Good morning. I'm Julie Trudell, and I head up investor relations here at Molina. Welcome to our 2019 Investor Day. We're so delighted you took the time this morning to be with us. For those of you joining on the web, you will be able to follow along in audio, and we will have the slides up so you can follow the cadence in the room. Let me spend a minute and talk about how we're going to spend our time this morning. With our margin recovery complete and margin sustainability well on its way, Joe's going to spend time this morning talking about our pivot to growth, and we'll provide you color on what's to come. We'll take a break, and Joe will host a panel with our executives, Dan Finke, Tom Tran, and James Woys.
After that, we'll turn it to you and find out what it is that you would like to talk about. For those of you on the web, if you'd like to ask a question, I'll facilitate it on your behalf. You can send your question to Julie.Trudell@molinahealthcare.com. With that, I will turn to Molina Healthcare, sorry. Molina, Amerigroup, Magellan. Let me turn to the cautionary statement and tell you that we will have forward-looking statements today. Our actual results could be different than what we talk about. I won't read you the whole thing. You're very familiar with this. With that, I'll turn the stage over to Joe. Good morning, Joe.
Thank you, Julie. Good morning, everyone. Thanks for being here at the second Investor Day of the new Molina. To leave nothing to the imagination and for absolute clarity, the title of this morning's session is Our Pivot to Growth. The content we will share with you this morning will stand in stark contrast to that which we shared with you in this very room at this very time last year. If you recall, at that time, the new management team hadn't arrived yet. We were sifting through a very long inventory of profit improvement initiatives across the entire spectrum of managed care fundamentals, trying to identify the levers that we would pull quickly to restore our margins.
We were all wondering whether the dismal financial performance of 2017 was truly the bottom, and we were sorting through the complexity of a balance sheet that had imbalanced capital at its subsidiaries, a dearth of dividends to the parent, struggling to cover its fixed charges, volatile and expensive convertible debt. The question that loomed large over this room was whether we would have to do an equity raise to fight our way through those problems. In addition, if you recall, we were also the receivers of the stunning news of 2 major contract losses, knowing that we'd have to deal with those in 2019. In that same context, we worked hard during the year to restore our margins to respectability. At the time, we were projecting 2%, long-term 2.7%, and we achieved 3.8%. I'm a tough grader.
I think we all, under any definition of success, will declare the 2018 margin recovery phase a success and mission accomplished. After celebrating that success for the shortest time in managed care history, the question then turned to, is it sustainable? We get that. I assure you, this is not a one-hit wonder. This was not done by serendipity. This was not done by alchemy. This was done by hard work of the executives that are here today to repair operational and financial infrastructure permanently to execute on the managed care fundamentals to create durable financial performance.
While one quarter is not conclusive, I believe our guidance for the year at the upper end of $11 of earnings per share, which is higher than we achieved in 2018, with projected margins in excess of 4% in a year where revenues were down by 10%, is an incredible accomplishment. Again, I believe, and my team believes, a validation that we are well on the way to margin sustainability, if not there already. If you buy into that, the question then becomes, yes, but can you grow? Today, with our theme being pivoting to growth, here's where the resemblance to last year's Investor Day takes place.
We are going to show you with specificity, with granular detail, and with complete transparency, a growth model that will tell you what we're going to do and how, where we're going to do it, and the financial results it will create. We've worked hard over the last 9 to 10 months on a strategic plan, a distilled version of which we will share with you today. Our goal today is for you not to leave here without understanding perfectly what we say we're going to do to grow. Your prerogative to believe it or not is what you do. You will understand it, because we're going to lay it out there and leave nothing to the imagination. Margin recovery, done. Sustainability, well underway. The growth story to be conveyed to you here this morning. We don't want to be presumptuous, because you're developing your own investment thesis.
That's what you do. We develop our own. We know why we're excited about this. We know why we're excited about the potential equity growth in this company. In words, we aspire to be the lowest cost, highest margin producer in the business in a turbo growth industry. We are committing to double-digit revenue growth on a long-term basis. We believe that because, for the most part, we're a rate taker, if we can execute and have the best cost structure in the industry and get the benefit of our competitors' higher cost structures and rates, we can have high top decile margins. Somebody has to be the highest margin player in the industry. With our maniacal focus on cost structure, both in the G&A line and the medical cost line, we believe we could be the highest margin player in a fast growth business.
