Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare’s second quarter 2010 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator instructions) As a reminder this conference is being recorded, Wednesday August 4, 2010. I would now like to turn the call over to Juan José Orellana, Vice President of Investor Relations. Please go ahead, sir. Juan José Orellana: Thank you, (Lensie). Hello everyone, and thank you for joining us. The purpose of this call is to discuss Molina Healthcare’s financial results for the second quarter ended June 30, 2010. The company’s earnings release reporting its results was issued today after the market closed, and was posted for viewing on our company website. We also issued another press release shortly after our earnings release. That second release announced our offering of common stock. Certain securities regulations prohibit the discussion of the offering or of any of the filings that have or will be made in connection with that offering. As a result, there can be no discussion of the offering on this call or on other similar calls until the offering is complete. The offering also limits our ability to comment on our expectations about the future. We therefore ask that during the question-and-answer session at the end of this call, you limit your questions to matters having only to do with our second quarter earnings announcements. On the call with me today are Dr. Mario Molina, our CEO; John Molina, our CFO; Terry Bayer, our COO; Dr. Jim Howatt, our CMO; and Joseph White, our Chief Accounting Officer. After the completion of our prepared remarks, we will open the call to take your questions. Our comments today will contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. All of our forward-looking statements are based on our current expectations and assumptions which are subject to numerous risk factors that could cause our actual results to differ materially. A description of such risk factors can be found in our earnings release and in our reports filed with the Securities and Exchange Commission including our Form 10-K Annual Report for fiscal year 2009 and our Form 10-Q quarterly reports and our Form 8-K current reports. These reports can be accessed under the Investor Relations tab of our company website or on the SEC’s website. All forward-looking statements made during today’s call represent our judgment as of August 4, 2010, and we disclaim any obligation to update such statements. This call is being recorded, and a 30-day replay of the conference call will be available over the Internet through the company’s website at molinahealthcare.com. I would now like to turn the call over to Dr. Mario Molina.

Thank you Juan José. Hello everyone and thank you for joining our earnings call. I will start today’s call by reviewing key company events for the quarter and then turn the call over to John, who will review the financial details of the quarter. We’d had busy quarter. On the growth front, we were awarded a Star Plus Medicaid managed care contract for the Dallas service area. Our Molina Medicaid solutions product HealthPass went live in Idaho in June. And although technically not a second quarter event, we reached a definitive agreement to acquire Abri Health Plan, a Medicaid health plan in the state of Wisconsin. Our health plans continued to perform well with marked improvements in California and New Mexico. Let me highlight each of these key events. In Texas, we were awarded a contract for the Star Plus program. The Star Plus program is the Texas Medicaid managed care program designed to provide primary care, acute care and long-term care services to the aged, blind or disabled populations. The contract is for the Dallas service area which includes Dallas and six surrounding counties. It is estimated that there are approximately 50,000 aged blind or disabled beneficiaries in this service area, who will be making a choice in the first quarter of 2011 among Molina and two other health plans. We’re excited about this contract award as it further expands our footprint in the state of Texas and increases our involvement in the care of aged blind or disabled beneficiaries. As a remainder, Molina Healthcare, Texas already serves approximately 42,000 Medicaid beneficiaries in the Harris Service Area, which includes Houston and in the Bexar service area which includes San Antonio. Nearly 45% of those members fall in the aged blind or disabled category. On May 3rd of this year,…

Thank you Mario. You may have noticed in today’s press release and 10-Q that we are now presenting two reportable segments in our 10-Q, our Health Plan segment and our Molina Medicaid Solution segment. The Health Plan segment includes all of the operations that we have in the past, reported on a consolidated basis, that is our HMOs and our corporate parent. Any revenues and expenses not specifically tied to the solutions business, such as interest expense and the cost of general corporate operations are included in the Health Plan segment. Our 10-Q is replete with disclosure concerning Molina Medicaid Solution segment. We have filed our 10-Q today so that you’ll have the benefit of that added disclosure as you review our earnings release. For now I want to point out some of the changes that you will see in the earnings release itself. First, our income statement now includes service revenue and cost of service revenue. Both of these accounts specifically capture revenue expense for the solutions business. Second, we are breaking out premium taxes as a separate line item on our income statements. Third, we have replaced the term core administrative ratio with the term G&A ratio. Now that we have raising out premium taxes as a separate line item on our income statement, there is no need to talk about subcategories of the G&A ratio. Fourth, nearly all of the depreciation expense associated with the solutions business is reported as cost of services revenue. Also a portion of the amortization of the purchase price of the solutions business is reported as a reduction to service revenue. This means that the depreciation and amortization as shown on our income statement is less than the amount we reported for D&A on our cash flow statement. For your convenience, we…

