Molina Healthcare, Inc. (MOH) Q3 2015 Earnings Report, Transcript and Summary

Ladies and gentleman, thank you for standing-by. Welcome to the Molina Healthcare Third Quarter 2015 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. As a reminder, this conference call is being recorded, Thursday, October 29, 2015. I would now turn the conference call over to Juan José Orellana, Senior Vice-President of Investor Relations. Please go ahead, sir. Juan José Orellana - Senior Vice President, Investor Relations & Marketing: Thank you, Jorge . Hello, everyone and thank you for joining us. The purpose of this call is to discuss Molina Healthcare's financial results for the third quarter ended September 30, 2015. The Company's earnings release reporting its results was issued today after the market closed and is now posted for viewing on our company website. On the call with me today are Dr. Mario Molina, our CEO; John Molina, our CFO; Terry Bayer, our COO; and Joseph White, our Chief Financial Officer. After the completion of our prepared remarks we will open the call to take your questions. If you have multiple questions, we ask that you get back in the queue so that others can have an opportunity to ask their questions. Our comments today will contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. All of our forward-looking statements are based on our current expectations and assumptions, which are subject to numerous risk factors that could cause our actual results to differ materially. A description of such risk factors can be found in our earnings release and in our reports filed with the Securities and Exchange Commission, including our Form 10-K annual report, our Form 10-Q quarterly reports, and our Form 8-K current reports. These reports can be accessed under the Investor Relations tab of our company website or on the SEC's website. All forward-looking statements made during today's call represent our judgment as of October 29, 2015, and we disclaim any obligation to update such statements except as required by the securities laws. This call is being recorded and a 30-day replay of the conference call will be available at our company's website, molinahealthcare.com. I would now like to turn the call over to Dr. Mario Molina. J. Mario Molina, MD - Chairman, President & Chief Executive Officer: Thank you, Juan José and thanks everyone for joining us on the call today as we review our financial results and key accomplishments for the quarter. As outlined in today's earnings release, we continued to grow enrollment and revenue when compared to last year and last quarter. We're making progress on our long-term margin improvement efforts. In addition, we remain watchful of new business opportunities. For example, over the last three quarters we've announced six transactions. These acquisitions have afforded us new avenues to expand our current health plan business and add capabilities to our service offering. Since we covered a considerable amount of information at our last Investor Day in New York just last month today, I will primarily highlight a few recent developments and discuss some of the things that have changed since our presentation in September. John will address our quarterly financials in greater detail during his remarks. For now, all I have to say is that those results are very good indeed. As of this September nearly 18 million people have gained health insurance by signing up for Medicaid or the marketplace as a result of the Affordable Care Act. The uninsured rate has fallen from a high of 18% to nearly 11%, the lowest uninsured rate in 50 years. And we at Molina Healthcare are doing our part to ensure that everyone has access to care. Our enrollment has grown by approximately 1.5 million members to 3.5 million since January of 2014. Today, we serve more than 0.5 million Medicaid expansion members and over 200,000 low-income marketplace members. But our contribution to healthcare goes beyond the numbers of members we serve. Our most important contribution lies in our commitment to providing access to quality healthcare for our members. To that end, we have set about expanding and deepening the care capabilities that we bring to our members. We are focusing on quality outcomes, care integration, and measurable results. During our Investor Day, we talked at great length about our acquisition of Providence Human Services. You will recall that Providence is one of the nation's largest providers of behavioral and mental health services with 6,800 employees, more than 80% of which are client facing, and operations in 23 states and the District of Columbia. The company's broad national footprint is deployed by a local