We also recognize that if your margins are the highest and your capital requirements for the ratings we choose to hold are modest, we'll also produce incredibly attractive returns on equity. Which means we should have more excess cash flow per dollar of earnings than our competitors, and we will return that to shareholders in an accretive way. On the softer side of our investment thesis, this management team we've assembled is incredibly accomplished, long experience, and chemistry is working really well. It's working so well as a team, which gives me great confidence that having restored the margins, sustained them, that now executing a growth strategy is the next charge that they will be responsible for, and they'll do it with the same discipline and rigor and success that they executed phase one and two. Lastly, we're a pure-play government business.
I say that because today, I'll tell you what you won't hear. You will not hear any delusions of grandeur. I'm not going to stand up here and tell you that we're going to reinvent the healthcare economy and the delivery system. I'm not going to stand up here and tell you that we can solve the opioid use disorder epidemic in the country. I'm not going to stand up here and tell you that we'll solve poverty through the social determinants of health. All those are very important facets of strategy. Rather than delusions of grandeur, we're going to give you illusions of practicality. The theme here today is stick to your knitting, stay in your lane, stay close to the core, do what you do it very well, and just do more of it every year.
We will ride the vortex of incredible growth in the products that we enjoy, being a pure-play government business. That's our strategy. We decided not to have you wait to page 70 for the punchline, we'll give it to you up front. I think this is helpful because if I stand up here and make comments for the next hour, at least you'll have the context of where it's headed. This is our long-term outlook. Tom will be up here later to put some more color around it. Think of it as a three to five-year trajectory off of 2019 guidance. Think about it as 2024. These are long-term CAGRs, average over time, not including any M&A that we choose to do over time, because it's hard to predict.
We are committing to double-digit revenue growth, we'll show you how 4.5% growth comes from just market growth and premium yield. Another 4.5% growth comes off of strategic initiatives that we're going to talk about here today. There's a 9% growth rate just in our existing portfolio. Add in new territory wins, which we'll talk about later this morning, we're at the midpoint of 11%. 4.5 from the market, 4.5 from strategy, two from new territories, 10%-12% growth CAGR over time, our commitment to double-digit revenue growth. We believe in doing so, we can maintain the margin profile that we've created. We put a range of 3.8%-4.2%, the midpoint being 4%, which is about where we are today.
You'll see later on where we're purposely going to allow the marketplace margins to slip to produce more revenue and a greater pool of profits. We think our Medicare margins are operating at the very high end of the range of what is sustainable. They'll probably recede a bit, but I call that reversion to the mean, not backing up. Our Medicaid margins at about 3% are probably in the right zip code. We actually believe we can grow at these rates and maintain the margin profile that we've created in the past two years. All of which means net income should grow at nearly the rate of revenue. By deploying the significant excess capital this plan creates over time. In our model, we made a share repurchase assumption to account for it in earnings per share conservatively at 12%-15%.
Double-digit revenue growth, whole margins, net income growing nearly at the same rate of revenue, EPS juiced by 300 basis points due to the deployment of capital. That's our commitment to you over the next number of years. I'll spend a few minutes just talking about the franchise. The first thing I'll say is this is the new Molina. Whatever you remember from the past, 2017 and prior, we're best just to forget because it doesn't exist anymore. We have a new management team. We have new processes. We have new technology. We have a new financial profile. Everything is new. We do have a franchise. We have plenty of revenue, plenty of membership, an incredible geographic footprint. There's a real scale play here, where we're not disadvantaged because of our size in our local markets with 3.4 million members.
With $16.4 billion of revenue, that's a great base off of which to grow. The franchise is there. This company was high on mission, my message to the 10,000 people that come in every day to do the hard work is never lose sight of it. Taking care of members and getting them access to high-quality healthcare is an incredibly noble mission. What was missing was equal weight to make sure that shareholders were cared for. The new Molina balances our attention to all of our stakeholders, including our shareholders. I think that's evident in the way we communicate with transparency, the way we guide with conservatism, and how we try to deliver on our commitments. We are a national company.
