MOLINA HEALTHCARE INC
For the period ended Dec 31, 2024. Filed Feb 11, 2025.
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FY2024 · Filed Feb 11, 2025
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Molina Healthcare, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Molina Healthcare, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 11, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| Incurred but not paid (IBNP) claims reserves | |
| Description of the Matter | As of December 31, 2024, the Company’s liability for fee-for-service claims incurred but not paid (“IBNP”) comprised $3,085 million of the $4,640 million of Medical Claims and Benefits Payable. As described in Note 10 to the consolidated financial statements, the Company’s IBNP liability is determined using actuarial methods that include a number of factors and assumptions, including completion factors, which seek to measure the cumulative percentage of claims expense that will be paid for a given month of service as of the reporting date, based on historical payment patterns, and assumed health care cost trend factors, which represent an estimate of claims expense based on recent claims expense levels and healthcare cost levels. There is significant uncertainty inherent in determining management’s best estimate of completion and trend factors, which are used to calculate actuarial estimates of incurred but not paid claims. |
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| Auditing management's estimate of the IBNP liability was complex and required the involvement of our actuarial specialists due to the highly judgmental nature of the completion factors and healthcare cost trend assumptions used in the valuation process. The significant judgment was primarily due to the sensitivity of management's best estimate of completion factors and healthcare cost trend assumptions, which have a significant impact on the valuation of the IBNP liability. | |
| How we addressed the matter in our audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the process for estimating the IBNP liability. This included testing management review controls over completion factors and healthcare cost trend assumptions, and management’s review and approval of actuarial methods used to calculate the IBNP liability, including the data inputs and outputs of those models. |
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| To test the IBNP liability, our audit procedures included, among others, testing the completeness and accuracy of data used in the calculation by testing reconciliations of underlying claims and membership data recorded in source systems to the actuarial reserving calculations, and comparing a sample of claims to source documentation. With the assistance of actuarial specialists, we (1) analyzed the Company’s completion and trend factor assumptions based on historical claim experience and healthcare cost trends by independently calculating a range of reasonable reserve estimates for comparison to management’s best estimate of the liability for incurred but not paid claims and (2) performed a review of the prior period IBNP liabilities for incurred but not paid claims using subsequent claims development. Additionally, we reviewed and evaluated management’s disclosures surrounding the IBNP liability. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2000.
Los Angeles, California
February 11, 2025
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