level enabling it to effectively target specific needs in diverse geographies. As states continue to look for cost effective strategies to manage the care of individuals with more complex healthcare and behavioral needs, we will continue to see more states move towards the integration of behavioral health and medical services. We're excited about the opportunity to pursue these initiatives with our new capability. And we look forward to bringing the skills, enthusiasm, commitment, and expertise of the Providence team to our members. In the meantime, we remain focused on closing this transaction in the near future. Given our recent acquisition activity, I wanted to remind everyone of our approach to M&A. In general, our acquisition strategy falls into three categories. New markets, existing markets, and new capabilities. When we target a new market, our goal is to continue to diversify our geographic footprint by increasing the number of state contracts that we hold. Over the long-term, this allows us to leverage our administrative infrastructure across a broader revenue base and drive down cost. In an existing market, our goal is to strengthen our competitive position and market share by pursuing bolt on acquisitions. These types of transitions typically see higher accretion levels and given our established infrastructure in these markets, enable us to drive short-term administrative leverage and create long-term value. When evaluating a new capability or the enhancement of an existing capability or provider arrangement, our strategy is to strengthen provider alignment to ensure our goals align with our providers goals, improving medical costs over time. Our pipeline remains robust and we have continued to execute on our acquisition strategy. Integral Health Plan in Florida is a 90,000 member Medicaid plan operating in the Pensacola, Tampa, Sarasota and Fort Myers regions. This acquisition further expands our Medicaid footprint to seven of the 11 Medicaid regions across the state. We expect the Integral acquisition to generate approximately $250 million in annualized revenue and that the transaction will close later this year. In Illinois, Loyola Physician Partners serves as a medical home for approximately 20,000 members in Cook County. This acquisition further expands our Chicago area footprint, complementing our recently announced acquisition of MyCare in July. Loyola is expected to generate approximately $50 million in revenue on an annualized basis and we anticipate that this transaction will close in the first quarter of 2016. As I mentioned before, the integration process for in market acquisitions benefits from our existing infrastructure and local presence. Because of this, the process requires minimal resources at the corporate level and allows for a significant portion to be completed locally. Our record number of acquisitions this year, while significant, has not diminished our focus on retaining existing business. In Michigan, for example, we currently provide services in 50 counties where approximately 1.3 million individuals eligible for Medicaid receive care. Our current enrollment, which includes members from the HealthPlus acquisition, is about 340,000 members across multiple lines of business. Earlier this month, the State of Michigan announced its health plan recommendations for their Medicaid program to begin January 2016. And we are pleased to announced that Molina Healthcare of Michigan was recommended for eight regions covering 65 counties. Our dual eligible programs continue to drive up membership and premium revenue quarter-over-quarter, with the majority of our states completing the passive enrollment process. Texas will complete passive enrollment this month, while South Carolina is still purely voluntary, with a passive enrollment date now set for April 1. As we near the end of the passive enrollment phase in these programs, it is important to understand that our focus shifts from enrolling new members to member retention. Last, I want to congratulate our New Mexico Plan President, Patty Kehoe, and the staff of our New Mexico Health Plan for being recognized at the Pinion Level by Quality New Mexico as part of its New Mexico Performance Excellence Awards. The award recognizes organizations that show evidence of using systemic processes as a foundation to attain improved overall outcomes. That concludes my commentary about the quarter. We continue to experience an exciting and extended period of growth. We continue to be well-positioned for the future and I look forward to what that will bring. With that, I will now turn the call over to John for a look at our financial performance in the quarter.

