care Costs

We expect continued uncertainty regarding utilization trends as 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 of COVID-19 infection rates. We believe that some portion of the utilization curtailment experienced in the first quarter of 2021 is likely the result of service deferrals, and so these services will likely be provided to members over the remainder of the year.

Capital and Financial Resources~~. Refer to “Liquidity and Financial Condition” below for a discussion of our capital and financial resources.~~

~~Affordable Care Act~~AFFORDABLE CARE ACT

In December 2018, in a case brought by the state of Texas and nineteen other states, a federal judge in Texas held that the ~~ACA’s~~ individual mandate of the ACA is unconstitutional. He further held that since the individual mandate is inseverable from the entire body of the ACA, the entire ACA is unconstitutional. The effect of his ruling was stayed pending the appeal of the ruling to the Fifth Circuit Court of Appeals. In December 2019, a three-judge panel of the Fifth Circuit Court of Appeal, in a two to one decision, affirmed the District Court’s ruling that the individual mandate is unconstitutional, but remanded the case back to the District Court for ~~additional analysis and findings regarding severability and the~~further consideration of ~~additional arguments.~~

the severability issue. The intervenor defendant states led by California subsequently appealed the case to the U.S. Supreme Court, ~~has accepted~~which heard oral arguments in the ~~appeal of the Fifth Circuit Court’s decision.~~case on November 10, 2020. The Supreme Court’s decision is expected by June 2021. ~~The ACA remains in effect until judicial review~~If the Supreme Court were to rule that the individual mandate is unconstitutional, and that the individual mandate is not severable from the balance of the ~~decision is concluded. Any final, non-appealable determination~~ACA, or that the entirety of the ACA is unconstitutional, that ruling could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

As of ~~June 30, 2020,~~March 31, 2021, we served a significant number of members enrolled in programs created by the ACA, including approximately ~~669,000~~990,000 Medicaid Expansion members and ~~325,000~~620,000 Marketplace members. In the ~~six months ended June 30, 2020,~~first quarter of 2021, premium revenue associated with these members amounted to ~~$2.4~~$2.1 billion, and contributed ~~Medical Margin~~medical margin of ~~$477~~$374 million.

~~Other Recent Developments~~

Molina Healthcare, Inc. March 31, 2021 Form 10-Q | 26

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OTHER RECENT DEVELOPMENTS

The acquisition of Passport allows us to enhance operational readiness and promote continuity of care for members in advance of our new contract award in the Kentucky Medicaid market. We believe the anticipated reduction in health plan startup costs and the positive margin impact from incremental revenue will allow us to recover the purchase price from positive cash flow within the first year following the acquisition. The transaction is subject to federal and state regulatory approvals, and other customary closing conditions, and is expected to close before the end of 2020.

MCC is a managed care organization serving members in six states, including Medicaid members in Arizona and statewide in Virginia, and Integrated Acute Care members in Florida. Through its Senior Whole Health branded plans, MCC provides fully integrated plans for Medicaid and Medicare dual beneficiaries in Massachusetts, as well as Managed Long Term Care in New York. MCC also provides consultative services to participants who self-direct their care through Wisconsin’s long-term services and supports (“LTSS”) program. As of December 31, 2019, MCC served approximately 155,000 members in managed care plans and provided services to 25,000 LTSS program participants in Wisconsin, with full year 2019 revenues over $2.7 billion.

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 31~~

~~Table of Contents~~

The transaction is subject to receipt of applicable federal and state regulatory approvals and satisfaction of other customary closing ~~conditions, and is expected~~conditions. We currently expect the transaction to close byin the ~~first quarter~~second half of 2021. ~~In connection with this transaction, Magellan Health, Inc. has agreed to provide certain transition services following the closing.~~

~~Marketplace Risk Corridor Ruling~~Ohio Procurement—Medicaid. . On April ~~27, 2020,~~13, 2021, we announced that our Ohio health plan subsidiary was selected as an awardee in all three regions across the ~~United States Supreme Court issued its opinion in~~ ~~Maine Community Health Options v. United States~~. The Supreme Court held that §1342 of the Affordable Care Act obligated the federal government to pay participating insurers the full Marketplace risk corridor amounts calculated by that statute, that such payment obligations survived Congress’ appropriations riders, and that impacted insurers may sue the federal government in the U.S. Court of Federal Claims to recover damages for breach of that obligation. On June 18, 2020, the Claims Court granted us judgment in the amount of $128.1 million for our 2014, 2015, and 2016 Marketplace risk corridor claims. This favorable judgment does not create additional minimum MLR rebates. We had not recognized the judgment as of June 30, 2020, because the timing of collection of the judgment award is uncertain.

~~Illinois. In March 2020, we terminated our agreement to acquire all of the capital stock of NextLevel Health Partners, Inc. due to the seller’s stated unwillingness to close~~state pursuant to the ~~terms of the acquisition agreement.~~

~~Puerto Rico. We are exiting Puerto Rico’s~~ Medicaid program when our current contract expires in October 2020. We will work closely with the regulatory authorities and the provider community in a manner designed to ensure that our members in Puerto Rico are cared for and have reliable continuity of care.

~~Update on Status of Significant Medicaid Contracts~~

~~California. Our~~ managed care contracts with the California Department of Health Care Services (“DHCS”) cover six regions in central and southern California (including the Los Angeles region covered under a separate subcontract with Health Net, LLC). These contracts are effective through December 31,request for award issued on September 30, 2020, which we expect to be renewed annually until the effectiveness of new forms of contract following RFP awards. DHCS has publicly indicated it expects to release the final Medicaid RFP in 2021, for implementation in January 2024.

