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, 2022

OR

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

For the transition period from ________ to ________

Commission file number: 001-31719

MOLINA HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-4204626
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
200 Oceangate, Suite 100
Long Beach,	California	90802
(Address of principal executive offices)		(Zip Code)

(562) 435-3666

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

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

The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of July 22, 2022, was approximately 58,100,000.

MOLINA HEALTHCARE, INC. FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS

ITEM NUMBER		Page
PART I
1.	Financial Statements	3
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
3.	Quantitative and Qualitative Disclosures About Market Risk	33
4.	Controls and Procedures	33
PART II
1.	Legal Proceedings	34
1A.	Risk Factors	34
2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
3.	Defaults Upon Senior Securities	Not Applicable.
4.	Mine Safety Disclosures	Not Applicable.
5.	Other Information	Not Applicable.
6.	Exhibits	35
	Signatures	36

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Dollars in millions, except per-share amounts) (Unaudited)
Revenue:
Premium revenue	$	7,799	$	6,583	$	15,330	$	12,889
Premium tax revenue	215		185		423		372
Investment income	22		10		33		19
Other revenue	18		22		38		42
Total revenue	8,054		6,800		15,824		13,322
Operating expenses:
Medical care costs	6,872		5,819		13,435		11,293
General and administrative expenses	551		484		1,122		957
Premium tax expenses	215		185		423		372
Depreciation and amortization	44		31		84		64
Other	11		8		27		28
Total operating expenses	7,693		6,527		15,091		12,714
Operating income	361		273		733		608
Other expenses, net:
Interest expense	27		30		55		60
Total other expenses, net	27		30		55		60
Income before income tax expense	334		243		678		548
Income tax expense	86		58		172		135
Net income	$	248	$	185	$	506	$	413
Net income per share - Basic	$	4.29	$	3.20	$	8.74	$	7.14
Net income per share - Diluted	$	4.25	$	3.16	$	8.63	$	7.05

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In millions) (Unaudited)
Net income	$	248	$	185	$	506	$	413
Other comprehensive loss:
Unrealized investment (loss) gain	(62)		1		(162)		(14)
Less: effect of income taxes	(15)		1		(39)		(3)
Other comprehensive loss, net of tax	(47)		—		(123)		(11)
Comprehensive income	$	201	$	185	$	383	$	402

See accompanying notes.

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 3

CONSOLIDATED BALANCE SHEETS

	June 30, 2022		December 31, 2021
	(Dollars in millions, except per-share amounts)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,312	$	4,438
Investments	3,567		3,202
Receivables	2,240		2,177
Prepaid expenses and other current assets	213		247
Total current assets	10,332		10,064
Property, equipment, and capitalized software, net	401		396
Goodwill, and intangible assets, net	1,286		1,252
Restricted investments	219		212
Deferred income taxes	141		106
Other assets	193		179
Total assets	$	12,572	$	12,209
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	3,775	$	3,363
Amounts due government agencies	2,722		2,472
Accounts payable, accrued liabilities and other	715		842
Deferred revenue	13		370
Total current liabilities	7,225		7,047
Long-term debt	2,175		2,173
Finance lease liabilities	216		219
Other long-term liabilities	126		140
Total liabilities	9,742		9,579
Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at June 30, 2022 and December 31, 2021	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	251		236
Accumulated other comprehensive loss	(128)		(5)
Retained earnings	2,707		2,399
Total stockholders’ equity	2,830		2,630
Total liabilities and stockholders’ equity	$	12,572	$	12,209

See accompanying notes.

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Outstanding	Amount
	(In millions)
	(Unaudited)
Balance at December 31, 2021	58	$	—	$	236	$	(5)	$	2,399	$	2,630
Net income	—	—		—		—		258		258
Other comprehensive loss, net	—	—		—		(76)		—		(76)
Share-based compensation	1	—		(18)		—		—		(18)
Balance at March 31, 2022	59	—		218		(81)		2,657		2,794
Net income	—	—		—		—		248		248
Common stock purchases	(1)	—		(2)		—		(198)		(200)
Other comprehensive loss, net	—	—		—		(47)		—		(47)
Share-based compensation	—	—		35		—		—		35
Balance at June 30, 2022	58	$	—	$	251	$	(128)	$	2,707	$	2,830