As Mario noted, from a financial perspective this was an excellent quarter for Molina Healthcare. Net income per diluted share more than doubled to $0.77 this quarter compared to $0.33 in the third quarter of 2014. For the year to date, net income per diluted share is $2.07 compared to approximately $0.60 for the same period last year. Adjusted EPS for the quarter increased to $0.89 per diluted share compared to just $0.48 during the same quarter a year ago. Before I get into the details of the quarter, I want to point out a couple of the most important takeaways from our progress for the first three quarters of 2015. First, top line revenue remains strong. Total revenue reached $10.3 billion for the nine months ended September 30, 2015. This is the second year in a row in which we have recorded more revenue year-to-date through September than during the entire previous year. Second, we continue to expand our margins. Our net profit margin for the last six months was 1.1%, a 70 basis point improvement over the last year. Our margin improvement over last year has been driven by three key factors, higher revenue, improved medical cost efficiencies and full reimbursement of the Affordable Care Act Health Insurance Fee. As is usually the case, there are some moving parts in the numbers when looked at on a quarterly basis, so let me tell you how those parts fit together. First, we have now recognized all revenue related to Medicaid Health Insurance Fee Reimbursement from January 2014 through September 2015. Our final HIF catch up this quarter added approximately $25 million to pre-tax income for the quarters, $8 million of which related to 2014. This amount was offset by $25 million in reduced revenue related to 2014 for medical cost corridors and profit limitations. The reduction in revenue related to 2014 is the result of the challenges posed by cost floors and profit limitations that are built around vague, ambiguous and poorly defined contract terms. We have several other costs floors and profit limitations to settle so I don't want to imply that this issue is behind us. But we have started the process, and with time will come more clarity. The important point to note is that these two items offset each other. Next, our medical care ratio continues to improve year-over-year, as we reported an 88.9% medical care ratio for the last nine months, compared to 89.6% in the same period last year. Absent the $25 million reduction related to the 2014 cost floor true-ups, which I just mentioned, our third quarter medical care ratio would have been consistent with the first two quarters of this year. Our MMP plans or Medicare Medicaid Plan, in particular on a quarter-over-quarter basis saw significant improvement. We continued to benefit from administrative cost leverage but you need to look a little bit deeper into the numbers to see it. If we ignore significant marketplace, broker and exchange fees, which weren't present last year our G&A ratio was 7.4% for the third quarter of 2015. It is 7.5% year-to-date. As a reminder, we do not provide quarterly guidance, and do not change guidance unless there is a material change in our business. Therefore, we're not going to adjust the year-to-date guidance that we've previously given and you should take nothing regarding our operations from that. Our results demonstrate that we continue to make progress towards achieving our 2017 margin goals that we have set for ourselves. I want to mention that while we're not providing specific guidance for 2016 on this call, I want to make a few general comments regarding the marketplace. First, open enrollment period for 2016 is slated to start this upcoming Sunday, November 1. Our premium levels are competitive headed into the enrollment window and we believe the marketplace will continue to be profitable in 2016. Second, I want to point out that the drop in marketplace enrollment that we saw between the second quarters and third quarters of this year is due to general attrition. Unlike enrollment in Medicaid, marketplace membership does not grow or replenish throughout the year. Mario touched on our acquisitions earlier, so let me just add that three health plan acquisitions remain open and are anticipated to close in the fourth quarter of 2015 or in early 2016. Combined, these account for roughly 180,000 new members or $300 million in new top-line revenue from health plan operations on an annual basis. Days in claims payable was flat sequentially and the company had cash and investments in excess of $3.7 billion, including approximately $470 million at the parent. As we discussed during Investor Day, we anticipate cash outflows will accelerate in the fourth quarter, as we begin to pay for acquisitions that have closed and disperse accrued dollars related to Medicaid expansion corridors. Finally, at our Investor Day in February 2013, we set our goal to double the size of the company from $6 billion in revenue to a run rate of $12 billion in revenue by the end of 2015. I'm pleased to report that as of the end of the third quarter, we remain forced to exceed that goal. We have achieved this by continuing to emphasize providing access to high-quality care, by operating in the right states, pursuing the right programs, building the right provider networks and hiring the best employees. This past year, we began shifting our focus towards expanding our margins. And as you can see from our results, we're getting some traction on that front for which we are pleased. This concludes our prepared remarks. We're now ready to take questions.