~~Ohio.~~ ~~Our managed care contract with~~by the Ohio Department of Medicaid. This new contract is expected to begin in early 2022, and will offer health care coverage to Medicaid ~~(“ODM”) covers~~beneficiaries through the ~~entire~~ state of ~~Ohio,~~Ohio’s Covered Family and is effective through July 1, 2021. In early 2019, the governor of Ohio asked ODM to initiate a process to re-procure the Ohio Medicaid program related to this contract. The re-procurement of the Ohio Medicaid program is currently projected to be released before the end of 2020, although ODM has not committed to or confirmed a specific timeline at this time.

~~Texas. On March 25, 2020, the Texas Health~~Children, Expansion, and Human Services Commission (“HHSC”), notified our Texas health plan that HHSC had upheld our protest and had canceled all previously awarded contracts associated with the re-procurement awards announced in October 2019 for the ABD program (known in Texas as “STAR+PLUS”). In addition, HHSC canceled the pending re-procurement associated with the TANF and CHIP programs (known in Texas as “STAR/CHIP”). HHSC further indicated that it was deliberating next steps with respect to both re-procurements. We do not expect the HHSC to re-issue the RFPs in the near future.

~~Update on Status of MMP Contracts~~

Our current Michigan, South Carolina and Texas MMP contracts are active through December 31, 2020. These contracts represented aggregate revenues of approximately $398 million in six months ended June 30, 2020. The current status of these contracts is as follows:

~~Michigan~~. The state has filed an extension request with the Centers for Medicare & Medicaid Services (“CMS”), which is under review. We expect the extension to be completed in two phases: a one-year extension through December 31, 2021; and a two-year extension through December 31, 2023.

~~South Carolina. CMS has granted a three-year extension through 2023; the contract is pending execution.~~

~~Texas. A three-year extension amendment, through December 31, 2023, is under development by CMS and HHSC.~~programs.

For a discussion of additional ~~Health Plans~~ segment trends, uncertainties and other developments, refer to our ~~2019~~2020 Annual Report on Form 10-K, “Item 1. Business—Our Business,” and “—Legislative and Political Environment.”

REPORTABLE SEGMENTS

As of March 31, 2021, we served approximately 4.6 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.

In the first quarter of 2021, we realigned our reportable operating segments to reflect recent changes in our internal operating and reporting structure, which is now organized by government program. These reportable segments consist 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.

The key metrics used to assess the performance of our Medicaid, Medicare, and Marketplace segments are premium revenue, medical margin and 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.

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, “Segments.”

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 3227

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SEGMENT MEMBERSHIP

The following ~~tables set~~table sets forth our ~~Health Plans~~membership by segment ~~membership~~ as of the dates indicated:

June 30,
2020 December 31,
2019 June 30,
2019
Ending Membership by Government Program:
Medicaid 3,122,000 2,956,000 2,962,000
Medicare 108,000 101,000 100,000
Marketplace 325,000 274,000 308,000
Total 3,555,000 3,331,000 3,370,000
Ending Membership by Health Plan:
California 572,000 565,000 590,000
Florida 131,000 132,000 142,000
Illinois 242,000 224,000 221,000
Michigan 377,000 362,000 360,000
Ohio 329,000 288,000 297,000
Puerto Rico 167,000 176,000 200,000
South Carolina 145,000 131,000 130,000
Texas 352,000 341,000 360,000
Washington 913,000 832,000 811,000
Other ⁽¹⁾
327,000 280,000 259,000
Total 3,555,000 3,331,000 3,370,000


	March 31,	December 31,	March 31,
	2021 (1)	2020	2020
Medicaid	3,859,000	3,599,000	2,970,000
Medicare	126,000	115,000	105,000
Marketplace	620,000	318,000	329,000
Total	4,605,000	4,032,000	3,404,000

~~_________________________~~____________________

(1)~~“Other” includes~~Approximately 200,000 members, from the ~~Idaho, Mississippi, New Mexico, New York, Utah and Wisconsin health plans, which~~Magellan Complete Care acquisition that closed on December 31, 2020, are included in the totals as of March 31, 2021, but not ~~individually significant to our consolidated operating results.~~in prior periods.

SEGMENT FINANCIAL PERFORMANCE

The ~~tables in the section below summarize~~following table summarizes premium revenue, ~~Medical Margin,~~medical margin, and MCR by ~~state health plan and by government program~~segment for the periods indicated (dollars in millions):

~~HEALTH PLANS~~

Three Months Ended June 30,
2020 2019
Premium Revenue Medical Margin MCR Premium Revenue Medical Margin MCR
California $ 559 $ 111 80.2 % $ 560 $ 110 80.4 %
Florida 162 25 85.0 176 26 85.7
Illinois 306 50 83.6 242 27 89.0
Michigan 415 106 74.4 413 75 81.8
Ohio 751 119 84.2 654 82 87.3
Puerto Rico 122 25 79.7 122 13 89.2
South Carolina 157 23 85.4 140 15 89.0
Texas 731 83 88.6 765 97 87.3
Washington 775 137 82.2 662 92 86.1
Other ⁽¹⁾
394 95 76.0 315 46 85.5
Total $ 4,372 $ 774 82.3 % $ 4,049 $ 583 85.6 %

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Six Months Ended June 30,
2020 2019
Premium Revenue Medical Margin MCR Premium Revenue Medical Margin MCR
California $ 1,110 $ 196 82.3 % $ 1,115 $ 184 83.5 %
Florida 316 55 82.8 399 96 76.0
Illinois 614 84 86.4 469 69 85.2
Michigan 826 180 78.2 818 149 81.8
Ohio 1,471 202 86.3 1,274 150 88.2
Puerto Rico 227 23 89.8 224 25 88.7
South Carolina 314 42 86.6 276 36 87.1
Texas 1,474 174 88.1 1,512 203 86.6
Washington 1,548 250 83.8 1,323 138 89.5
Other ⁽¹⁾
776 156 79.9 591 114 80.7
Total $ 8,676 $ 1,362 84.3 % $ 8,001 $ 1,164 85.5 %

~~__________________~~

~~(1)“Other” includes the Idaho, Mississippi, New Mexico, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.~~

As discussed in “Trends and Uncertainties” above, the COVID-19 pandemic had a significant impact on many aspects of our quarterly results. Some of these impacts increased earnings, such as the lower than expected medical costs from the curtailment of utilization, while others served to decrease earnings, such as the temporary, retroactive Medicaid premium rate refunds, profit corridors, and related actions enacted by certain states. All our state health plans benefited from the lower than expected medical costs, while certain of our state customers enacted Medicaid premium rate refunds and related actions.