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
	Outstanding	Amount
	(In millions)
	(Unaudited)
Balance at December 31, 2020	59	$	—	$	199	$	37	$	1,860	$	2,096
Net income	—	—		—		—		228		228
Common stock purchases	(1)	—		(2)		—		(120)		(122)
Other comprehensive loss, net	—	—		—		(11)		—		(11)
Share-based compensation	—	—		(27)		—		—		(27)
Balance at March 31, 2021	58	—		170		26		1,968		2,164
Net income	—	—		—		—		185		185
Share-based compensation	—	—		21		—		—		21
Balance at June 30, 2021	58	$	—	$	191	$	26	$	2,153	$	2,370

See accompanying notes.

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 5

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2022		2021
	(In millions) (Unaudited)
Operating activities:
Net income	$	506	$	413
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	84		64
Deferred income taxes	3		7
Share-based compensation	57		35
Other, net	(6)		10
Changes in operating assets and liabilities:
Receivables	(43)		(192)
Prepaid expenses and other current assets	(64)		(6)
Medical claims and benefits payable	405		272
Amounts due government agencies	247		792
Accounts payable, accrued liabilities and other	(147)		(15)
Deferred revenue	(357)		(333)
Income taxes	46		14
Net cash provided by operating activities	731		1,061
Investing activities:
Purchases of investments	(1,413)		(1,006)
Proceeds from sales and maturities of investments	879		622
Purchases of property, equipment and capitalized software	(50)		(29)
Other, net	(7)		5
Net cash used in investing activities	(591)		(408)
Financing activities:
Common stock purchases	(200)		(128)
Common stock withheld to settle employee tax obligations	(53)		(52)
Contingent consideration liabilities settled	(20)		(20)
Other, net	5		—
Net cash used in financing activities	(268)		(200)
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents	(128)		453
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	4,506		4,223
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	4,378	$	4,676

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2022

1. Organization and Basis of Presentation

Organization and Operations

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

As of June 30, 2022, we served approximately 5.1 million members eligible for government-sponsored healthcare programs, located across 19 states.

Our state Medicaid contracts typically have terms of three to five years, contain renewal options exercisable by the state Medicaid agency, and allow either the state or the health plan to terminate the contract with or without cause. Such contracts are subject to risk of loss in states that issue requests for proposal (“RFPs”) open to competitive bidding by other health plans. If one of our health plans is not a successful responsive bidder to a state RFP, its contract may not be renewed.

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

Recent Developments

Wisconsin Acquisition — Medicaid and Medicare. On July 13, 2022, we announced a definitive agreement to acquire substantially all the assets of My Choice Wisconsin (“MCW”). As of May 2022, MCW served over 44,000 managed long-term services and supports and core Medicaid members throughout Wisconsin, delivering approximately $1 billion in premium revenue for the 12 months ended March 31, 2022. The purchase price for the transaction is approximately $150 million, net of expected tax benefits and required regulatory capital, which we intend to fund with cash on hand. The transaction is subject to receipt of applicable federal and state regulatory approvals, and the satisfaction of other customary closing conditions. We currently expect the transaction to close in 2022.

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

New York Acquisition—Medicaid. On October 7, 2021, we announced a definitive agreement to acquire the Medicaid Managed Long Term Care business of AgeWell New York. The purchase price for the transaction is approximately $106 million, net of certain tax benefits and target allocation of required regulatory capital, which we intend to fund with cash on hand. The transaction is subject to applicable federal and state regulatory approvals and the satisfaction of other customary closing conditions. We currently expect the transaction to close in the fourth quarter of 2022.

California Procurement—Medicaid. In April 2022, we submitted our RFP response. We expect the award to be announced in early August 2022, with an effective date of January 2024.

Texas Procurement—Medicaid. In March 2022, the Texas Health and Human Services Commission posted the ABD program (known in Texas as STAR+PLUS) RFP, with awards estimated to be announced in the first quarter of 2023, and start of operations in February 2024.

