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 March 31, 2023

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 April 21, 2023, was approximately 58,300,000.

MOLINA HEALTHCARE, INC. FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

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	19
3.	Quantitative and Qualitative Disclosures About Market Risk	30
4.	Controls and Procedures	30
PART II
1.	Legal Proceedings	30
1A.	Risk Factors	30
2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
3.	Defaults Upon Senior Securities	Not Applicable.
4.	Mine Safety Disclosures	Not Applicable.
5.	Other Information	Not Applicable.
6.	Exhibits	32
	Signatures	33

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,
	2023		2022
	(Dollars in millions, except per-share amounts) (Unaudited)
Revenue:
Premium revenue	$	7,885	$	7,531
Premium tax revenue	172		208
Investment income	71		11
Other revenue	21		20
Total revenue	8,149		7,770
Operating expenses:
Medical care costs	6,871		6,563
General and administrative expenses	591		571
Premium tax expenses	172		208
Depreciation and amortization	44		40
Other	16		16
Total operating expenses	7,694		7,398
Operating income	455		372
Other expenses, net:
Interest expense	28		28
Total other expenses, net	28		28
Income before income tax expense	427		344
Income tax expense	106		86
Net income	$	321	$	258
Net income per share - Basic	$	5.58	$	4.45
Net income per share - Diluted	$	5.52	$	4.39

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended March 31,
	2023		2022
	(In millions) (Unaudited)
Net income	$	321	$	258
Other comprehensive gain (loss):
Unrealized investment gain (loss)	46		(100)
Less: effect of income taxes	11		(24)
Other comprehensive gain (loss), net of tax	35		(76)
Comprehensive income	$	356	$	182

See accompanying notes.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 3

CONSOLIDATED BALANCE SHEETS

	March 31, 2023		December 31, 2022
	(Dollars in millions, except per-share amounts)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,554	$	4,006
Investments	3,810		3,499
Receivables	2,536		2,302
Prepaid expenses and other current assets	259		277
Total current assets	11,159		10,084
Property, equipment, and capitalized software, net	274		259
Goodwill, and intangible assets, net	1,369		1,390
Restricted investments	242		238
Deferred income taxes	208		220
Other assets	119		123
Total assets	$	13,371	$	12,314
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	3,824	$	3,528
Amounts due government agencies	2,349		2,079
Accounts payable, accrued liabilities and other	787		889
Deferred revenue	654		359
Total current liabilities	7,614		6,855
Long-term debt	2,177		2,176
Finance lease liabilities	204		215
Other long-term liabilities	88		104
Total liabilities	10,083		9,350
Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at March 31, 2023 and December 31, 2022	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	296		328
Accumulated other comprehensive loss	(125)		(160)
Retained earnings	3,117		2,796
Total stockholders’ equity	3,288		2,964
Total liabilities and stockholders’ equity	$	13,371	$	12,314

See accompanying notes.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Total
	Outstanding	Amount
	(In millions)
	(Unaudited)
Balance at December 31, 2022	58	$	—	$	328	$	(160)	$	2,796	$	2,964
Net income	—	—		—		—		321		321
Other comprehensive income, net	—	—		—		35		—		35
Share-based compensation	—	—		(32)		—		—		(32)
Balance at March 31, 2023	58	$	—	$	296	$	(125)	$	3,117	$	3,288

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive 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

See accompanying notes.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 5

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2023		2022
	(In millions) (Unaudited)
Operating activities:
Net income	$	321	$	258
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	44		40
Deferred income taxes	1		16
Share-based compensation	25		34
Other, net	5		(8)
Changes in operating assets and liabilities:
Receivables	(234)		21
Prepaid expenses and other current assets	7		(32)
Medical claims and benefits payable	296		263
Amounts due government agencies	270		137
Accounts payable, accrued liabilities and other	(215)		(81)
Deferred revenue	295		(352)
Income taxes	101		67
Net cash provided by operating activities	916		363
Investing activities:
Purchases of investments	(646)		(403)
Proceeds from sales and maturities of investments	371		513
Purchases of property, equipment and capitalized software	(32)		(23)
Other, net	5		(13)
Net cash (used in) provided by investing activities	(302)		74
Financing activities:
Common stock withheld to settle employee tax obligations	(58)		(52)
Contingent consideration liabilities settled	—		(20)
Other, net	(7)		(5)
Net cash used in financing activities	(65)		(77)
Net increase in cash, cash equivalents, and restricted cash and cash equivalents	549		360
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	4,048		4,506
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	4,597	$	4,866

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2023

1. Organization and Basis of Presentation

Organization and Operations

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

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

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

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

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

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

Recent Developments

Indiana Procurement—Medicaid. In March 2023, we announced that the Indiana Department of Administration has recommended that contract negotiations begin with our Indiana health plan. Under the proposed contract with the Indiana Family and Social Services Administration (“FSSA”), we are expected to provide risk-based managed care long term services and supports as part of the Indiana Pathways for Aging LTSS program pursuant to the request for proposal issued by FSSA in February 2022. The new contract is expected to have an initial four-year term, with the potential for two one-year renewal terms.