~~Comments relating to the performance of our health plans in California, Ohio, Texas and Washington, which represent our largest health plans from a premium revenue standpoint, follow:~~

~~California.~~ For the second quarter of 2020, Medical Margin was relatively flat year-over-year, as the lower medical costs from the curtailment of utilization was offset by Medicaid premium actions and underperformance in Marketplace. For the six months ended June 30, 2020, Medical Margin improved compared with the prior year due to lower MCRs in the Medicaid and Medicare businesses, due to a net favorable overall impact from COVID-19, partially offset by the underperformance in Marketplace.

~~Ohio.~~ For the second quarter and six months ended June 30, 2020, Medical Margin was higher when compared with the same periods in 2019 due to stronger performance in Medicaid. The lower medical costs from the curtailment of utilization due to COVID-19 were offset by retroactive Medicaid premium rate refunds and related actions. Premium revenues were higher year-over-year, mainly due to program changes and rate increases in Medicaid.

~~Texas.~~ For the second quarter and six months ended June 30, 2020, performance declined year-over-year, with a lower Medical Margin compared with the same periods in 2019. The decline resulted mainly from underperformance in Marketplace, due primarily to lower premiums and higher acuity for some of the new members we now serve, partially offset by lower MCRs in Medicaid and Medicare.

~~Washington.~~ For the second quarter and six months ended June 30, 2020, Medical Margin was higher when compared with the same periods in 2019, mainly driven by improved results in Medicaid. Medicaid premium revenues increased in both the second quarter and six months ended June 30, 2020, due to membership growth. In addition, lower medical costs from the curtailment of utilization driven by COVID-19 were partially offset by related Medicaid premium refund actions by the state.

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 34~~

~~Table of Contents~~

~~PROGRAMS~~

Three Months Ended June 30,
2020 2019
Premium Revenue Medical Margin MCR Premium Revenue Medical Margin MCR
Medicaid $ 3,375 $ 553 83.6 % $ 3,067 $ 364 88.1 %
Medicare 630 125 80.0 572 84 85.2
Marketplace 367 96 74.0 410 135 67.2
Total $ 4,372 $ 774 82.3 % $ 4,049 $ 583 85.6 %


		Six Months Ended June 30,																										Three Months Ended March 31,
		2020										2019													2021								2020
		Premium Revenue		Medical Margin		MCR		Premium Revenue		Medical Margin		MCR			Premium Revenue		Medical Margin		MCR		Premium Revenue				Medical Margin			MCR
																											Premium Revenue					Medical Margin	MCR
Medicaid	Medicaid	$	6,661	$	918	86.2	%	$	6,071	$	710	88.3	%	Medicaid	$	4,840	$	604	87.5	%			$	3,286						$	365			88.9	%
Medicare	Medicare	1,264		242		80.8		1,123		169		85.0		Medicare	799		77		90.3		634				117			81.7
Marketplace	Marketplace	751		202		73.1		807		285		64.7		Marketplace	667		151		77.3		384				106			72.3
Total	Total	$	8,676	$	1,362	84.3	%	$	8,001	$	1,164	85.5	%	Total	$	6,306	$	832	86.8	%	$	4,304			$	588		86.3	%

Medicaid

Medicaid premium revenue increased ~~$308~~$1,554 million in the ~~second~~first quarter of ~~2020~~2021, when compared with the ~~second~~first quarter of ~~2019, and increased $590 million in the six months ended June 30, 2020, when compared with the six months ended June 30, 2019.~~2020. The increase ~~in both periods~~ was mainly due to membership growth and ~~premium increases~~the impact from the Magellan Complete Care and other acquisitions closed in the second half of 2020. Excluding the acquisitions, the membership growth was across several states and was mainly driven by the extension of the PHE period and the associated suspension of membership redeterminations due to COVID-19. The overall increase was partially offset by ~~premium refunds and related actions related to~~state risk corridors stemming from COVID-19.

As described above in ~~“Health Plans,” and~~ “Trends and Uncertainties,” we ~~accrued $75~~recognized approximately $110 million in the first quarter of 2021, for the impact of risk corridors enacted in several states beginning in the second quarter of 2020, ~~for certain states that are implementing premium rate refunds, profit corridors, and related actions~~ in response to the lower utilization of medical services resulting from COVID-19.

The ~~Medical Margin~~medical margin in our Medicaid program increased ~~$189~~$239 million, or ~~52%~~65%, in the ~~second~~first quarter of ~~2020~~2021 when compared with the ~~second~~first quarter of ~~2019,~~2020. The increase was driven by increased premium revenues and ~~increased $208 million, or 29% in the six months ended June 30, 2020, when compared~~margin associated with the ~~six months ended June 30, 2019. The increase in both periods was mainly driven by the~~membership growth discussed above, and from a reduction in the MCR.

The total Medicaid MCR decreased to ~~83.6%~~87.5% in the ~~second~~first quarter of 2021, from 88.9% in the first quarter of 2020, ~~from 88.1% in the second quarter of 2019,~~ or ~~450~~140 basis points. The ~~Medicaid MCR decreased~~improvement was mainly attributable to ~~86.2%~~lower than expected utilization, resulting from the combined effects of a modest level of COVID-related utilization curtailment, severe winter weather in several states, and the absence of a typical flu season. Performance in utilization management and payment integrity also favorably impacted the MCR. The improvement was partially offset by the impact of the various COVID-related risk corridors enacted by several states, as discussed above.