Nevada Procurement—Medicaid. Our new contract in Clark and Washoe Counties commenced on January 1, 2022, and offers health coverage to TANF, CHIP and Medicaid Expansion beneficiaries. The four year contract with a possible two-year extension was ratified in September 2021.

Consolidation and Interim Financial Information

The consolidated financial statements include the accounts of Molina Healthcare, Inc., and its subsidiaries. In the opinion of management, these financial statements reflect all normal recurring adjustments, which are considered necessary for a fair presentation of the results as of the dates and for the interim periods presented have been included. All significant intercompany balances and transactions have been eliminated. The consolidated results of

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

operations for the six months ended June 30, 2022 are not necessarily indicative of the results for the entire year ending December 31, 2022.

The unaudited consolidated interim financial statements have been prepared under the assumption that users of the interim financial data have either read or have access to our audited consolidated financial statements for the fiscal year ended December 31, 2021. Accordingly, certain disclosures that would substantially duplicate the disclosures contained in our December 31, 2021, audited consolidated financial statements have been omitted. These unaudited consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the fiscal year ended December 31, 2021.

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.

2. Significant Accounting Policies

Cash and Cash Equivalents

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

	June 30,
	2022		2021
	(In millions)
Cash and cash equivalents	$	4,312	$	4,608
Restricted cash and cash equivalents	66		68
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	4,378	$	4,676

Receivables

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

	June 30, 2022		December 31, 2021
	(In millions)
Government receivables	$	1,628	$	1,566
Pharmacy rebate receivables	272		276
Other	340		335
Total	$	2,240	$	2,177

Premium Revenue Recognition and Amounts Due Government Agencies

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

Certain components of premium revenue are subject to accounting estimates and are described in further detail below, and in our 2021 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.”

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

Contractual Provisions That May Adjust or Limit Revenue or Profit

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

The following table sets forth amounts due government agencies, categorized by program:

	June 30, 2022		December 31, 2021
	(In millions)
Medicaid program:
Minimum MLR and profit sharing	$	1,018	$	1,016
Other	402		263
Medicare program:
Risk adjustment and Part D risk sharing	68		89
Minimum MLR and profit sharing	115		101
Other	22		35
Marketplace program:
Risk adjustment	1,037		902
Minimum MLR	7		18
Other	53		48
Total amounts due government agencies	$	2,722	$	2,472

Medicaid Program

Minimum MLR and 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, based on our best estimate of the ultimate premium we expect to realize for the period being adjusted.

Beginning in 2020, various states enacted temporary risk corridors in response to the reduced demand for medical services stemming from COVID-19, which have resulted in a reduction of our medical margin. In some cases, these risk corridors were retroactive to earlier periods in 2020, or as early as the beginning of the states’ fiscal years in 2019. Since the second quarter of 2020, we have recognized risk corridors that we believe to be probable, and where the ultimate premium amount is reasonably estimable. For the three and six months ended June 30, 2022, we recognized approximately $94 million and $122 million, respectively, related to such risk corridors, primarily in the Medicaid segment, compared to $56 million and $166 million, respectively, recognized in the three and six months ended June 30, 2021. The decrease is due to the elimination of several of the COVID-19 risk corridors.

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

Marketplace Program

Risk Adjustment. Under this program, our health plans’ composite risk scores are compared with the overall average risk score for the relevant state and market pool. Generally, our health plans will make a risk adjustment payment into the pool if their composite risk scores are below the average risk score (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, 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, 2022, Marketplace risk adjustment payables amounted to $1,037 million and related receivables amounted to $61 million, for a net payable of $976 million. As of December 31, 2021, Marketplace risk adjustment payables amounted to $902 million and related receivables amounted to $7 million, for a net payable of $895 million.

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

Concentrations of Credit Risk

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

Income Taxes

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

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

Recent Accounting Pronouncements

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

3. Net Income Per Share

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In millions, except net income per share)
Numerator:
Net income	$	248	$	185	$	506	$	413
Denominator:
Shares outstanding at the beginning of the period	58.1		57.7		57.9		58.0
Weighted-average number of shares issued:
Stock-based compensation	—		—		0.2		0.2
Stock purchases	(0.3)		—		(0.2)		(0.5)
Denominator for basic net income per share	57.8		57.7		57.9		57.7
Effect of dilutive securities: (1)
Stock-based compensation	0.6		0.7		0.7		0.8
Denominator for diluted net income per share	58.4		58.4		58.6		58.5
Net income per share - Basic (2)	$	4.29	$	3.20	$	8.74	$	7.14
Net income per share - Diluted (2)	$	4.25	$	3.16	$	8.63	$	7.05

______________________________

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

(2)    Source data for calculations in thousands.