(Operator Instructions) And our first question comes from the line of Josh Raskin from Barclays Capital. Please go ahead with your question. Josh Raskin – Barclays Capital: Hi thanks, good afternoon. I guess, first question is on the operations, you mentioned in the press release and Mario spoke to it as well, a very difficult premium rate environment, I think that’s a little different than some of the more contractive comments that we’ve heard from some of your peers. So maybe you could talk about what you’re seeing, is that more of an expectations going forward or is that have to do with things like Michigan coming back with the retroactive reduction in premiums?

Hi Josh, this is Mario. As we have said all along this year, we’re really expecting premium rate increases in the low single-digits and we think state budgets are certainly under pressure. We think that the passage of the extended (inaudible) will be helpful and we look forward to that. The differences that you may note between us and some of the other health plans may have to do with the states that we operate in as well. We don’t overlap a lot with the other publicly traded managed care plans that are in the Medicaid space, but this is our experience. Josh Raskin – Barclays Capital: Okay, that’s helpful. And then in Michigan, it looks like the net impact was $5 million, so the cost reduction was minimal. Do they not change anything on the fee schedule?

No Josh, this is John. What happened was the state had originally submitted a range for our rates to the legislature and the state had thought that they had paid the actual point within the range in the midpoint well in fact, they paid it to high end. So they went back and readjusted the rates to fix them at the midpoint of the range and that was one issue. The second issue was they discovered that they had invitingly enrolled some members who were eligible both for Medicare and Medicaid into the health plans, which they shouldn’t have done. So it took the premium back for those members and the fact that we were able to then recoup about $0.5 million for claims that we had paid out on behalf of the members that shouldn’t have been enrolled. Josh Raskin – Barclays Capital: Okay so they gave you a rate, you guys executed a contract and then they came back and said, we’ve decided, we’re just going to pay you less?

I think what they said was we didn’t intend you to pay you as much as we did, we intended to pay you and that’s really sound great, but that rate was in supposed to be in the midpoint of the actuarial range and we – in error (ph) put it at the high end of the range. Josh Raskin – Barclays Capital: Okay, got you. And then was there any appropriate reserved element in the quarter?

Nothing that was outside what our normal EPD is? Josh Raskin – Barclays Capital: Okay and then, I’m sorry to even ask because I am feeling that you’re just not going to answer this, but did you give the breakout between primary and secondary shares in the offering?

We did not discuss the offering, no. Josh Raskin – Barclays Capital: Are you going to be filing so that, is the filing going to come for the secondary in any time soon or?

Say that again Josh. Josh Raskin – Barclays Capital: I guess at some point you’re going to file some sort of perspectives or something for the offering, is that expected to come soon?

Yes and we put out a press release earlier today on the offering. So check the release. Josh Raskin – Barclays Capital: Okay, I just didn’t see any details in the release. I guess we can follow-up. Okay, thanks guys.

Okay.

Your next question comes from the line of Chris Brek (ph) with (inaudible).Please go ahead.

Good afternoon guys. You commented in your press release that you observed hospitalized billing from more intensive levels of care in the physician and outpatients cost segment, I guess are you just trying to make a point that you’re observing that or are you saying you’re going back potentially questioning the legitimacy of some of those claims. Any detail there would be great.

I think, this is John, I think that the answer is sort of all of the above. One of the things that we have done is we have shared our data with a couple of the states and that has caused them to re-look at how their states fee-for-service system pays these claims. We’re also going back and looking at those claims for things like switch (ph) removal which truly are not emergency in nature and talking to the hospitals and the providers about those goals.

Okay and then can you tell us how much of the year-to-date cash flow changed is because of Ohio? It’s down about $70 million year-to-date, how much of that is from Ohio?

That is bulk of it, its Joe speaking, pretty much consistent with what we would add at the first quarter. Ohio practice hasn’t changed, they continue to pay it now mid month versus last date of previous month.

Okay and that – so if its bulk, that’s not just for one month or is that for one month?

Ohio revenues can run about $90 million easily in a month.

Okay, and okay and then lastly on Unisys, is anything tracking materially different than you’ve expected either positively or negatively?

This is Terry Bayer. No.

Okay, thanks a lot.