Medicare

Medicare premium revenue increased $165 million in the ~~six months ended June 30, 2020,~~first quarter of 2021, primarily due to the impact from ~~88.3% in~~ the ~~six months ended June 30, 2019, or 210 basis points.~~Magellan Complete Care acquisition, including higher membership and higher premium revenue PMPM. The ~~year-over-year comparisons are impacted primarily~~increase was partially offset by ~~the lower utilization of medical services stemming from COVID-19, as elective and discretionary healthcare services have been postponed and deferred, and the premium rate refunds, new~~ risk corridors, ~~and related actions.~~

~~In the second quarter of 2020, the MCR for TANF and CHIP decreased 730 basis points, and decreased 180 basis points~~mainly in ~~the ABD program, due mainly to lower utilization of medical services stemming from COVID-19. The MCR for TANF and CHIP decreased 60 basis points~~MMP, enacted in ~~the six months ended June 30, 2020, due~~response to the lower utilization of medical services stemming from ~~COVID-19, partially offset by unfavorable year-over-year changes in prior year reserve development.~~

~~The decrease in the Medicaid Expansion MCR in the second quarter of 2020, when compared with the second quarter of 2019, was mainly due to lower utilization of medical services stemming from~~ COVID-19. The decrease in the Medicaid Expansion MCR in the six months ended June 30, 2020, when compared with the six months ended June 30, 2019, was mainly due to lower utilization of medical services stemming from COVID-19, partially offset by unfavorable year-over-year changes in prior year reserve development.

~~Medicare~~

Medicare premium revenue increased by $58 million in the second quarter of 2020 and $141 million in the six months ended June 30, 2020, primarily due to increases in premium revenue PMPM and member months. PMPMs improved due to increased revenue resulting from risk scores that are more commensurate with the acuity of our population and increases in quality incentive premium revenues.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 3528

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The ~~Medical Margin~~medical margin for Medicare ~~increased $41~~decreased $40 million, ~~or 49%,~~ in the ~~second~~first quarter of ~~2020~~2021, when compared with the ~~second~~first quarter of ~~2019, and was~~2020, mainly ~~attributed~~due to ~~increased revenues described above and lower utilization of medical services stemming from COVID-19. The Medical Margin for Medicare increased $73 million, or 43%,~~an increase in the ~~six months ended June 30, 2020, when compared with~~MCR, partially offset by the ~~six months ended June 30, 2019, and resulted primarily from the increased revenues described above.~~increase in revenues.

The Medicare MCR ~~decrease for~~increased to 90.3% in the ~~second~~first quarter of 2021, from 81.7% in the first quarter of 2020, or 860 basis points. The increase was primarily driven by higher direct COVID medical costs, and ~~six months ended June 30, 2020, when compared with~~risk scores that do not fully reflect the ~~same periods in 2019, was due to the same factors impacting the year-over-year changes in Medical Margin as discussed above.~~acuity of our membership.

Marketplace

Marketplace premium revenue ~~decreased $43~~increased $283 million in the ~~second~~first quarter of ~~2020~~2021, mainly due to increased membership, partially offset by a decrease in premium revenue PMPM. Our Marketplace membership as of March 31, 2021, amounted to 620,000 members, representing growth of 302,000 members sequentially, and ~~$56~~substantially exceeding our previous beginning of the year expectation of approximately 500,000 members. This improvement resulted from several factors, including strong product design and competitive pricing, better than expected natural attrition rates, and the extended open enrollment period. The decrease in premium revenue PMPM was mainly driven by changes in business mix, with an increase of members in the bronze metal tier.

The Marketplace medical margin increased $45 million in the ~~six months ended June 30, 2020, mainly due to lower pricing in an effort to be more competitive, lower risk scores that were not commensurate with the risk~~first quarter of ~~the population, and the impact of more health plans being subject to minimum medical loss ratio rebates~~2021, when compared with the ~~prior year.~~

~~The Marketplace Medical Margin decreased $39 million in the second~~first quarter of 2020, when compared with the second quarter of 2019, and decreased $83 million in the six months ended June 30, 2020, when compared with the six months ended June 30, 2019. In both periods, the Medical Margin decrease was primarily due to the ~~decrease~~increase in ~~premium revenues.~~membership and premiums, partially offset by an increase in the MCR compared to 2020.

The Marketplace MCR increased to 77.3% in the ~~second~~first quarter ~~and~~of 2021, from 72.3% in the ~~six months ended June 30,~~first quarter of 2020, ~~which was mainly attributable to lower premium revenues. Medical cost PMPM was slightly lower compared with~~or 500 basis points. The increase resulted from higher direct COVID medical costs, as the ~~same periods~~COVID infection rate resurged in ~~2019.~~many of our Marketplace geographies.

~~OTHER~~Other

The Other segment includes service revenues and costs associated with the long-term services and supports consultative services we now provide in Wisconsin, and also includes certain corporate amounts not allocated to the ~~Health Plans segment.~~Medicaid, Medicare, or Marketplace segments. Such amounts ~~are~~were immaterial to our consolidated results of ~~operations.~~operations in the first quarters of 2021 and 2020, respectively.

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 ~~Health Plans segment~~ 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~~quarter of ~~2020,~~2021, we did not experience noticeable delays of, or changes in, the timing and 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 ~~regarding various states’ premium actions~~ in “Future Sources and Uses of Liquidity—Future ~~Uses.~~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 ~~second~~first quarter ~~and six months ended June 30, 2020,~~of 2021, the parent received ~~$185~~$74 million ~~and $235 million, respectively,~~ in dividends from the regulated health plan subsidiaries. See further discussion of dividends below in “Future Sources and Uses of Liquidity—Future Sources.”

