Molina Healthcare, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Molina provides managed healthcare services through Medicaid, Medicare, and ACA Marketplace programs; it served approximately 5.0 million members across 20 states at year-end.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $34.072 billion | $31.974 billion | Up 7% |
| Premium revenue | $32.529 billion | $30.883 billion | Up 5% |
| Operating income | $1.573 billion | $1.173 billion | Up $400 million |
| Net income | $1.091 billion | $792 million | Up 38% |
| Diluted EPS | $18.77 | $13.55 | Up 39% |
| Medical care ratio (MCR) | 88.1% | 88.0% | Up 0.1 percentage point |
| G&A ratio | 7.2% | 7.2% | Unchanged |
| Operating cash flow | $1.662 billion | $773 million | Up $889 million |
Investment income increased to $394 million from $143 million, reflecting higher invested assets and interest rates. The after-tax margin improved to 3.2% from 2.5%. The effective tax rate was 25.5% in both years.
Segment results and changes
- Medicaid: Premium revenue rose 6% to $26.327 billion; segment MCR increased to 88.7% from 88.0%, and medical margin was $2.973 billion versus $2.981 billion. Redeterminations reduced membership, while acquisitions, new contracts, and risk-corridor benefits partly offset the impact.
- Medicare: Premium revenue rose 10% to $4.179 billion; MCR increased to 90.7% from 88.5%, and medical margin fell to $388 million from $437 million. Higher use of supplemental benefits, in-home services, and high-cost drugs weighed on results. Management said the segment MCR was above its long-term target range.
- Marketplace: Premium revenue declined to $2.023 billion from $2.261 billion as membership fell to 281,000 from 348,000. MCR improved to 75.3% from 87.2%, and medical margin increased to $499 million from $290 million; management described the MCR as below its long-term target range.
- Consolidated year-end membership declined to 4.995 million from 5.258 million, primarily reflecting Medicaid redeterminations and Marketplace membership reductions.
Financial position and capital
- Cash and investments totaled $9.4 billion at year-end, versus $7.7 billion in 2022; working capital was $4.4 billion versus $3.2 billion.
- Long-term debt was $2.180 billion. The company had no borrowings outstanding under its $1.0 billion revolving credit facility and reported compliance with debt covenants.
- Regulated health plans held approximately $4.1 billion of statutory capital and surplus against estimated minimum requirements of $2.3 billion. Subsidiary dividends to the parent were $705 million in 2023.
- The board authorized up to $750 million in share repurchases through December 31, 2024; no shares were purchased under the program through February 9, 2024. Molina has not paid cash dividends on common stock.
- Management said cash resources, available borrowing capacity, and internally generated funds should be sufficient for operations and obligations for at least the next 12 months.
Outlook, developments, and risks
- Management expects Medicaid membership to increase approximately 12% in 2024 to 5.1 million, despite an estimated further 100,000 redetermination-related losses. It expects Medicare membership to rise approximately 58% to 270,000, including the 109,000 members added through the California Medicare acquisition, and Marketplace membership to rise approximately 31% to 370,000.
- The company cited a 13%–15% revenue growth target through 2026. Recent procurement wins and acquisitions represent approximately $7 billion in annual premium revenue, expected to be mostly reflected in 2024 and fully reflected in 2025.
- My Choice Wisconsin was acquired in September 2023 for preliminary consideration of approximately $74 million. The Bright Health Medicare businesses in California were acquired effective January 1, 2024 for $441 million. New California Medicaid and Nebraska contracts also began January 1, 2024; the New Mexico contract is expected to start July 1, 2024.
- Medicaid redeterminations remain a key uncertainty: Molina estimated approximately 500,000 members lost in 2023, offset by new enrollment, and expects to retain about 40% of membership gained during the pandemic eligibility suspension. Enrollment, member acuity, and rate adjustments may differ from estimates.
- Other principal risks include state contract renewals and rate adequacy, medical-cost and pharmacy-cost trends, Medicare risk adjustment and Star ratings, integration and readiness for new business, cyber and vendor incidents, regulatory audits and payment recoupments, and concentration in major states. The Medicare-Medicaid pilot programs are expected to transition to D-SNP arrangements after 2025; the financial effect is uncertain.
- Unusual items included $376 million of California managed-care-organization tax revenue and matching expense recorded in 2023, retroactive to April 1, 2023; a $41 million credit loss related to a Texas Marketplace risk-pool issuer insolvency; and $427 million of favorable prior-year medical claims development, whose earnings effect was largely absorbed by minimum MLR and corridor provisions. In 2022, Molina recorded $208 million of real-estate and related impairment charges.
- Pending matters include a challenge to the Kentucky Medicaid contract award, a Puerto Rico contract dispute with an agreement in principle reported in January 2024, and Texas qui tam litigation set for trial in September 2024. The company could not estimate outcomes or potential losses for these matters.
- The independent auditor issued unqualified opinions on the financial statements and internal controls. The audit identified IBNP claims reserves as a critical audit matter; management excluded My Choice from its 2023 internal-control assessment while integrating its controls.
Investor verification priorities
- Track 2024 Medicaid redetermination losses, member retention, acuity, and whether state rate updates adequately reflect costs.
- Monitor Medicare MCR, utilization, risk-adjusted premiums, Star-rating effects, and the integration and performance of the acquired California plans.
- Assess whether new contract launches and the stated growth pipeline convert into expected revenue and sustainable margins, including Medicaid MCR and Marketplace performance.
- Review development of the $4.204 billion medical claims payable liability, including the $2.901 billion IBNP component and favorable reserve development.
- Follow the Texas Marketplace issuer receivable loss and the Kentucky, Puerto Rico, and Texas litigation matters for changes in exposure.
- Confirm capital availability at the parent level, regulated-subsidiary dividend capacity, debt refinancing costs, and use of the $750 million repurchase authorization.