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

4. Business Combinations

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

Affinity. On October 25, 2021, we closed on our acquisition of substantially all of the assets of Affinity Health Plan, Inc., a Medicaid health plan in New York, for initial purchase consideration of approximately $176 million. In the six months ended June 30, 2022, we recorded various measurement period adjustments, including an increase of $7 million to “Medical claims and benefits payable,” and an increase of $17 million to “Receivables” net of “Amounts due government agencies.” In the aggregate, we recorded a net increase of $11 million to goodwill for these measurement period adjustments and various purchase price adjustments.

5. Fair Value Measurements

We consider the carrying amounts of current assets and current liabilities to approximate their fair values because of the relatively short period of time between the origination of these instruments and their expected realization or payment. For our financial instruments measured at fair value on a recurring basis, we prioritize the inputs used in measuring fair value according to the three-tier fair value hierarchy. For a description of the methods and assumptions used to: a) estimate the fair value; and b) determine the classification according to the fair value hierarchy for each financial instrument, refer to our 2021 Annual Report on Form 10-K, Note 5, “Fair Value Measurements.”

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

Our financial instruments measured at fair value on a recurring basis at June 30, 2022, were as follows:

			Observable Inputs		Directly or Indirectly Observable Inputs		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(In millions)
Corporate debt securities	$	2,268	$	—	$	2,268	$	—
Mortgage-backed securities	717		—		717		—
Asset-backed securities	293		—		293		—
Municipal securities	146		—		146		—
U.S. Treasury notes	96		—		96		—
Other	47		—		47		—
Total assets	$	3,567	$	—	$	3,567	$	—
Contingent consideration liabilities	$	8	$	—	$	—	$	8
Total liabilities	$	8	$	—	$	—	$	8

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

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

			Observable Inputs		Directly or Indirectly Observable Inputs		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(In millions)
Corporate debt securities	$	1,833	$	—	$	1,833	$	—
Mortgage-backed securities	614		—		614		—
Asset-backed securities	247		—		247		—
Municipal securities	123		—		123		—
U.S. Treasury notes	353		—		353		—
Other	32		—		32		—
Total assets	$	3,202	$	—	$	3,202	$	—
Contingent consideration liabilities	$	47	$	—	$	—	$	47
Total liabilities	$	47	$	—	$	—	$	47

Contingent Consideration Liabilities

Our Level 3 financial instruments at June 30, 2022 are comprised solely of contingent consideration liabilities of $8 million, in connection with our 2020 acquisition of certain assets of Passport Health Plan, Inc., a Medicaid health plan in Kentucky. Such liabilities are recorded at fair value on a recurring basis. In the six months ended June 30, 2022, the estimated fair value of contingent purchase consideration increased by approximately $4 million, relating to an operating income guarantee.

In the six months ended June 30, 2022, we paid the seller $43 million, of which $23 million was for the remaining half of the consideration due for minimum member enrollment targets and $20 million was for the first payment of the consideration due for the operating income guarantee. For the amounts paid in the six months ended June 30, 2022, $20 million has been presented in “Financing activities” in the accompanying consolidated statements of cash flows, with the balance reflected in “Operating activities.” The remaining balance of the liabilities is reported in “Accounts payable, accrued liabilities and other” in the accompanying consolidated balance sheets.

