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 our business and view the markets we serve. The Health Plans segment consists of our health plans. Our health plans are operating segments that have been aggregated for reporting purposes because they share similar economic characteristics. The Molina Medicaid Solutions segment provides support to state government agencies in the administration of their Medicaid programs including business processing, information technology development, and administrative services. The Other segment includes primarily our Pathways behavioral health and social services provider, and corporate amounts not allocated to other reportable segments.

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 the amount of 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
	(In millions)
2017
Total revenue	$	19,352	$	187	$	344	$	19,883
Gross margin ⁽¹⁾	1,781		16		13		1,810
Depreciation and amortization ⁽²⁾	126		43		9		178
Goodwill, and intangible assets, net	212		43		—		255
Total assets	6,347		219		1,905		8,471
2016
Total revenue	17,234		195		353		17,782
Gross margin ⁽¹⁾	1,671		21		33		1,725
Depreciation and amortization ⁽²⁾	122		45		15		182
Goodwill, and intangible assets, net	513		72		175		760
Total assets	5,897		267		1,285		7,449
2015
Total revenue	13,917		195		66		14,178
Gross margin ⁽¹⁾	1,467		55		5		1,527
Depreciation and amortization ⁽²⁾	95		25		6		126
Goodwill, and intangible assets, net	393		73		175		641
Total assets	4,707		213		1,656		6,576

______________________

(1)

In connection with the reclassification of Medicare and Marketplace health insurer fees to premium revenue, from health insurer fees reimbursed, amounts differ from amounts previously reported as follows: the Health Plans segment gross margin for the years ended December 31, 2016 and 2015 increased $53 million, and $20 million, respectively. The Consolidated gross margin increased by the same amounts.


(2)	Depreciation and amortization reported in accompanying consolidated statements of cash flows.

The following table reconciles gross margin by segment to consolidated (loss) income before income tax (benefit) expense:



	Year Ended December 31,
	2017			2016			2015
	(In millions)
Gross margin:
Health Plans	$	1,781		$	1,671		$	1,467
Molina Medicaid Solutions	16			21			55
Other	13			33			5
Total gross margin	1,810			1,725			1,527
Add: other operating revenues ⁽¹⁾	508			798			664
Less: other operating expenses ⁽²⁾	(2,873		)	(2,217		)	(1,804		)
Operating (loss) income	(555		)	306			387
Other expenses, net	57			101			65
(Loss) income before income tax (benefit) expense	$	(612	)	$	205		$	322

______________________


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


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