~~To satisfy minimum statutory net worth requirements, the~~The parent company may also contribute capital to the regulated health plan ~~subsidiaries.~~subsidiaries to satisfy minimum statutory net worth requirements, including funding for newer health plans with growing enrollment. In the ~~second~~first quarter ~~and six months ended June 30, 2020,~~of 2021, the parent contributed capital of ~~$42 million and~~ $52 million ~~respectively,~~ to the regulated health plan subsidiaries.

Cash, cash equivalents and investments at the parent company amounted to ~~$1,166~~$436 million, and ~~$997~~$644 million as of ~~June 30, 2020,~~March 31, 2021, and December 31, ~~2019,~~2020, respectively. The ~~increase in 2020~~decrease as of March 31, 2021, was mainly due to ~~net proceeds~~our share repurchase program. In the first quarter of ~~$789~~2021, we purchased an aggregate of approximately 577,000 shares for $122 million, at an average cost of $211.65 per share.

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million for the newly issued 4.375% Notes, $380 million drawn on the term loan facility in the first quarter of 2020, and $235 million of dividends received from our regulated health plan subsidiaries year to date. The increase was partially offset by the $600 million repayment of the term loan facility, purchases of our common stock amounting to $453 million, $42 million net cash paid for the aggregate convertible notes-related transactions, and $52 million contributed to our 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.

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 10 years, or less than 10 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 AA. 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 the current volatility in the capital markets.

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

Cash Flow Activities

Our cash flows are summarized as follows:


		Six Months Ended June 30,											Three Months Ended March 31,
		2020		2019		Change			2021		2020		Change

		(In millions)											(In millions)
Net cash provided by operating activities	Net cash provided by operating activities	$	749	$	156	$	593	Net cash provided by operating activities	$	568	$	143	$	425
Net cash provided by (used in) investing activities		38		(393)		431
Net cash provided by (used in) financing activities		71		(362)		433
Net cash used in investing activities								Net cash used in investing activities	(87)		(103)		16
Net cash used in financing activities								Net cash used in financing activities	(207)		(125)		(82)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	$	858	$	(599)	$	1,457	Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	$	274	$	(85)	$	359

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 ~~six months ended June 30, 2020~~first quarter of 2021 was ~~$749~~$568 million, compared with ~~$156~~$143 million in the ~~six months ended June 30, 2019.~~first quarter of 2020. The ~~$593~~$425 million increase in cash flow was due to ~~stronger operating results~~the growth in ~~the six months ended June 30, 2020,~~operations and the net impact of timing differences in government receivables and payables.

Investing Activities

Net cash ~~provided by investing activities was $38 million in the six months ended June 30, 2020, compared with $393 million~~ used in investing activities was $87 million in the ~~six months ended June 30, 2019,~~first quarter of 2021, compared with $103 million in the first quarter of 2020, an increase in cash flow of ~~$431~~$16 million. ~~The year over year~~This increase was primarily due to decreased purchases of investments in the ~~six months ended June 30, 2020.~~

~~Molina Healthcare, Inc. June 30, 2020 Form 10-Q | 37~~

~~Table~~first quarter of ~~Contents~~2021.

Financing Activities

Net cash ~~provided by financing activities was $71 million in the six months ended June 30, 2020, compared with $362 million~~ used in financing activities was $207 million in the ~~six months ended June 30, 2019, an increase~~first quarter of 2021, compared with $125 million in the first quarter of 2020, a decrease in cash flow of ~~$433~~$82 million. In the ~~six months ended June 30,~~first quarter of 2021, financing cash outflows included common stock purchases of $128 million, $51 million for common stock withheld to settle employee tax obligations, and $20 million paid to settle contingent consideration liabilities relating to our Kentucky Passport acquisition in 2020. In the first quarter of 2020, net cash ~~inflows included $789~~paid for the common stock purchases amounted to $453 million, ~~from the issuance~~partially offset by proceeds of ~~the 4.375% Notes and~~ $380 million borrowed under the term loan facility. ~~Cash outflows included the $600 million repayment~~

Molina Healthcare, Inc. March 31, 2021 Form 10-Q | 30

Table of the term loan facility, common stock purchases of $453 million, which included $7 million to settle shares purchased in late December 2019, and net cash paid for the aggregate convertible senior notes-related transactions amounting to $42 million. In the six months ended June 30, 2019, net cash paid for the aggregate convertible senior notes-related transactions amounted to $609 million, partially offset by proceeds of $220 million borrowed under the term loan facility.Contents

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.

On a consolidated basis, at ~~June 30, 2020,~~March 31, 2021, our working capital was ~~$3,307 million,~~$3.0 billion, compared with ~~$2,698 million~~$2.9 billion at December 31, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, our cash and investments amounted to ~~$5,296 million,~~$6.5 billion, compared with ~~$4,477 million~~$6.2 billion at December 31, ~~2019.~~2020.

Regulatory Capital and Dividend Restrictions

Each of our regulated, ~~HMO~~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 ~~HMO~~ 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 ~~(net assets)~~ requirement for these subsidiaries was estimated to be approximately ~~$1,300 million~~$1.7 billion at ~~June 30, 2020,~~March 31, 2021, compared with ~~$1,110 million~~$1.5 billion at December 31, ~~2019. Our HMO~~2020. The aggregate capital and surplus of our wholly owned subsidiaries ~~were~~was in ~~compliance with~~excess of these minimum capital requirements as of both dates.

Under applicable regulatory requirements, the amount of dividends that may be paid by our ~~HMO~~wholly owned subsidiaries without prior approval by regulatory authorities as of ~~June 30, 2020, is~~March 31, 2021, was approximately ~~$41~~$30 million in the aggregate. ~~Our HMO~~The subsidiaries may pay dividends over this amount, but only after approval is granted by the regulatory authorities.