Having said that, later today, we're going to show you that we're not as fully penetrated as we could be in many of these geographies. We are as well geographically diversified as many of our top competitors. We have incredibly strong relationships and incumbency status in our states, which gives us high confidence in re-procurement efforts. We're national in scope. Yes, we have a headquarters in Long Beach, California. We recently opened up an office here in New York, where many corporate functions will reside to take advantage of a new labor pool here on the East Coast, which is very rich with managed care talent. Geographically diverse. The portfolio is fine. There are no states and territories here that I wouldn't choose to do business in today if we were not there.
We have gone through a major shift, which is the essence of the turnaround success that we've had early. We had to change completely the operating model and the management process of the company. None of that existed. All the things that you would routinely think happen in companies now happen with a great deal of cadence and discipline and rigor. The culture needed to change. Ask any one of my team what a plan is, and you'll get the answer, a plan is a commitment. It's not a suggestion. It's not, this is the best I can do given the cards that were dealt me. A plan is a commitment, and we will do whatever it takes to deliver on those commitments. We want to be known as the reliable company.
We want to make commitments that are realistic, that are achievable, and consistently deliver on them so that we're not surprising our investors. The last one under culture, I can't help myself but raising the question of the Molina brand. Let me tell you what we're not going to do. We are not going to rebrand the company or change its name as a symbolic gesture to distance ourselves from the past. We believe turning a $500 million loss into a billion-dollar gain is testament enough that the turnaround has occurred, and we don't need a symbolic gesture. I tell you what we will do. We will, as part of this growth strategy, study the branding of the company, both at the institutional level and at the local level. If we do make changes, it'll all be to facilitate growth.
The question won't be, is it symbolic? Is it cool? Does it make you feel good? The answer is going to be, do I get more members, and do I hold on to business longer by doing this? Because it's expensive to do. Only if it facilitates growth. I wanted to make sure I addressed that as part of the cultural statement that I'm making here this morning. Lastly, the team's here. It's an incredible team. Most of them are new. Pam running the health plans, driving the P&L results in 15 different geographies. Jim Woys, with decades of experience running the centralized services, the backbone of all the transactional services that Pam and the health plans rely on to be successful. Mark Keim, who's been with me now in two prior lives, head of transformation, helping Jim structure all those very complex outsourcing deals.
He's responsible for strategy and our future M&A approach. Of course, Tom Tran, who has decades in the managed care business, living through the WellCare turnaround. Then, of course, Larry, Carolyn, and Jeff running some very, very important corporate functions. Great team. They're here today. You'll hear from a few of them, and you'll get to mingle with them at lunchtime. As you build a company that is going to produce durable financial results that lacks surprises, that delivers on its commitments. You have to build a strong foundation, one that's forged in steel. We're pretty focused on that. When we fix things, we don't do it with, as they say, bubble gum and Band-Aids . This is permanent infrastructure fixes to make sure our business processes and our technologies can support the revenue base and the complexity of the business. We've built an incredibly strong foundation.
Obviously, our 2019 guidance, I think, is testament to that strong foundation. Who would have thought that we'd be producing $1.1 billion of EBITDA two years into this turnaround? Net income margins of 4.2%, EBITDA margins of 6.8%, and have $1.8 billion by the end of the year on our balance sheet and the free debt capacity to do the things that we might want to do. An incredible story really quickly manifested itself in a very, very strong financial foundation, both earnings and operational and balance sheet. Our margins. I constantly get asked, they seem to be the best in the industry. You be the judge of that. What are you doing differently than competitors? All I can tell you is what we're doing. We're constantly working the cost structure. We'll be talking about that today. We're in a very reasonable and rational rate environment that's actuarially sound.
We continue to identify profit improvement opportunities that when we began was $500 million in size, and now even after harvesting most of it through earnings, we still have $450 million remaining. With our profit improvement initiatives, with a rational rate environment, and having investments to be made in growth that can be funded out of earnings, we believe that this margin story that we've created, for the most part, is sustainable and gives us an incredible amount of flexibility to execute this growth strategy. This is a really important point. As I mentioned a few moments ago, that if you do have high margins, if as a pure play Medicaid play, your capital requirements to hold the rating that you aspire to are roughly 10% of premium. Your unlevered ROE on sort of regulatory capital is 40%. That's just pure, simple math.