Consolidation and Interim Financial Information

The consolidated financial statements include the accounts of Molina Healthcare, Inc., and its subsidiaries. In the opinion of management, these financial statements reflect all normal recurring adjustments, which are considered necessary for a fair presentation of the results as of the dates and for the interim periods presented. All significant intercompany balances and transactions have been eliminated. The consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results for the entire year ending December 31, 2023.

The unaudited consolidated interim financial statements have been prepared under the assumption that users of the interim financial data have either read or have access to our audited consolidated financial statements for the fiscal year ended December 31, 2022. Accordingly, certain disclosures that would substantially duplicate the disclosures contained in our December 31, 2022, audited consolidated financial statements have been omitted. These unaudited consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the fiscal year ended December 31, 2022.

Use of Estimates

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

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

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.

	March 31,
	2023		2022
	(In millions)
Cash and cash equivalents	$	4,554	$	4,804
Restricted cash and cash equivalents	43		62
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the consolidated statements of cash flows	$	4,597	$	4,866

Receivables

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

	March 31, 2023		December 31, 2022
	(In millions)
Government receivables	$	1,896	$	1,702
Pharmacy rebate receivables	275		291
Other	365		309
Total	$	2,536	$	2,302

Premium Revenue Recognition and Amounts Due Government Agencies

Premium revenue is generated from our contracts with state and federal agencies, in connection with our participation in the Medicaid, Medicare, and Marketplace programs. Premium revenue is generally received based on per member per month (“PMPM”) rates established in advance of the periods covered. These premium revenues are recognized in the month that members are entitled to receive healthcare services, and premiums collected in advance are deferred. State Medicaid programs and the federal Medicare program periodically adjust premium rates, including certain components of premium revenue that are subject to accounting estimates and are described below, and in our 2022 Annual Report on Form 10-K, Note 2, “Significant Accounting Policies,” under “Contractual Provisions That May Adjust or Limit Revenue or Profit,” and “Quality Incentives.”

Molina Healthcare, Inc. March 31, 2023 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. Categorized by program, such amounts due government agencies included the following:

	March 31, 2023		December 31, 2022
	(In millions)
Medicaid program:
Minimum MLR, corridors, and profit sharing	$	1,302	$	1,145
Other premium adjustments	557		482
Medicare program:
Minimum MLR and profit sharing	85		84
Risk adjustment and Part D risk sharing	61		76
Other premium adjustments	27		27
Marketplace program:
Risk adjustment	278		230
Minimum MLR	1		2
Other premium adjustments	38		33
Total amounts due government agencies	$	2,349	$	2,079

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 as a percentage of premium revenue, or minimum medical loss ratio (“Minimum MLR”). Under certain medical cost corridor provisions, the health plans may refund premiums or receive additional premiums, depending on whether amounts spent on medical care costs fall below or exceed defined thresholds. This includes remaining risk corridors that were enacted by various states in 2020 in response to the reduced demand for medical services stemming from COVID-19.

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

Other Premium Adjustments. State Medicaid programs periodically adjust premium revenues on a retroactive basis for rate changes and changes in membership and eligibility data. In certain states, adjustments are made based on the health status of our members (as measured through a risk score). In these cases, we adjust our premium revenue in the period in which we determine that the adjustment is probable and reasonably estimable, based on our best estimate of the ultimate premium we expect to realize for the period being adjusted.

Marketplace Program

Risk Adjustment. Under this program, our health plans’ composite risk scores are compared with the overall average risk score for the relevant state and market pool. Generally, our health plans will make a risk adjustment payment into the pool if their composite risk scores are below the average risk score for all plan participants in a state (risk adjustment payable), and will receive a risk adjustment payment from the pool if their composite risk scores are above the average risk score for all plan participants in a state (risk adjustment receivable). Under CMS rules, the Marketplace risk adjustment pool is budget neutral. We estimate our ultimate premium based on insurance policy year-to-date experience, and the data submitted and expected to be submitted to CMS, and recognize estimated premiums relating to the risk adjustment program as an adjustment to premium revenue in our consolidated statements of income. As of March 31, 2023, Marketplace risk adjustment estimated payables amounted to $278 million and estimated receivables amounted to $173 million, for a net payable of $105 million. As of December 31, 2022, Marketplace risk adjustment estimated payables amounted to $230 million and estimated receivables amounted to $135 million, for a net payable of $95 million.