Based on our cash and investments balances as of ~~June 30, 2020,~~March 31, 2021, management believes that its regulated ~~health plan~~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 high-yield senior notes is rated “BB-” by Standard & Poor’s, and ~~“B2”~~“Ba3” by Moody’s Investor Service, Inc. A downgrade in our ratings could adversely affect our borrowing capacity and increase our 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. ~~As of June 30, 2020, we were in compliance with all financial and non-financial covenants under the Credit Agreement and other long-term debt.~~

In addition, the indentures governing ~~the~~each of our outstanding high-yield 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 March 31, 2021, we were in compliance with all financial and non-financial covenants under the Credit Agreement and other long-term debt.

FUTURE SOURCES AND USES OF LIQUIDITY

Future Sources

Our ~~Health Plans segment~~ 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

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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. ~~While~~Excluding acquisitions and our exit from Puerto Rico, we have added nearly 500,000 new Medicaid ~~eligibility and enrollment are likely~~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 ~~increased unemployment, it remains unclear how high~~ the ~~membership peak will be, how quickly it will be attained, how quickly it will fall as~~suspension of redeterminations for Medicaid eligibility. We expect Medicaid enrollment to continue to benefit from the ~~economy recovers, and where it will ultimately settle. Therefore, we are currently unable to predict the timing or amount~~extension of the ~~expected increases in enrollment. Increased~~PHE period, and the associated pause on membership ~~would~~redeterminations, through the end of the third quarter of 2021. We estimate that for each month the PHE is extended, it could increase our ~~premium~~full-year revenue ~~but would also likely result in a significant increase in medical care claims and related costs.~~estimate by $150 million.

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 of the COVID-19 pandemic, state regulators could

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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.

Credit Agreement Borrowing Capacity. As of ~~June 30, 2020,~~March 31, 2021, we had available borrowing capacity of ~~approximately $1~~$1.0 billion under the revolving credit facility of our ~~new~~ 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 ~~we maintain a minimum~~our consolidated net leverage ~~ratio.~~ratio is not greater than a defined maximum. See further discussion in the Notes to Consolidated Financial Statements, Note 7,8, “Debt.”

Future Uses

Common Stock Purchases. In September 2020, our board of directors authorized the purchase of up to $500 million, in the aggregate, of our common stock. This program is funded with cash on hand and extends through December 31, 2021. 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 April 29, 2021, approximately $219 million remained available to purchase our common stock under this program through December 31, 2021.

Acquisitions. On April 22, 2021, we announced a definitive agreement to acquire Cigna Corporation’s Texas Medicaid and Medicare-Medicaid Plan (“MMP”) contracts, along with certain operating assets. As of December 31, 2020, Cigna served approximately 48,000 members in the Texas ABD program, also known as “STAR+PLUS,” in the Hidalgo, Tarrant and Northeast service areas, and approximately 2,000 MMP members in the Hidalgo service area, with full year 2020 premium revenue of approximately $1.0 billion. The purchase price for the transaction is approximately $60 million, which we intend to fund with cash on hand. The transaction is subject to receipt of applicable federal and state regulatory approvals and satisfaction of other customary closing conditions. We currently expect the transaction to close in the second half of 2021.

In September 2020, we entered into a definitive agreement to acquire substantially all of the assets of Affinity Health Plan, Inc., a Medicaid health plan in New York. The net purchase price for the transaction is approximately $380 million, subject to various adjustments at closing, which we intend to fund with cash on hand. We currently expect the transaction to close in the third quarter of 2021.

In connection with the acquisition of certain assets of Passport Health Plan, Inc. in 2020, in the first quarter of 2021, the contingent purchase consideration relating to 2021 member enrollment was finalized and half the consideration due, or $23 million, was paid to the seller. We expect to pay the remaining balance of the liabilities, reported in “Accounts payable, accrued liabilities and other” in the accompanying consolidated balance sheets, later in 2021 and in the first quarter of 2022.

Outcome of ACA Constitutionality Court Case. As described above in “Trends and Uncertainties,” the Supreme Court’s decision is expected by June 2021. If the Supreme Court were to rule that the individual mandate is unconstitutional, and that the individual mandate is not severable from the balance of the ACA, or that the entirety of the ACA is unconstitutional, that ruling could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

Potential Impact of COVID-19 Pandemic. The pandemic, along with the related quarantine and social distancing measures, has reduced demand for certain routine and non-critical medical services, while at the same time increased demand for other medical services, such as COVID-19 testing and emergency services. Increased demand for medical services, which we are presently unable to predict the timing or magnitude, could result in a significant increase in medical care costs and related provider claims payments.

~~Also, as~~As described above in ~~“Health Plans Segment—Trends~~“Trends and Uncertainties,” we have been subject to Medicaid risk corridors as a result of the pandemic. Beginning in 2020, through March 31, 2021, various states ~~are implementing or proposing~~enacted temporary ~~premium rate refunds, profit~~risk corridors ~~and related actions~~ in response to the reduced demand for medical services stemming from COVID-19, which ~~are resulting~~have resulted in a reduction of our medical margin. In some cases, these ~~premium refunds and related actions are~~risk corridors were retroactive to earlier periods in 2020, or as early as the beginning of the states’ fiscal years in 2019. ~~We have accrued approximately $75 million~~Beginning in the second quarter of 2020, ~~for certain of these~~we have recognized retroactive ~~premium refunds and related actions~~risk corridors that we believe to be probable, and where the ultimate premium amount is reasonably estimable. ~~There is potential for additional near-term premium actions, however, these proposals have not yet been finalized or enacted,~~In the ~~outcomes are subject~~first quarter of 2021, we recognized approximately $110 million related to ~~significant uncertainties, and there are still wide variations~~such risk corridors, primarily in the ~~formulas~~Medicaid segment.

~~Acquisitions~~. Our strategic focus has shifted to a disciplined and steady approach to growth. Organic growth, which includes leveraging our existing health plan portfolio and winning new territories, is our highest priority. In addition to organic growth, we will consider targeted acquisitions that are a strategic fit that we believe will leverage operational synergies, and lead to incremental earnings accretion.