Our next question comes from the line of Tom Carroll with Stifel Nicolaus. Please go ahead. Tom Carroll – Stifel Nicolaus: Hey guys, good afternoon. A question I see more just looking for a bit more color on the challenges you’re facing in Idaho and particularly does this have a change do you think of turning into or creating an opportunity for the politicians in the market to make a lot of noise?

This is Terry Bayer. I think at this point, recall we acquired the HIM division of Unisys on May 1 and the system went live on May 31, technically June 1. So our involvement in the pre go live activities was very limited. The DDI (ph) period is a several year period prior. It is not unusual to have glitches or biffs when you first go live with a new systems and I’ll make a couple of comments about Idaho that it really enhanced the provider anxiety. Due to budgetary constraints the state did withhold Medicaid provider payments, delay them. So as it simultaneous with the system go live. So you can imagine there is a new system and there is also been withholding a payments. This is a primarily impacted to the smaller providers who are more cash flow dependent. But secondarily there was a major provider reenrollment in Idaho and this is not the case as an example our next state coming up is not experiencing that same kind of a provider reenrollment. So when you ask the providers to reenroll, you’re now subjected to all of the errors that can occur building in that provider database. So when you compound these with the new system it’s not surprising that we have discovered issues. It’s our responsibility to make sure going forward we’re meeting the providers needs, the state has made advanced payments to ensure there are no cash flow problems and we have beefed up our on the ground support in Idaho and in the call centers so that in the coming months we will resolve the issues for the providers and we’re – our partners with the state of Idaho on this for the long haul so we’re addressing it now and end learning from this as well because it’s our first one. Tom Carroll – Stifel Nicolaus: Terry, great. That’s exactly the color I was looking for in the market. Do you anticipate that the issues will be taken care off over what period of time, I mean within the next quarter?

It’s difficult to predict, so I have to take do that but we’ve got a joint letter going out to the providers this week and we’ll be keeping them posted and again hard to predict because as we don’t – as more claims are paid out and more types of providers that call in the questions we’ll just resolve it as it comes and we’ll update you next quarter on the progress we made. Tom Carroll – Stifel Nicolaus: Okay and do you have any further opinion on rate changes as they impact 2011 for some of your larger markets like Ohio and California and Michigan, Washington I think you mentioned?

Tom we’re not going to comment on 2011. Tom Carroll – Stifel Nicolaus: So no more okay, thank you very much.

(Operator Instructions) The next question comes from the line of John Rex with JP Morgan. Please go ahead. John Rex – JP Morgan: Thanks, so during the course of the quarter there has been bit more talk from some others about just much lighter utilization trends, even Medicaid books maybe then I’m hearing from you and I just want to get a little more color commentary just straight aside from the provider coding side, just what you’re seeing in straight utilization terms so I’m thinking I’ve heard like talks of kind of OB being down in Medicaid populations and just broadly utilization down. Are you not seeing that to any meaningful extent?

This is Dr. Jim Howatt. We certainly have seen different utilization. The utilization in the first quarter and leading over into the second quarter was higher than normal for pediatric RSV infections which often require hospitalization. And remember also that H1N1 really started its peak in mid to late April. So we expect to see utilization trend downward and we think we’re starting to see that now but it has been relatively flat for us in the first two quarters.

And again John some of this may also reflect a different states that we’re in as compared to other health plans. John Rex – JP Morgan: So even like – even when you look at things like your bad days remember that’s held pretty steady also?

Yes it has I mean there is regional differences and we’ve also taken on some newer sicker members that the same story last year with rapid growth and acquisition of new members. We see higher costs. So they’re whole series of moving parts here. John Rex – JP Morgan: And I understand because the month-to-month stuff on this is a little tough on this business but did it trend that way pretty much throughout the quarter, so again we thought so much of it significant slackening in June from lot of indications we’re getting from providers out there, is that not from it take it also the kind of something that you were seeing your claim at least in your claims run.

Yes I think we’re seeing improvement in June. We do monitor this using authorizations rather than claims and we’re starting to see trends downward from earlier utilization.

But John I think this is Mario, I think it’s also fair to say that our utilization trends have been flatter perhaps than what some other people have talked about. John Rex – JP Morgan: Right, so your year-over-year comp for offset being a factor is I guess.

Yes.

Yes, John let me also caution you, when you compare the year-over-year you have to also remember we had $5 million net in terms of the take back from Michigan that wasn’t associated with medical costs, that was pulled out and then you also had the pharmacy carve outs in Ohio and Missouri and since we typically do pretty well on the pharmacy piece we actually had to step back when they carved that business that was really difficult Missouri to just compare MCR 2009 to 2010 and draw a lot of conclusions. John Rex – JP Morgan: Okay and then just on your claims inventory I think it was like down $50 million sequentially and maybe that was just getting closer to where you’d been in the end of the year, at the end of December call but is that kind of where you expected to be or was that in something was there something significant there in terms of a speed up?

