Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Daryn Miller – Goldman Sachs.
Daryn Miller – Goldman Sachs
Your MCR year over year is up over 200 basis points. Did you say only 50 basis points of that was due to H1N1?
John Molina
That’s right, Daryn.
Daryn Miller – Goldman Sachs
Was there any incentive comp reversal in the third quarter?
John Molina
No.
Daryn Miller – Goldman Sachs
Just thinking back to last year where we had an issue where guidance was actually lowered and that happened. Was there a reason why it wasn’t lowered this time?
Dr. Mario Molina
Why what wasn’t lowered, Daryn?
Daryn Miller – Goldman Sachs
Incentive compensation with the change in the outlook?
Joseph White
I think the difference may have been, as I recall last year, we probably had something on the books when we lowered guidance versus we didn’t have anything accrued at this time.
Daryn Miller – Goldman Sachs
So, you haven’t accrued yet for that?
Joseph White
That’s correct.
Daryn Miller – Goldman Sachs
On the Florida MCR at 95%, are you accruing to a target there or is that what the state is running at? Just provide a little bit more clarity as to what cost elements if it is higher, what is driving that higher?
John Molina
Daryn, what’s driving it higher than what we’d like and expect to see is that patients are going through a transition phase from the MediPass to the full risk HMO. As a result of that, we have to keep continuity of care, so certain drugs that are not on our formulary, we’ve got to continue to supply for a period of time. We expect over time we will bring that down below 90, but that’s an actual number; it’s not a target number.
Daryn Miller – Goldman Sachs
That’s specifically related to the population that’s transitioning then?
John Molina
Correct.
Operator
The next question comes from the line of Joshua Raskin with Barclays Capital.
Joshua Raskin – Barclays Capital
Can you talk a little about the timing of the recognition of these issues and why not preannounce the quarter? It doesn’t look like you guys are sort of even in the ballpark.
John Molina
Josh, I think that the first two months of the quarter are running pretty well. We had some issues in the third month of the quarter which brought the earnings down for the whole quarter, so there was really no reason or time to do the preannouncement.
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