On April 30, 2020, we entered into a definitive agreement to acquire the Magellan Complete Care (“MCC”) line of business of Magellan Health, Inc. Net of certain tax benefits, the purchase price for the transaction is approximately $820 million, which we intend to fund with cash on hand. The transaction is subject to federal and state regulatory approvals, and other customary closing conditions, and is expected to close by the first quarter of 2021. In connection with this transaction, Magellan Health, Inc. has agreed to provide certain transition services following the closing.

In addition, on July 17, 2020, we entered into a definitive agreement to acquire certain assets of Passport Health Plan in Kentucky. The purchase price for the transaction is approximately $20 million, plus contingent consideration that is payable in 2021 based on our Kentucky health plan’s open enrollment results for the 2021 plan year. We intend to fund this purchase with cash on hand.

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~~Outcome of ACA Litigation~~. As described above in “Health Plans Segment—Trends and Uncertainties,” the U.S. Supreme Court has accepted the appeal of the Fifth Circuit Court’s decision regarding the constitutionality and severability of the individual mandate. The Supreme Court’s decision is expected by June 2021. The ACA remains in effect until judicial review of the decision is concluded. Any final, non-appealable determination that the ACA is unconstitutional could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

Regulatory Capital Requirements and Dividend Restrictions. 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.

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CONTRACTUAL OBLIGATIONS

A summary of future obligations under our various contractual obligations and commitments as of December 31, ~~2019,~~2020, was disclosed in our 2020 Annual Report on Form ~~10-K for the year ended December 31, 2019.~~10-K.

~~Other than the financing transactions described in Notes to Consolidated Financial Statements, Note 7, “Debt,” there~~There were no significant changes to ~~this previously filed information~~our contractual obligations and commitments outside the ordinary course of business during the ~~six months ended June 30, 2020.~~first quarter of 2021.

CRITICAL ACCOUNTING ESTIMATES

When we prepare our consolidated financial statements, we use estimates and 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 6,7, “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 first quarter of 2021 there have been no significant changes ~~during the six months ended June 30, 2020,~~ to our disclosure reported in “Critical Accounting Estimates” in our 2020 Annual Report on Form ~~10-K for the year ended December 31, 2019.~~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. ~~For a discussion~~In the first quarter of ~~this topic, including amounts recorded in our consolidated financial statements, refer to Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies.”~~

•~~Goodwill and intangible assets, net.~~ ~~There~~2021, there have been no significant changes ~~during the six months ended June 30, 2020,~~ to our disclosure reported in “Critical Accounting Estimates” in our 2020 Annual Report on Form 10-K.

•Business combinations, goodwill, and intangible assets, net. In the first quarter of 2021, we realigned our reportable operating segments to reflect recent changes in our internal operating and reporting structure, which is now organized by government program. The revised reporting structure reflects the reporting and review process used by our chief executive officer (who is our chief operating decision maker) to assess performance and allocate resources, and is consistent with how we currently manage the business and view the markets we serve. These reportable segments consist of: 1) Medicaid; 2) Medicare; 3) Marketplace; and 4) Other. Such reportable operating segments also now constitute our reporting units in the annual assessment of goodwill impairment. Refer to Notes to Consolidated Financial Statements, Note 10, “Segments,” for a presentation of goodwill, and intangibles assets, net, by reportable segment, and “Critical Accounting Estimates,” in our 2020 Annual Report on Form 10-K, for ~~the year ended December 31, 2019.~~further information.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and financial position are exposed to financial market risk relating to changes in interest rates, and the resulting impact on investment income and interest expense.

Substantially all of our investments and restricted investments are subject to interest rate risk and will decrease in value if market interest rates increase. Assuming a hypothetical and immediate 1% increase in market interest rates at ~~June 30, 2020,~~March 31, 2021, the fair value of our fixed income investments would decrease by approximately ~~$47~~$44 million. Declines in interest rates over time will reduce our investment income.

For further information on fair value measurements and our investment portfolio, please refer to Notes to Consolidated Financial Statements, Note 4,5, “Fair Value Measurements,” and Note 5,6, “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 7,8, “Debt.”

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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 has been no change in our internal control over financial reporting during the fiscal quarter ended ~~June 30, 2020,~~March 31, 2021, that has materially affected, or is 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 ~~10,~~11, “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 ~~set forth below and those~~ discussed under the caption “Risk Factors,” in our 2020 Annual Report on Form 10‑K. The risk factors described in our 2020 Annual Report on Form 10-K for the year ended December 31, 2019, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in our Current Reports on Form 8-K. The risk factors below, together with those described in the reports listed above, 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.

~~Our business, financial condition, and results of operations may continue to be impacted by the COVID-19 pandemic, and the full extent of such impact cannot be reasonably foreseen at this time.~~

~~We expect that the COVID-19 pandemic will continue to impact our business, financial condition, cash flows, or results of operations in a number of ways, including but not limited to the following:~~

•~~It may impact the health of our members, resulting in increases in their medical care costs, as well as increased costs related to testing and vaccination protocols;~~

•Uncertainty and variability associated with the demand for medical services may lead states to pursue retroactive rate refunds (as has already occurred in certain instances), or to impose medical cost risk corridors or rate cuts that are incommensurate with the ultimate demand for medical services;

•State tax revenues may decline significantly as a result of the depressed economy, potentially disrupting the timely monthly payment of capitation amounts to us or resulting in adverse program changes;

•~~The continuing work-from-home status of our workforce may heighten the risk of a cybersecurity incident or HIPAA breach.~~

Due to the uncertainties surrounding the duration and breadth of the COVID-19 pandemic, the ultimate impact on our business, financial condition, and operating results cannot be reasonably estimated at this time.