Our first question comes from the line of Matthew Borsch with Goldman Sachs. Please to ahead. Matthew Richard Borsch - Goldman Sachs & Co.: Yes. Thank you. My first question is on the rate outlook, as you head into next year and I'm asking partly in the context of another large competitor or company in the industry that talked to seeing or potentially seeing some adverse impact going into next year. Can you just talk about where you stand relative to rate resets?

Sure, Matt. We did get a rate adjustment in Florida, that's effective September 1, that I believe is about a gross 7% increase, but there are some provider passes et cetera. So it'll end up being somewhere in the neighborhood of 5%, 5.5%. I believe that's the only one that we have now that's sort of lock downed. Matthew Richard Borsch - Goldman Sachs & Co.: And what are you anticipating for some of your other geographies. I mean, I guess the question I'm asking is, is this an environment where Medicaid plans have generally been doing well and you find some of your states are in a mode where they're contemplating rate increases that might be tougher?

Matt, if you look back over the last several years, the success of plans like Molina increasing our profitability, is due more to our own operations, than has been to increases in rates. We've been experiencing flat to low single-digit rates for the past several years. So, I don't know that we're going to be expecting decreases or anything of that nature. We will see some or likely to see some, with respect to the Medicaid expansion rates because we are accruing money to give back under those programs. Matthew Richard Borsch - Goldman Sachs & Co.: Okay. J. Mario Molina, MD - Chairman, President & Chief Executive Officer: Matt, this is Mario. If you go back to our Investor Day, I think there was a nice table where we went through our expectations around rate increases. And there's really not been much changed since that Investor Day presentation. Matthew Richard Borsch - Goldman Sachs & Co.: Okay. Good fair enough. If I could just on the -- on the cost and rebate floors that you referred to, is the -- the $25 million there that was offset by recruitment of the Health Insurer Fee. Is that, that was something that you were not in a position to recognize last year because you just couldn't know or didn't have a good basis for knowing how it was going to come out?

That's correct. Matthew Richard Borsch - Goldman Sachs & Co.: Okay. Got it.

We had money accrued but this was above and beyond that. Matthew Richard Borsch - Goldman Sachs & Co.: Got it. And do you feel that you are closer to understanding what the methodology is at least that you'd be in a better position to predict it going forward?

As long as they don't change the methodology, I think we're in good shape. Matthew Richard Borsch - Goldman Sachs & Co.: Okay. Fair enough. All right. Thank you.

Our next question comes from the line of A.J. Rice with UBS. Please go ahead.

Thanks. Hi, everybody. Maybe just following up, make sure I understand the $25 million adjustment. Is -- when you guys laid out your guidance for this year, should we think that that was in there or it was just such an unknown that you did not have that in your guidance?

Now, A.J., a big portion of that came from New Mexico and Washington. Washington was a change in the risk adjustment methodology. So we had no visibility to it when we put in our guidance numbers. And in New Mexico it related to the retroactive adjustments that they made with respect to a certain population that came in, I guess retroactively.

Okay. And is it, I know you said you think you're getting your arms around all the 2014 exposure. Are there open ended issues with respect to what's happening in 2015 that might be like this either for the fourth quarter or next year?

There are potentially because some of the methodologies are not articulated very clearly in the state contract. So, there is some interpretation of medical costs and such. We believe that in the discussions we have with the states that are impacted, there was a good dialogue with the state regulators and we would hope that there wouldn't be much impact either way.

Okay. And just, I know you don't update full year outlook unless there is a material change, but I guess the $25 million, which wasn't contemplated, would seem to me to be meaningful. You're not updating guidance in any way for that. So, does that imply that the rest of the business is effectively – you're raising your outlook for the rest of the business to offset that, is that the way we should – because I think you did say you always had contemplated collecting the Health Insurance Fee, albeit, you didn't know what quarter it was going to come in.

Again, I hate to isolate one factor and say that is the only thing that's material. We have a number of acquisitions that are coming in in the fourth quarter that we didn't contemplate at the beginning of the year, that certainly will have an impact on earnings. And to try and pinpoint just for the sake of a single quarter doesn't make a lot of sense. I would say that from a revenue and profit margin perspective, we are at a place that is a little bit further than what we thought, but it doesn't make sense since what we're really driving to is a sustainable profit margin in 2017, to really monkey around with the numbers for one quarter.