Molina Healthcare, Inc. March 31, 2023 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, U.S. Treasury securities, and corporate debt securities. Concentration of credit risk with respect to accounts receivable is limited because our payors consist principally of the federal government, and governments of each state in which our health plan subsidiaries operate.

Income Taxes

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

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

Recent Accounting Pronouncements

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

3. Net Income Per Share

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

	Three Months Ended March 31,
	2023		2022
	(In millions, except net income per share)
Numerator:
Net income	$	321	$	258
Denominator:
Shares outstanding at the beginning of the period	57.4		57.9
Weighted-average number of shares issued:
Stock-based compensation	0.1		0.1
Denominator for basic net income per share	57.5		58.0
Effect of dilutive securities: (1)
Stock-based compensation	0.5		0.7
Denominator for diluted net income per share	58.0		58.7
Net income per share - Basic (2)	$	5.58	$	4.45
Net income per share - Diluted (2)	$	5.52	$	4.39

______________________________

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

(2)    Source data for calculations in thousands.

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

4. 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 2022 Annual Report on Form 10-K, Note 5, “Fair Value Measurements.”

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

			Observable Inputs		Directly or Indirectly Observable Inputs		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(In millions)
Corporate debt securities	$	2,335	$	—	$	2,335	$	—
Mortgage-backed securities	851		—		851		—
Asset-backed securities	323		—		323		—
Municipal securities	151		—		151		—
U.S. Treasury notes	123		—		123		—
Other	27		—		27		—
Total assets	$	3,810	$	—	$	3,810	$	—

Our financial instruments measured at fair value on a recurring basis at December 31, 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	$	2,184	$	—	$	2,184	$	—
Mortgage-backed securities	731		—		731		—
Asset-backed securities	288		—		288		—
Municipal securities	149		—		149		—
U.S. Treasury notes	105		—		105		—
Other	42		—		42		—
Total assets	$	3,499	$	—	$	3,499	$	—
Contingent consideration liabilities	$	8	$	—	$	—	$	8
Total liabilities	$	8	$	—	$	—	$	8

Contingent Consideration Liabilities

In the three months ended March 31, 2023, we paid $8 million in connection with our 2020 acquisition of certain assets of Passport Health Plan, Inc., which represented the final payment of the consideration due relating to an operating income guarantee. The amount paid in the three months ended March 31, 2023, has been presented in “Operating activities” in the accompanying consolidated statements of cash flows.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 11

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.

	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
4.375% Notes due 2028	$	793	$	742	$	792	$	729
3.875% Notes due 2030	643		568		643		554
3.875% Notes due 2032	741		637		741		629
Total	$	2,177	$	1,947	$	2,176	$	1,912

5. Investments

Available-for-Sale

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

	March 31, 2023
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses
	(In millions)
Corporate debt securities	$	2,428	$	6	$	99	$	2,335
Mortgage-backed securities	897		2		48		851
Asset-backed securities	337		—		14		323
Municipal securities	160		—		9		151
U.S. Treasury notes	123		—		—		123
Other	29		—		2		27
Total	$	3,974	$	8	$	172	$	3,810

	December 31, 2022
	Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses
	(In millions)
Corporate debt securities	$	2,303	$	2	$	121	$	2,184
Mortgage-backed securities	787		—		56		731
Asset-backed securities	308		—		20		288
Municipal securities	160		—		11		149
U.S. Treasury notes	106		—		1		105
Other	45		—		3		42
Total	$	3,709	$	2	$	212	$	3,499

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 12

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

	Amortized Cost		Estimated Fair Value
	(In millions)
Due in one year or less	$	280	$	277
Due after one year through five years	2,340		2,245
Due after five years through ten years	455		443
Due after ten years	899		845
Total	$	3,974	$	3,810

Gross realized gains and losses from sales of available-for-sale securities are calculated under the specific identification method and are included in investment income. Gross realized investment gains were insignificant for the three months ended March 31, 2023, and 2022. Gross realized investments losses amounted to $10 million in the three months ended March 31, 2023, and were reclassified into earnings from other comprehensive income on a net-of-tax basis. Gross realized investment losses were insignificant in the three months ended March 31, 2022.

We have determined that unrealized losses at March 31, 2023, and December 31, 2022, primarily resulted from fluctuating interest rates, rather than a deterioration of the creditworthiness of the issuers. Therefore, we determined that an allowance for credit losses was not necessary. So long as we maintain the intent and ability to hold these securities to maturity, we are unlikely to experience losses. In the event that we dispose of these securities before maturity, we expect that realized losses, if any, will be insignificant.

