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.

Recent Developments – Molina Medicaid Solutions Segment

In late 2017, as part of the 2017 Restructuring Plan, management decided to pursue the divestiture of MMS.

In June 2018, we entered into a definitive agreement to sell Molina Medicaid Solutions (MMS) to DXC Technology Company. The divestiture, expected to close in the third quarter of 2018, is subject to the satisfaction of customary closing conditions and the receipt of certain third party consents and regulatory approvals. We expect the net cash selling price for the equity interests of MMS to approximate $220 million after certain adjustments.

As of June 30, 2018, Molina Medicaid Solutions’ major classes of assets and liabilities were as follows:



	(In millions)
Cash and cash equivalents	$	9
Receivables and prepaid expenses	41
Goodwill and property, equipment, and capitalized software, net	70
Deferred contract costs and other assets	110
Total assets held for sale	$	230

Accounts payable and accrued and other liabilities	$	27
Deferred revenue	39
Total liabilities held for sale	$	66

Description of Earnings Measures for 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 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 was insignificant for all periods presented.



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In millions)
Total revenue:
Health Plans	$	4,752	$	4,868	$	9,261	$	9,639
Molina Medicaid Solutions	48		47		99		93
Other	83		84		169		171
Consolidated	$	4,883	$	4,999	$	9,529	$	9,903

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In millions)
Gross margin:
Health Plans	$	664		$	249		$	1,265		$	786
Molina Medicaid Solutions	4			4			12			8
Other	5			1			11			6
Total gross margin	673			254			1,288			800
Add: other operating revenues ⁽¹⁾	242			130			431			255
Less: other operating expenses ⁽²⁾	(573		)	(671		)	(1,155		)	(1,260		)
Operating income (loss)	342			(287		)	564			(205		)
Other expenses (income), net	37			27			80			(22		)
Income (loss) before income taxes	$	305		$	(314	)	$	484		$	(183	)

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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, impairment losses, and restructuring and separation costs.