Okay. And maybe just one last data point question there. I guess you picked up 65,000 in Medicaid expansion lives during the quarter. I guess it's – it seems to be late in the year to be seeing more Medicaid expansion unless you're in – there's somehow a new market or is this acquisitions that are doing that? How did you end up picking up 65,000 new Medicaid expansion lives?

It is for the most part the acquisitions.

Okay. All right. Thanks a lot.

You bet.

Our next question comes from the line of Josh Raskin with Barclays. Please go ahead.

Thanks. I hate to harp on this $25 million issue, but just want to make sure I understand. Obviously, they've changed the methodology with which they're looking back at 2014. Is that now contemplated in your thoughts for 2015 as well? Or have you sort of recalibrated based on what the states are telling you in terms of floor definitions, et cetera?

We think, Josh, that we've got it pretty well ironed out now.

Okay. But did you have – I guess my question is, did you have any catch-up accruals in the third quarter to account for the fact that if they applied the same methodology, for argument's sake, that maybe you'd owe more money back to the states as well?

Josh, it's Joe speaking. Very insignificant, because if you think of it, the bulk of this activity happened in 2014. So, there were some adjustments, but they were relatively insignificant relating to 2015, a few million dollars.

Okay. But you know what I mean, Joe, where I say, if they are assuming, whatever they are defining these costs to be or the premium calculation, I would assume if you guys were owing money – if you guys owed money last year, maybe you'd owe it again this year. But it doesn't sound like you've made any extra accruals for this year, this all relates to the prior year?

No, Josh, to be clear, we true up all accruals through the report date based on our knowledge as of that date. So we have adjusted those numbers. It's just that the impact on 2015 wasn't particularly severe. So, for example, if you think of New Mexico, most of the retroactivity happened in 2014.

Okay. So that was a specific cohort. I got you. Got you. Okay. And then just on Puerto Rico, the MLR moved down from, say, 95%, I assume that was just sort of a target accrual number, to just below 90%. I guess I am curious how operations are going there and are you guys now accruing based on claims or just better estimates in terms of your targets? I'm just curious why the MLR came down there.

Josh, it's Joe speaking. We are moving towards reliance on claims, but oftentimes in the initial months of a startup, we generally tend to run higher MCRs, so what you're seeing now is we're moving closer to what we expect that to run.

Okay. So, a 90%-ish number is what you would expect in the future or you think it comes down from there?

I wouldn't think it would drop much more below 90%.

Got you. So, clearly no claims trends or anything that are unusual or out of the ordinary that you didn't expect?

That's correct. So far it appears to be what we expected it to be. If you look back to, Mario mentioned our guidance presentation at the beginning of the year, we thought it would come in around 91%. So, it's pretty much coming in where we thought it would.

Okay. Okay.

Anything else, Josh?

Our next question comes from the line of Peter Costa with Wells Fargo Securities. Please go ahead.

Thanks for the question. Question sort of relates to the guidance and then sort of known items in the fourth quarter, I like to break it down by business instead of by state. If you look at your original guidance for the year on a GAAP basis it was $2.35. After nine months you're at $2.07, so that leaves sort of $0.28 for the fourth quarter. And I want to be clear that you're not actually reiterating the $2.35, you're just not updating that. So it's not necessarily $0.28 that you're telling us to get to for the fourth quarter. And then the remainder of the question is, are there known items to you now going into the fourth quarter that are going to go up either in the Medicaid expansion business, and you've been running at a very low MLR there. You said you've been accruing for the various updates, but is there something that's going to make that go up, that loss ratio go up in the fourth quarter? The same question regarding the medical – the marketplace business, where you're at sort of 70% loss ratio. Do you expect that to go higher in the fourth quarter? And then third, your acquisitions. Overall, do you expect them to be accretive or dilutive going into the fourth quarter?