No I think that it’s sort of back to where we wanted to be towards the end of the year.

Those inventories, its Joe speaking, those inventories tend to draw down in the summer, peak in the spring and the fall and draw down right around the middle of the summer and Christmas time. John Rex – JP Morgan: Okay and then just I understand you can’t talk on outlook at this point but do you have a plan to refresh outlook post transaction or can you even talk about that?

We can’t even talk about that. John Rex – JP Morgan: Okay, all right. Thanks.

Our next question comes from the line of Scott Green with Bank of America Merrill Lynch. Please go ahead. Scott Green – Bank of America Merrill Lynch: Hi thanks for the question. I noticed in the press release that pharmacy unit costs were up and my understanding was that you had re-contracted pharmacy towards the end of last year and I would have thought we would have seen some sort of decrease in unit cost. Can you talk about that?

I think it’s the mix of Medicare members, I mean we doubled our Medicare enrollments and I think it had a tendency to pull it up also when we carved out Missouri which was all tentative and Ohio where the bulk of its tenant those costs, those drug costs sort of so again it’s going to change the waiting. Scott Green – Bank of America Merrill Lynch: Okay, and did you exit the California AIM program in the quarter?

We’ve been winding – this is Terry Bayer. We’ve been winding down the California AIM program so we stopped accepting new members late last year and during this quarter the final rollout would have occurred those had been enrolled so it’s been a dwindling number but it would, is now over. Scott Green – Bank of America Merrill Lynch: And I guess to markets could you talk about the MOR (ph) increase in Texas and what drove that sequentially?

This is Joe speaking, I think the main thing we’re seeing in Texas is I can’t necessarily speak sequentially but back in September 1, 2009 we had some premium cuts from the state specifically in the Star Plus product line which is there, aged blind disabled product lines and certainly since then we’ve seen relative decrease of the profitability. Scott Green – Bank of America Merrill Lynch: Okay, I think it was like 750 basis points sequentially though.

Well if you look at the PMPM premiums for Texas they have gone down and the medical costs have actually gone up a little bit so it probably reflects both the combination of the decrease in the premiums and back that you’ve got a lot of Star Plus members there. So almost half of our membership are the aged blind and disabled in Texas.

There was smaller population like in Texas where we added about 40,000 members also have a more inherent degree of variability in their supported medical cost. The impact that shifts in reserve development are much more profiled in the population. Scott Green – Bank of America Merrill Lynch: Okay and then lastly in Florida are you still complying with continuity of care issues there or just your outlook on helping to lower the medical cost there?

This is James Howatt. I think you’re refereeing especially to the pharmacy costs. Scott Green – Bank of America Merrill Lynch: Yes.

And they are coming down quarter-over-quarter they were at 1point, I think in the 70s or 80s they’re now in the high 20s, low 30s. It’s still an issue and they’re driven largely by psychotropic drugs but as we can we’re introducing generics and lower cost alternatives without disrupting treatment. Scott Green – Bank of America Merrill Lynch: Okay, thank you.

Next we have a follow-up question from the line of Tom Carroll with Stifel Nicolaus. Please go ahead. Tom Carroll – Stifel Nicolaus: Hey guys quick Abri follow-up question. Abri has like 3,000 Medicare advantage members that you downstream to Universal America, and so the question is what percent of the premium does Molina keep in that contract if any?

There is a retention, but we’re not going to disclose that. Tom Carroll – Stifel Nicolaus: Would you suggest that it is of a traditional amount that we see in contracts like this?

We don’t do make these contracts so I don’t know.

I would comment I would (ph) tradition we don’t have other arrangements like this, it’s hard for us to really know. Tom Carroll – Stifel Nicolaus: But across the industry, I mean we can see things like this, would you suggest it’s out of the ordinary or you’re just not going to comment.

We’re not going to comment. Tom Carroll – Stifel Nicolaus: all right, thank you.

Okay.

Dr. Molina, there are no further questions at this time. I would now turn the call back to you.

Well thanks for the questions. we want to thank all of you for joining us. we look forward to discussing next quarter’s results.

Actually we can’t say that Mario, that’s a forward-looking statement.

Good bye everybody.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines. Have a great day everyone.