Fair Value Measurements – Disclosure Only

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

	June 30, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
4.375% Notes due 2028	$	792	$	724	$	791	$	829
3.875% Notes due 2030	642		550		642		675
3.875% Notes due 2032	741		630		740		760
Total	$	2,175	$	1,904	$	2,173	$	2,264

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 12

6. Investments

Available-for-Sale

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

	June 30, 2022
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses
	(In millions)
Corporate debt securities	$	2,372	$	2	$	106	$	2,268
Mortgage-backed securities	759		—		42		717
Asset-backed securities	306		—		13		293
Municipal securities	153		—		7		146
U.S. Treasury notes	96		—		—		96
Other	49		—		2		47
Total	$	3,735	$	2	$	170	$	3,567

	December 31, 2021
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses
	(In millions)
Corporate debt securities	$	1,836	$	9	$	12	$	1,833
Mortgage-backed securities	616		2		4		614
Asset-backed securities	248		—		1		247
Municipal securities	123		1		1		123
U.S. Treasury notes	353		—		—		353
Other	32		—		—		32
Total	$	3,208	$	12	$	18	$	3,202

The contractual maturities of our current investments as of June 30, 2022 are summarized below:

	Amortized Cost		Estimated Fair Value
	(In millions)
Due in one year or less	$	340	$	338
Due after one year through five years	2,276		2,175
Due after five years through ten years	377		358
Due after ten years	742		696
Total	$	3,735	$	3,567

Gross realized gains and losses from sales of available-for-sale securities are calculated under the specific identification method and are included in investment income. Gross realized investment gains and losses were insignificant for the six months ended June 30, 2022, and 2021.

We have determined that unrealized losses at June 30, 2022, and December 31, 2021, primarily resulted from fluctuating interest rates, rather than a deterioration of the creditworthiness of the issuers. Therefore, we determined that an allowance for credit losses was not necessary. So long as we maintain the intent and ability to hold these securities to maturity, we are unlikely to experience losses. In the event that we dispose of these securities before maturity, we expect that realized losses, if any, will be insignificant.

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 13

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

	In a Continuous Loss Position for Less than 12 Months					In a Continuous Loss Position for 12 Months or More
	Estimated Fair Value		Unrealized Losses		Total Number of Positions	Estimated Fair Value		Unrealized Losses		Total Number of Positions
	(Dollars in millions)
Corporate debt securities	$	1,971	$	104	921	$	36	$	2	19
Mortgage-backed securities	647		40		273	50		2		26
Asset-backed securities	264		13		134	—		—		—
Municipal securities	100		7		124	—		—		—
Other	27		2		14	—		—		—
Total	$	3,009	$	166	1,466	$	86	$	4	45

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

	In a Continuous Loss Position for Less than 12 Months					In a Continuous Loss Position for 12 Months or More
	Estimated Fair Value		Unrealized Losses		Total Number of Positions	Estimated Fair Value		Unrealized Losses		Total Number of Positions
	(Dollars in millions)
Corporate debt securities	$	1,063	$	12	395	$	—	$	—	—
Mortgage-backed securities	408		4		146	—		—		—
Asset-backed securities	166		1		75	—		—		—
Municipal securities	69		1		61	—		—		—
Total	$	1,706	$	18	677	$	—	$	—	—

Restricted Investments Held-to-Maturity

Pursuant to the regulations governing our state health plan subsidiaries, we maintain statutory deposits and deposits required by government authorities primarily in cash, cash equivalents, 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 $219 million at June 30, 2022, of which $191 million will mature in one year or less, and $28 million will mature in one through five years.

Molina Healthcare, Inc. June 30, 2022 Form 10-Q | 14

7. Medical Claims and Benefits Payable

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

	June 30, 2022		December 31, 2021
	(In millions)
Claims incurred but not paid (“IBNP”)	$	2,719	$	2,486
Pharmacy payable	229		219
Capitation payable	94		82
Other	733		576
Total	$	3,775	$	3,363

“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various government agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. Non-risk provider payables amounted to $229 million and $226 million as of June 30, 2022, and December 31, 2021, respectively.

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

	Six Months Ended June 30, 2022
	Medicaid		Medicare		Marketplace		Consolidated
	(In millions)
Medical claims and benefits payable, beginning balance	$	2,580	$	404	$	379	$	3,363
Components of medical care costs related to:
Current year	11,059		1,681		1,006		13,746
Prior years	(243)		(33)		(35)		(311)
Total medical care costs	10,816		1,648		971		13,435
Payments for medical care costs related to:
Current year	8,532		1,270		820		10,622
Prior years	1,801