So, Pete, that's a lot of great questions there, so let me see if I can parse it out. I'm going to start with the three business lines questions first and then get to guidance. With respect to the Medicaid expansion, you have to remember that the GAAP definition for Medical Care Ratio is different than what the states are using and the states frankly are using different requirements, or different components depending on the state. But we don't expect other than normal seasonality that that should increase materially. With the marketplace, I would say the same thing. We did see some deterioration in the enrollment. It may be that folks didn't pay their premium and some were dropped off and it's most likely that the folks who didn't pay their premiums were not using – utilizing a lot of services anyway. So, there may be a bit of a mix shift there. But again, I don't think it's going to mean anything material. The third question was acquisitions. We did close a couple of acquisitions in this quarter, the HealthPlus acquisition and the Integral acquisition. Pardon me, and the smaller one in Florida, Integral will close in the fourth quarter, Preferred was closed in the current quarter. We do tend to see pent-up demand early on with these types of acquisitions. I think we've talked about that ad nauseum before, so that you may see something. But then we'll also get some possibly towards of the end of the fourth quarter, some of the normalization from the acquisitions that closed in the third quarter. So again, I don't know that that's going to be a significant impact. With respect to guidance, I think the way you characterize it is correct. We're not updating guidance, on the other hand, we're not confirming that low number. It is -- the number is going to be what it is after we have the medical costs and the admin costs running through there. You will see an increase in the admin costs related to what we're doing in terms of the marketplace in Medicare enrollment. You may see a little bit higher medical cost because it is the fourth quarter, but nothing that I would is say is extraordinary.

Thank you. That was helpful.

Our next question comes from the line of Kevin Fischbeck with Bank of America. Please go ahead.

Hello, this is Steve Baxter filling in for Kevin. Sorry to come back to the $25 million again, does that all relate to the TANF businesses in Washington and New Mexico or is there any of that spread out in ABD?

It's Joe speaking. It's about $20 million or so related mainly to TANF in New Mexico and the rest to expansion in Washington.

Okay, thanks. So I guess if I am looking at the sequential TANF, CHIP MLR it was up about 300 basis points in rough math, I guess we'd probably explain about half of that. I guess is there anything else you want to highlight there in terms of kind of pressure you saw in the quarter or is that just reading too much into it?

I think we'd say that's reading too much into it, it's a single quarter. I wouldn't – I wouldn't read beyond John's remarks about rates at the beginning of the call.

Okay. And then, I guess the sequential movement in the marketplace MLR. I think it was in the mid-50s in the second quarter, now moving into the mid-70s. Is that the progression that you would expect? I guess, it's hard for us to totally understand how that business is running, I think you guys are the only ones who disclose it, is that correct?

Yeah, we don't have enough history with this large of a population to draw any conclusions definitively at this time.

Okay. Thank you.

I think, with that said we can say that year-to-date number, it's pretty solid.

Okay. Thank you.

Focus on the year-to-date not the quarter.

And our next question comes from the line of Andy Schenker with Morgan Stanley. Please go ahead. Cornelia Miller - Morgan Stanley & Co. LLC: Hey. This is Cornelia in for Andy. So some of your large cap peers have discussed competitive pricing on the exchanges and some potential for enrollment declines next year. Do you think you can grow your presence meaningfully on the exchanges and do you have any expectations to pick-up lives from some of the co-ops closing?

This is John. I don't know if we have too many of the co-ops closing in the states that we are doing the marketplace. We priced our products at a point we thought they would be competitive and yet remain profitable, and I would also want to make sure that people understand it's not just the premium, it's also things like co-pays, deductibles, et cetera that really roll into what a competitive financial package is. But we think, we're well positioned for the marketplace going into next year. Cornelia Miller - Morgan Stanley & Co. LLC: Okay. And then, just in Florida, it looks like your MLR increased almost 600 basis points quarter-to-quarter. Is it possible to breakout what that was driven by (33:45) long-term care versus the exchanges or should we be thinking about the majority of that was the increase from the 55% to 73% in the exchange MLR?

Yeah. It's Joe speaking, you have it at the end, it's a trend in marketplace. Cornelia Miller - Morgan Stanley & Co. LLC: Okay. Great. Thanks.

Our next question comes from the line of Ana Gupte with Leerink Partners. Please go ahead.