We leverage at the parent company 45%-50%. The ROEs are incredibly attractive and robust, which means that in this plan, we will generate significant excess cash flow. You'll see later about $4 billion worth, some of which we plowed back into share repurchase and create that 300 basis point increase in EPS. Most of which would still sit on the balance sheet and act as a cushion to our guidance. It's an incredibly attractive story from a deployment of capital perspective that produces more excess cash flow for dollar earnings than our competitors, that we will then look for additional organic growth opportunities, look for M&A opportunities that are in our strike zone. Of course, if we run out of opportunities to use it, we would return it to our shareholders in an accretive way.
One of the parts of the story that we are, as a management team, most proud of is the restoration of the disheveled balance sheet that we inherited. I will tell you that, first of all, with all the losses the company absorbed, the capital in all of our operating subsidiaries was completely out of balance. Some were over-capitalized, some were under-capitalized, and you could never get the capital out of the over-capitalized ones to fund the under-capitalized ones. You're constantly raising capital, which was why we were sitting here last year kind of scratching our heads, where is this leading at an equity raise or not?
By restoring our earnings, by Tom and his team and Mark Keim working really hard, we have created an incredibly balanced capital story at our subsidiaries, created a robust flow of dividends to the parent company to where we now, by the end of the year, will have $1.8 billion of cash and unused debt capacity at the parent company. What an incredible liquidity picture. Meanwhile, our credit stats are extraordinary. We can pay back our entire debt load with 1 year of EBITDA, 1 times EBITDA coverage. We're covering our fixed charges with like three and a half weeks of earnings at 14.7 times. Even holding a 45% debt to cap, which we do in our projection period. Of course, there are our ratings. The credit stats are fantastic. The cash flows to the parent are robust.
Lastly, I would mention what I call the operational balance sheet improvement. This is a complex business. It's always hard to sift through the complexity of the actuarial information, the medical cost information, the complexity of risk adjustment. It's really complex, but we needed to get better at our operational accruals, reserves, risk adjustment, and we have. Testament to that is most of the time in the past 15 months we've been doing this, every time we've had a quarter, you know your accrual is either efficient or deficient by some amount. Things have been running off favorably, which is our intention is to be very conservative. Operational strength of the balance sheet, fantastic credit stats.
Our subs are capitalized at the right levels, which creates an incredible amount of dividend flow to the parent company, where we're over-liquid at the parent company and have plenty of deployable cash and debt capacity. I made this point before, but if you're producing 45% ROEs unlevered, and pick your number levered, your first and foremost and highest and best use of capital is go find those organic growth opportunities to sign up more premium. You could even do it at a margin that's slightly dilutive to your overall margin. At those returns, you would do that every day of the week. The problem isn't the capital capacity to write the business, the problem is finding the business. It's a highly competitive market.
We have market share where it is, and we fight for this business every day, but we're not burdened by constraint of capital in order to write new business. We have an expert acquisition team in place, and we will look for bolt-on, tuck-in opportunities all around the theme of the same products we're in today, in the geographies we're in today, bolt-on, tuck-in, or geographies we're not in today, expanding our territories. We'll look for underperforming opportunities since we have a history of turning around underperforming businesses in our own portfolio. We believe we can bring those skills to bear in the M&A market. First and foremost use of capital, find organic opportunities to sign up more premium. Second, look for accretive bolt-on, tuck-in acquisitions. Third, return it to shareholders or repurchase your debt if it's a good buy.
We'll spend a few moments just putting a point, because as I said, one year and one quarter of actual doesn't necessarily conclude the sustainability phase. Sustainability by its very nature, by its very definition, means long-term. We want to put a point on why we believe our margin profile is sustainable. First, we're getting a lot better at forecasting. We're identifying the risks in the portfolio. We're finding small problems before they become large ones and fixing them, which has given us the ability over time to admittedly issue conservative guidance, constantly beat it. More importantly to this story, this story wasn't just conservative forecasting. This story was a building to a crescendo of the profit improvement opportunities that we commenced upon at the beginning of last year. If you recall, the initial portfolio had $500 million in it.
Some of it was coming from our new pharmacy contract, UM, Payment Integrity, SG&A. It's hard work. When you add it, the momentum just builds and the opportunities then begin to manifest themselves in the earnings stream. Not only were we just being conservative, and we were admittedly, but the profit improvement was building more rapidly than even we imagined. Which gave us the picture last year of starting out the year with margins that were below 2% and ending the year with margins that were 3.7, nearly four, and gave us the ability to guide this year to margins that are in the same zone at $11 a share. The profit improvement opportunities continued to build and manifest themselves in earnings. Second, we inherited a portfolio that had what I call performance skews.