~~Our exit from Puerto Rico could negatively impact our business, financial condition, cash flows, or results of operations.~~

We are exiting Puerto Rico’s Medicaid program when our current contract expires in October 2020. We expect to work cooperatively with ASES, the Puerto Rico Medicaid agency, to facilitate an orderly exit and transition of members. Any departure from the terms of our expected orderly transition as a result of an adverse weather event or due to any other cause could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

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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 first quarter ~~ended June 30, 2020,~~of 2021, 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
April 1 - April 30 136 $ 133.48 — $ —
May 1 - May 31 2,024 $ 180.01 — $ —
June 1 - June 30 408 $ 173.58 — $ —
Total 2,568 $ 176.52 —


	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	$	243.08	191,000	$	299,000,000
February 1 - February 28	—	$	—	386,000	$	219,000,000
March 1 - March 31	227,000	$	222.24	—	$	219,000,000
Total	228,000	$	222.32	577,000

_______________________

(1)During the ~~three months ended June 30, 2020,~~first quarter of 2021, we withheld ~~2,568~~approximately 228,000 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 program, refer to Note 8,9, “Stockholders' Equity.”

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 4234

Table of Contents

INDEX TO EXHIBITS

Exhibit No.

Title

Method of Filing

~~2.1~~

Stock and Asset Purchase Agreement, dated as of April 30, 2020, by and between Molina Healthcare, Inc. and Magellan Health, Inc.*

~~Filed as Exhibit 2.1 to registrant’s Form 8-K filed May 6, 2020~~

~~4.1~~

~~Indenture, dated as of June 2, 2020, by and between Molina Healthcare, Inc. and U.S. Bank National Association, as Trustee.~~

~~Filed as Exhibit 4.1 to registrant’s Form 8-K filed June 2, 2020~~

~~4.2~~

~~Form of Notes (included in Exhibit 4.1).~~

~~Filed as Exhibit 4.2 to registrant’s Form 8-K filed June 2, 2020 (Included in Exhibit 4.1 to registrant’s Form 8-K filed June 2, 2020)~~

~~10.1~~

~~Commitment Letter, dated April 30, 2020, by and among Molina Healthcare, Inc., Truist Bank and SunTrust Robinson Humphrey, Inc.~~

~~Filed as Exhibit 10.1 to registrant’s Form 8-K filed May 6, 2020~~

~~10.2~~

Seventh Amendment to Credit Agreement, dated as of May 14, 2020, by and among Molina Healthcare, Inc., the Guarantors party thereto, the Lenders party thereto, and Truist Bank (successor by merger to SunTrust Bank), in its capacity as Administrative Agent.

~~Filed as Exhibit 10.1 to registrant’s Form 8-K filed May 15, 2020~~

~~10.3~~

~~Purchase Agreement, dated May 28, 2020, by and between the Company and SunTrust Robinson Humphrey, Inc., as representative of the several initial purchasers named in Schedule A thereto.~~

~~Filed as Exhibit 1.1 to registrant’s Form 8-K filed May 29, 2020~~

10 .4

Credit Agreement, dated as of June 8, 2020, by and among Molina Healthcare, Inc., as the Borrower, Truist Bank, as Administrative Agent, Issuing Bank and Swingline Lender, and the Lenders party thereto.

~~Filed as Exhibit 10.1 to registrant’s Form 8-K filed June 8, 2020~~

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

XBRL Taxonomy Instance Document.

Filed herewith.

101.SCH

XBRL Taxonomy Extension Schema Document.

Filed herewith.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Filed herewith.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Filed herewith.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

104

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

Filed herewith.


*			Certain portions of this agreement have been omitted in accordance with Item 601(b)(10) of Regulation S-K. A copy of any omitted portion will be furnished to the Securities and Exchange Commission upon request.

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 4335

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MOLINA HEALTHCARE, INC.

(Registrant)

Dated:

~~July 31, 2020~~April 29, 2021

/s/ JOSEPH M. ZUBRETSKY

Joseph M. Zubretsky

Chief Executive Officer

(Principal Executive Officer)

Dated:

~~July 31, 2020~~April 29, 2021

/s/ ~~THOMAS~~MARK L. ~~TRAN~~KEIM

~~Thomas~~Mark L. ~~Tran~~Keim

Chief Financial Officer and Treasurer

(Principal Financial Officer)

Molina Healthcare, Inc. ~~June 30, 2020~~March 31, 2021 Form 10-Q | 4436


	June 30, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(In millions)
4.375% Notes	$	789	$	802	$	—	$	—
5.375% Notes	696		723		696		745
4.875% Notes	327		333		327		340
Term loan facility ⁽¹⁾	—		—		220		220
1.125% Convertible Notes ⁽¹⁾	—		—		12		42
Total	$	1,812	$	1,858	$	1,255	$	1,347


	RSAs	PSUs	Total	Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2019	447,680	324,078	771,758	$	102.01
Granted	318,299	185,422	503,721	123.07
Vested	(160,927)	(7,368)	(168,295)	93.34
Forfeited	(20,073)	(26,096)	(46,169)	103.65
Unvested balance, June 30, 2020	584,979	476,036	1,061,015	$	113.31


	June 30, 2020	December 31, 2019	June 30, 2019
Ending Membership by Government Program:
Medicaid	3,122,000	2,956,000	2,962,000
Medicare	108,000	101,000	100,000
Marketplace	325,000	274,000	308,000
Total	3,555,000	3,331,000	3,370,000

Ending Membership by Health Plan:
California	572,000	565,000	590,000
Florida	131,000	132,000	142,000
Illinois	242,000	224,000	221,000
Michigan	377,000	362,000	360,000
Ohio	329,000	288,000	297,000
Puerto Rico	167,000	176,000	200,000
South Carolina	145,000	131,000	130,000
Texas	352,000	341,000	360,000
Washington	913,000	832,000	811,000
Other ⁽¹⁾	327,000	280,000	259,000
Total	3,555,000	3,331,000	3,370,000


	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
April 1 - April 30	136	$	133.48	—	$	—
May 1 - May 31	2,024	$	180.01	—	$	—
June 1 - June 30	408	$	173.58	—	$	—
Total	2,568	$	176.52	—