Segments

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 care 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.

The following table presents total revenue by segment. Inter-segment revenue is insignificant for all periods presented.



	Three Months Ended March 31,
	2018		2017
	(In millions)
Total revenue:
Health Plans	$	4,509	$	4,771
Molina Medicaid Solutions	51		46
Other	86		87
Consolidated	$	4,646	$	4,904

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



	Three Months Ended March 31,
	2018			2017
	(In millions)
Gross margin:
Health Plans	$	601		$	537
Molina Medicaid Solutions	8			4
Other	6			5
Total gross margin	615			546
Add: other operating revenues ⁽¹⁾	189			125
Less: other operating expenses ⁽²⁾	(582		)	(589		)
Operating income	222			82
Other expenses (income), net	43			(49		)
Income before income taxes	$	179		$	131

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


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