I would rather have a portfolio where every property in the portfolio was performing at one standard deviation to the mean and there were no outliers. I'd actually give up 50 basis points of margin to have that be a regular occurrence, but that's not the way the world works. The world works in skews, and the world works in distributions with tails. We inherited a portfolio that had some incredible over-performers and some incredible under-performers. Pam and her team and Jim and the operators did a great job of working with the under-performers to where for full year 2018, every business, every product in every geography made money on a fully allocated basis. Only one made money but was below our target margin, which I think was 2% after tax, and everything was at target. The portfolio we inherited in 2017 had many performance skews.
The portfolio is working really, really well. We hold them to high standards. We build stretch plans and a plan is a commitment, and we push hard for them to constantly improve their profitability to make sure that we don't have to push two or three properties to produce more because two or three properties are lagging. Everybody needs to perform to plan and close to the mean to get rid of those ugly performance skews that we inherited in 2017. Our margin sustainability story is backed by a premise. That premise is that rates stay rational, stable, and actuarially sound. I will tell you, because we're a rate taker in Medicaid, that's the environment we're in today. We put up on the chart here all the different rating factors that you're always "negotiating" with states.
You're always arguing about whether medical cost trend is 4% or three and a half. You're always looking at shifts in the acuity of your membership and trying to make sure you're getting rated adequately for that. When benefits get carved in and carved out? Are you getting enough premium for the carved-in benefits? Are you giving up the right amount of premium for the carved-out benefits? That's always a interesting exercise. Lastly, risk adjustment matters. How risky is a portfolio, and can you articulate and document the risk of your portfolio to make sure you're getting an adequate rate? Right now, the rate environment is rational, stable, actuarially sound, and for the most part, rates are tracking with medical cost trends. If that should change, then perhaps the outlook changes.
That's the environment we're in today, and I see nothing in current rate deliberations with states that would cause me to change that tune in the foreseeable future. This is a condensed version of the inventory we showed you last year. Early on, we identified $500 million of profit improvement opportunity, much of which dropped through to the performance of 2018. We freshened that up at the beginning of the year. I think we articulated to you at a major conference. It was $550 million at the time. We freshened it up. We told you that best estimation is we pulled $200 million of that into the 2019 earnings picture. Some of which went to absorb some rate deficiency, some of which went to absorb the stranded fixed costs of the two lost contracts.
$200 million, nonetheless, we believe is manifesting itself in the 2019 run rate. Our recent work has caused us to freshen up that estimate by an additional $100 million to where we believe there's still $450 million remaining. Profit improvement opportunity levers one would pull across the following spectrum. Utilization control, there's still more there. We're good. We're not great. We need to be better, particularly in high acuity. If you can't manage NICU, OUD, behavioral, and LTSS in this business, you can't be in the business. We're good at it. We need to get better. Our clinical policies are dated. Those are being modernized.
We're constantly looking at our medico- econ information and making it better, richer, more insightful, higher veracity, higher velocity, so we can look at inpatient admissions, ER utilization, length of stay, and all the pharmacy data that gets quite complex. We're at this every single day. There's still more there. We're good. We want to be great. Second, payment integrity, which is a very generic term for a very discrete set of activities that is critical to running a managed care company. You can see the capabilities down the left side of the page. Think of this as claim edits. Think of this as the arms race of providers who are constantly working with their revenue cycle management people, finding clever ways to bill you, and then the arms race of having the managed care industry respond with its own technologies to figure that out and eradicate it.
Meanwhile, the providers are then working on the next generation of revenue cycle management, and your job is to catch all that and keep it in balance. Whether it's prepay, pause and pay or post-pay, we were not modern with our technology stacks to do that. We brought in vendor partners who are best in class at this to help us, and we've harvested much of this opportunity in 2018. A lot of it is manifesting in 2019, but a lot of it still remains. In fact, this has a lagged effect on earnings. The work we're doing today will benefit not only today's earnings, but 2020 and 2021 earnings. The claim edits that we're building is building to a point where the earnings impact is quite significant. Our best-in-class vendor partners certainly have been a huge help there.