Yeah. Thanks. Good evening. First question is about the RFPs. You obviously won in Michigan, Georgia and Iowa were not successful. So as you look at the wins and the criteria are there any learnings from what might have made things different? And what the criteria that are being used right by largely just incumbents versus new entrants? J. Mario Molina, MD - Chairman, President & Chief Executive Officer: Well, this is Mario. I think, the clearly incumbents in a state like Georgia have an advantage. You're operating there, you've got your networks in place, you're well known both to the state and to the providers. So that clearly played into it. I don't want to comment on Iowa. We are happy with the results in Michigan. I wouldn't read a whole lot into it, they were three RFPs in three different states with a lot of different criteria. So it's hard to draw conclusions across them

And as you bought the behavioral piece in Providence and other capabilities you're building it seems to be the services. And you look at the upcoming pipeline of RFPs, can you comment on what those might look like, and I believe Virginia comes out maybe in the next year and Pennsylvania is out there, Nebraska and so on. J. Mario Molina, MD - Chairman, President & Chief Executive Officer: Well, we didn't do the acquisition because of the RFPs. We did it because we believe there is an overall trend in the Medicaid program to integrate and coordinate behavioral health with the medical benefits, and that's a long-term trend. At the same time, in many states where we're being asked to manage those benefits we felt that it was prudent for us to have a stronger presence in the behavioral health area, and also to have providers that we can draw on. So Providence is largely a provider organization, providing care to Medicaid beneficiaries. It matches very well with our business and our strategy.

Okay. Got it. Thanks. One more if I may on the G&A. Where do you think this will settle out here? You have some pressure here, with some drivers for that. What is just the target right now on the normalized G&A and then on the loss ratio as well with the 89.3%. So is it still at the 2% net margin that we should be kind of thinking about and what the timing of that margin might be? Can you give us some color?

Ana, we haven't changed our thinking in terms of where we want to be in 2017.

Okay. Great. And then one final one, if I might. On exchanges you say you're positioned well, obviously we're hearing a lot of angst from others. You had 200,000 (37:03) losses this quarter but it's sort of 200,000 plus. Any thoughts on what you might expect to see in the open enrollment season that is starting a couple of days from now? J. Mario Molina, MD - Chairman, President & Chief Executive Officer: Well, this is Mario, we have not provided any guidance on what we think our 2016 marketplace is going to look like. It's really hard to tell. We have put together what we think are competitive rates. We remain in operations in all the states where we had operations last year. We have slightly expanded our footprint by adding a few new counties. But remember too that the primary goal of our entering into the marketplace was to provide continuity of care for people that had been on Medicaid and may be no longer qualified and had become uninsured as a result. And that continues to be the strategy. If you look at our marketplace enrollment, it is largely people below 250% of poverty.

Yeah. That makes a ton of sense. Yeah, thanks, Mario. I appreciate it.

Our next question comes from the line of Brian Wright with Sterne Agee CRT. Please go ahead.

Thanks. Good morning. A couple of questions. Is there a way or do you have any guess or sense as to kind of what the buckets of attrition for the public marketplace is between tax documentation, immigration documentation and failure to pay premiums? And just kind of any insights into deadlines that may have occurred in the third quarter specifically for any of those issues?

Brian, this is John. You're working way too hard, if you start this by saying good morning. We don't have the granular detail in terms of why people rolled off the marketplace during the third quarter.

Okay. And then...

It'd just be speculation on our part.

Yeah. Do you have anything procedurally as far as any insights into some of the procedural documentation kind of deadlines for any of those issues or...

I don't believe that they give us reasons why people drop off, whether it's, whatever you had cited to. J. Mario Molina, MD - Chairman, President & Chief Executive Officer: We're – Brian, this is Mario, the answer is no.

Okay, then no worries. And then one that I know you can help me out with. Texas kind of picked up a bit sequentially, was there – on the MLR side. Was there anything kind of one time-ish or anything that you could point us to to what may be driving some of that?

Go ahead Joe.