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

	In a Continuous Loss Position for Less than 12 Months					In a Continuous Loss Position for 12 Months or More
	Estimated Fair Value		Unrealized Losses		Total Number of Positions	Estimated Fair Value		Unrealized Losses		Total Number of Positions
	(Dollars in millions)
Corporate debt securities	$	719	$	15	480	$	1,107	$	84	510
Mortgage-backed securities	257		6		144	467		42		228
Asset-backed securities	134		2		76	133		12		73
Municipal securities	48		1		28	83		8		105
Other	8		1		9	10		1		7
Total	$	1,166	$	25	737	$	1,800	$	147	923

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, 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	$	1,124	$	45	683	$	887	$	76	371
Mortgage-backed securities	395		20		220	319		36		131
Asset-backed securities	161		6		108	118		14		59
Municipal securities	75		4		83	57		7		57
U.S. Treasury notes	88		1		6	—		—		—
Other	15		1		16	17		2		6
Total	$	1,858	$	77	1,116	$	1,398	$	135	624

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 13

Restricted Investments Held-to-Maturity

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

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

6. Medical Claims and Benefits Payable

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

	March 31, 2023		December 31, 2022
	(In millions)
Claims incurred but not paid (“IBNP”)	$	2,589	$	2,597
Pharmacy payable	233		206
Capitation payable	95		94
Other	907		631
Total	$	3,824	$	3,528

“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various government agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. Non-risk provider payables amounted to $493 million and $228 million as of March 31, 2023, and December 31, 2022, respectively.

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

	Three Months Ended March 31, 2023
	Medicaid		Medicare		Marketplace		Consolidated
	(In millions)
Medical claims and benefits payable, beginning balance	$	2,815	$	452	$	261	$	3,528
Components of medical care costs related to:
Current year	5,865		934		370		7,169
Prior years	(250)		(14)		(34)		(298)
Total medical care costs	5,615		920		336		6,871
Payments for medical care costs related to:
Current year	3,728		542		217		4,487
Prior years	1,822		369		167		2,358
Total paid	5,550		911		384		6,845
Acquired balances, net of post-acquisition adjustments	—		—		—		—
Change in non-risk and other provider payables	270		—		—		270
Medical claims and benefits payable, ending balance	$	3,150	$	461	$	213	$	3,824

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 14

	Three Months Ended March 31, 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	5,424		840		505		6,769
Prior years	(154)		(25)		(27)		(206)
Total medical care costs	5,270		815		478		6,563
Payments for medical care costs related to:
Current year	3,402		465		330		4,197
Prior years	1,633		306		260		2,199
Total paid	5,035		771		590		6,396
Acquired balances, net of post-acquisition adjustments	(25)		—		—		(25)
Change in non-risk and other provider payables	93		3		—		96
Medical claims and benefits payable, ending balance	$	2,883	$	451	$	267	$	3,601

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

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

7. Debt

The following table summarizes our outstanding debt obligations, all of which are non-current as of the dates reported below:

	March 31, 2023		December 31, 2022
	(In millions)
Non-current long-term debt:
4.375% Notes due 2028	$	800	$	800
3.875% Notes due 2030	650		650
3.875% Notes due 2032	750		750
Deferred debt issuance costs	(23)		(24)
Total	$	2,177	$	2,176

Credit Agreement

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

Effective April 26, 2023, we amended the Credit Agreement to transition from the use of the London Interbank Offered Rate, or LIBOR, to the Secured Overnight Financing Rate, or SOFR, as a benchmark interest rate used in the Credit Agreement.

We have other relationships, including financial advisory and banking, with some parties to the Credit Agreement.

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 15

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

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

Senior Notes

Our senior notes are described below. Each of these notes are senior unsecured obligations of the parent corporation, Molina Healthcare, Inc., and rank equally in right of payment with all existing and future senior debt, and senior to all existing and future subordinated debt of Molina Healthcare, Inc. In addition, each of the indentures governing the senior notes contain customary non-financial covenants and change of control provisions. As of March 31, 2023, we were in compliance with all non-financial covenants in the indentures governing the senior notes.

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

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

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

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

8. Segments

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

The Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which we offer managed healthcare services. The Other segment, which is insignificant to our consolidated results of operations, includes long-term services and supports consultative services in Wisconsin.

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

Molina Healthcare, Inc. March 31, 2023 Form 10-Q | 16

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

	Three Months Ended March 31,
	2023		2022
	(In millions)
Total revenue:
Medicaid	$	6,578	$	6,187
Medicare	1,056		949
Marketplace	497		616
Other	18		18
Total	$	8,149	$	7,770

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

	Three Months Ended March 31,
	2023		2022
	(In millions)
Margin:
Medicaid	$	734	$	710
Medicare	126		128
Marketplace	154		130
Other	2		3
Total margin	1,016		971
Add: other operating revenues (1)	246		221
Less: other operating expenses (2)	(807)