The company has done a great job of really focusing on the G&A line. With $1.8 billion-$1.9 billion of G&A, irrespective of where it's reported in the income statement, and 10,000 people, there's a lot to manage here. G&A in our company has neither been an art or a science. It clearly hasn't been a science, but it's becoming one. We are creating an environment where we're going to have a manufacturer's activity-based costing discipline to constantly work on the actions we can endeavor in order to reduce costs, outsourcing, spans of control, looking at lower labor cost pools, and clearly introducing automation, process design, and digitization to get rid of manual work. Continuing working on cost actions and with the growth we're projecting, we'll leverage the fixed cost base. Arguably, sometimes your cost base is 60/40, sometimes it operates as 40/60.
50/50 is a good number. There's a significant amount of cost leverage there is by growing the business, particularly the way we say we're going to grow it, in market, in product, leveraging the infrastructure that's already in place. Taking the cost actions we are taking, leveraging the fixed cost base gives us the flexibility to include in our forecast all the investments we need to make to grow the business. The investments we need to grow the business are in our projection, and they're funded through cost actions and leveraging the fixed cost base. Whether it's just working in new business development, in state, ground game, on the ground, developing relationships.
Whether it's the licensing of the technologies I referred to, whether it's the cost to actually get an operation outsourced and our rent-to-own vendor approach, or whether it's just more marketing and media to grow, it's all in the run rate of the business funded by continued cost actions and the incredible fixed cost leverage we get from growing the business. Lastly, if you're not good at this, you can't be in the government-sponsored managed care business. Every one of our product lines relies on capturing appropriate risk scores and quality measures. I know you know how this works, so I won't go through a tutorial. You not only need to be good at this and get better at it, you need to get better at this relative to your competitors. For the most part, these things are budget neutral.
You only can take out of the system what gets paid in and vice versa. You need to get better at this relative to your competitors. Jim and his team have been working really hard at implementing new technologies and processes to identify the gaps in quality scores, and identifying the people where we can really get appropriate level of intervention, get them into the doctor, make sure their acuity is documented appropriately, so we're collecting the right amount of premium. All we want to be able to do is collect the right amount of premium for the acuity of our population. We've invested a tremendous amount of time and energy in this, and we're getting better at this all the time.
As I mentioned before with payment integrity, this truly has a lagging effect, as the work we're doing today will actually benefit 2020, 2021, particularly, in Medicare and in Medicaid. It's some immediate benefit, but the portfolio build, which is creating lasting, durable, and future value. The last point I'll make on our trip down the sustainability road, to put a point on why we really think our margins are sustainable, is our operating model. We believe that there are certain things that we need to do in order to deliver on our promises to our customers. There are certain things that need to be proprietary. We need to do high acuity care management. We need to do frontline utilization control and care management.
We certainly need to do our own provider contracting and have the relationships with providers, whether it's a fee-for-service rate or whether it's a value-based contract. Calls, member calls, certainly. Provider calls, maybe. Having that touch point with a customer and a provider partner is critically important. There's things that we know need to be proprietary, are the essence of what you do, are front and center with the customer, and you would never outsource that touch point with the customer that would distance the Molina brand from the customer. Having said that, there's a host of activities that we couldn't possibly scale. There are niche capabilities that are so esoteric, it would be hard to imagine that we could hire effectively to get the best transplant team in the business to review transplants.
We ventured on a rent-to-own model with highly prestigious vendors to make sure we take advantage of capabilities that already exist in the market, that are already fully scaled, and give us the ability to integrate them with our proprietary process and make promises to our customer. Yeah, we're giving away some EBITDA margin. Trust me, these relationships and giving away a little bit on the SG&A line pays multiple times over in the medical cost line, particularly with CVS Caremark, NovoLogix, and the payment integrity routines. Our co-source, outsource model, our rent-to-own model, one, preserves capital. As I told you, our M&A strategy is not to go out and buy something at 10 times revenue and some company that has some capabilities. We can rent those capabilities, and enjoy the benefits of that particular skill without owning the equity of the company that's doing it.