It's the launch of the MMP in Texas, Brian, that's picking up speed.

Okay.

So, we'll run higher (40:00) MCR in the initial stages.

So, that's just an initial – based on guests, but not based on claims?

Correct.

Correct.

Great. Okay, thank you.

Thanks.

Our next question comes from the line of Chris Rigg with Susquehanna Financial Group. Please go ahead.

Hey, guys. Not to beat this horse to death but on the $25 million, can you give us just a sense of sort of the gestation of how that occurred? I mean, is this something that just sort of came up during the quarter or has this been – particularly I think, you said New Mexico it's about $20 million. Sort of how long has this been ongoing and when you kind of came to a resolution on it?

I'll take the first part of that. If you flip back through our 10-Qs, particularly in the Washington situation, we've been talking about this for a number of quarters. The issue related to Washington is essentially our rates are tied to premium adjustment across – risk adjustment across the entire population and we don't have visibility into that. We've been talking about that for a long time in the 10-Qs and we just got clarity on it just this quarter. You can also go back to our Investor Day back in September where we talked a fair amount about this. But suffice to say, these are – until these amounts are at least settled for the first year, it's very uncertain as to the actual mechanics of the calculation and the definitions involved.

Okay. And then just on the guidance, again I appreciate your comments. But is there any – you kind of gave some of the puts and takes for the fourth quarter, but is there anything large either on the plus side or the negative side that we should be thinking about or is it just sort of normal business trends with some impacts from maybe some of the recent acquisitions?

I would say that, Chris.

Okay. I'll leave it there. Thanks a lot, guys.

Our next question comes from the line of Dave Windley with Jefferies. Please go ahead.

Hi. Thanks for taking the questions. The first one on the Providence acquisition, you talked at the Investor Day about spending I think in the order of $160 million on behavioral-related care. How quickly in the overlap, perhaps how quickly can you begin to leverage Providence services into your health plan footprint? J. Mario Molina, MD - Chairman, President & Chief Executive Officer: This is Mario. It's hard to say at this point because we haven't closed the acquisition, the first thing we've got to do is close and then we can get in there and begin talking to them about how we can make better use of their services, but that is our goal. I just can't give you any idea on the timing.

And did I understand correctly that it would also be maybe the second step in the goal would be to expand the Providence footprint into additional Molina states? J. Mario Molina, MD - Chairman, President & Chief Executive Officer: Certainly.

Okay. Then on I guess Texas Quality where – sorry, if this question has been asked. Do you have any better visibility on the – what has been opaque calculation on that?

Dave, I think, Juan José wins $25 because he bet at some point, someone would ask that even if we were silent. No, we've got no update.

Okay. And in Michigan with re-procurement there and the -- I think eight regions that you were awarded, is it your expectation that membership would be about stable or do you think you can pick up some incremental numbers based on your going forward footprint?

Usually, we would only expect to pick up membership if one or more plans in a region were dropped. I think in a couple of regions and we may have one plan that was dropped and so that membership would be distributed. But for the most part, we think it will largely be stable.

Okay. And the HealthPlus acquisition, is the only kind of cross benefit there, just leverage as an SG&A presence in the state. Is that what I remembered from the Investor Day conversation?

That's a big portion of it, yes.

Okay. All right. Thank you.

Great.

Our final question is a follow up question from Brian Wright with Sterne Agee CRT. Please go ahead.

I missed a bit of the answer on that last one, I apologize. Is there any set timeframe on getting greater clarity on the definitions in Texas?

Well we thought we would have it by the end of the third quarter, Brian we're hoping that we'll have it by the end of the year. I recall the last time we got it it was about 15 months before we got clarity. So, if they give it to us by the end of the year, it will be a step in the right direction.

Right. So, there is a chance but we're not holding our breath.

I'm not.

Okay. Fair enough. Thank you. J. Mario Molina, MD - Chairman, President & Chief Executive Officer: All right. Well, thank you everyone. We appreciate you joining in the call. It was a good quarter and we look forward to talking to you at the next earnings release.