Segment Information

We have three reportable segments. These segments consist of our Health Plans segment, which constitutes the vast majority of our operations; our Molina Medicaid Solutions segment; and our Other segment. Our reportable segments are consistent with how we currently manage the business and view the markets we serve.

Gross margin is the appropriate earnings measure for our reportable segments, based on how our chief operating decision maker currently reviews results, assesses performance, and allocates resources.

Gross margin for our Health Plans segment is referred to as “Medical margin,” and for our Molina Medicaid Solutions and Other segments, as “Service margin.” Medical margin represents the amount earned by the Health Plans segment after medical costs are deducted from premium revenue. The medical care ratio represents medical care costs as a percentage of premium revenue, and is one of the key metrics used to assess the performance of the Health Plans segment. Therefore, the underlying medical margin is the most important measure of earnings reviewed by the chief operating decision maker. The service margin is equal to service revenue minus cost of service revenue.



	Health Plans			Molina Medicaid Solutions			Other			Consolidated
	Health Plans			Molina Medicaid Solutions			Other			Consolidated
	(In millions)
Three Months Ended September 30, 2017
Total revenue ⁽¹⁾	$	4,899		$	47		$	85		$	5,031
Gross margin	557			5			2			564
Impairment losses	—			(28		)	(101		)	(129		)
Restructuring and separation costs	(33		)	(8		)	(77		)	(118		)

Nine Months Ended September 30, 2017
Total revenue ⁽¹⁾	$	14,538		$	140		$	256		$	14,934
Gross margin	1,343			13			8			1,364
Impairment losses	—			(28		)	(173		)	(201		)
Restructuring and separation costs	(33		)	(8		)	(120		)	(161		)

Three Months Ended September 30, 2016
Total revenue ⁽¹⁾	$	4,412		$	48		$	86		$	4,546
Gross margin	443			6			8			457
Impairment losses	—			—			—			—
Restructuring and separation costs	—			—			—			—

Nine Months Ended September 30, 2016
Total revenue ⁽¹⁾	$	12,835		$	146		$	267		$	13,248
Gross margin	1,285			17			29			1,331
Impairment losses	—			—			—			—
Restructuring and separation costs	—			—			—			—

Total assets
September 30, 2017	$	7,031		$	233		$	1,690		$	8,954
December 31, 2016	5,897			267			1,285			7,449

Goodwill and intangible assets, net
September 30, 2017	$	488		$	43		$	—		$	531
December 31, 2016	513			72			175			760

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(1)	Total revenue consists primarily of premium revenue, premium tax revenue and health insurer fee revenue for the Health Plans segment, and service revenue for the Molina Medicaid Solutions and Other segments. Inter-segment revenue is insignificant for all periods presented.

The following table reconciles gross margin by segment to consolidated income before income tax expense:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Gross margin:
Health Plans	$	557		$	443		$	1,343		$	1,285
Molina Medicaid Solutions	5			6			13			17
Other	2			8			8			29
Total gross margin	564			457			1,364			1,331
Add: other operating revenues ⁽¹⁾	124			222			379			625
Less: other operating expenses ⁽²⁾	(769		)	(561		)	(2,029		)	(1,644		)
Operating (loss) income	(81		)	118			(286		)	312
Other expenses, net	32			26			10			76
(Loss) income before income taxes	$	(113	)	$	92		$	(296	)	$	236

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(1)	Other operating revenues include premium tax revenue, health insurer fee revenue, investment income and other revenue.


(2)	Other operating expenses include general and administrative expenses, premium tax expenses, health insurer fee expenses, depreciation and amortization, impairment losses, and restructuring and separation costs.