I'm not criticizing other models for doing that. That's fine for others. It's not what we're doing. It's not what we're going to do. We don't need to buy these capabilities. We can rent them. By the way, if they get big enough to scale, our agreements give us the ability to bring them back in-house. Rent to own. A winning optimal operating model. Now that we've talked about the solid foundation that we believe we've created, financial and operational. Now we've talked about what gives us confidence in our ability to sustain the margin profile that we've built. We're now going to talk about our discipline and steady growth, our growth strategy. I find it actually unhelpful, I think, to you all. I don't want to put words in your mouth. To give you 25 pages on the industry, you've all written about that.
You did the same research we've done. You read all the government reports, all the consulting house reports. We're going to talk about the market on one page. I don't want to be presumptuous here, but I think we can all agree that being in the government managed care space is a pretty good place to be today, and we'll talk a little bit about that, but we're only going to do it on one page. Believe me, we got plenty of pages to support all this, but we're not going to read back to you what you've already written to us. Medicaid. These are addressable markets, not our growth rates. This is what we believe our consensus view is of the growth rates in these markets. Medicaid growing at 5%-8%.
There's a little bit of redetermination pressure going on right now, but that's just the ebb and flow of the economy. Economy's growing, 3.6% unemployment, particularly in the expansion population. Some people are going back to work. They kind of income out of Medicaid eligibility, fine. When unemployment goes back up to 5%, which it inevitably will at some point, they'll come back in. A little bit of pressure right now, but long term, we believe it's a stable market. No regulator, politician, or legislator is going to get rid of healthcare access for poor people. The underlying segment growth is really the high acuity populations that are still in fee for service. It's still less than half. More than two-thirds of the lives are in managed care, less than half of the money is, and states are still holding on to ABD money.
They're still holding on to LTSS money and money for all those other different programs that service the severely ill, mentally and physically. It's just true. When is it all going managed? Over time. We believe there's a 5%-8% growth rate, including trend, in the Medicaid business, which means the addressable market is pretty reasonable and pretty attractive. A refresher on what our Medicare business is. Our Medicare business is not traditional Medicare Advantage, MAPD or whatever our competitors call it. Our business is duals, both integrated through the MMP program, and in the free market D-SNP program. The duals is growing. This looks like a wide range of growth rates, but the consensus is it's growing, and it's probably growing at double-digit rates.
One of the reasons is with 10,000-11,000 people aging into Medicare every day, some of those people are already in Medicare, Medicaid, they'll age into Medicare. Secondly, it is nearly irrefutable that right now the number of people in D-SNP is under-penetrated, meaning that there are more people eligible for it that actually know about it and that are in it. Not only are people aging into Medicare every day, but there are already people, whether they've aged into it or whether they're severely disabled, who are eligible for it and don't know about it. We absolutely believe that us and our competitors are going to make sure we find them, either through brokers or direct through community outreach. We also have strong evidence that our state business partners are really, really focused on getting these people into an integrated and managed program.
We could go on for hours about all the data. It's a complex marketplace, how they access the program, how you service it. Carol will be up here later to talk a little bit about that. I think suffice it to say, it's a double-digit growth market and one that we're going to take advantage of. Lastly, the marketplace. It's not growing as the membership. Most of that 3%-5% is just trend and yield. The growth story we'll tell is our under-penetration in it, and if we're more fully penetrated across our Medicaid footprint, then we'll be able to grow. 3%-5% growth in the marketplace is mostly just the trend effect of premium yield. The addressable markets are there.
They match up with our product portfolio really well. We think this is not only high growth, but all of these products are perfectly synergistic. We provide access to quality healthcare to the disadvantaged through government programs. Whether someone is in Medicaid and aging into the duals, whether they're in the marketplace and lose their jobs and go back into Medicaid, whether they come out of Medicaid, they make a little bit of money, but are highly subsidized in the marketplace, our membership is moving in and out of these programs every single day, and we have the products to capture them and keep the membership for life. Not only is it a high growth portfolio, inherently, it is a synergistic portfolio, meaning the products make sense together in the same portfolio. What did we do during 2018?
When it became clear that we had sufficiently solved the margin restoration and recovery process, we knew the question that would be immediately asked is, when can you start growing again? We began working on building the infrastructure to do that. About two-thirds of the way through 2018, we built our new business development team to identify the opportunities in greenfield states, engage in a ground game, and go after new opportunities. We knew we couldn't wait. We did pass in North Carolina. If you recall, I announced that last year. It was the right thing to do at the time. Now we knew we needed to reengage in that activity, so we rebuilt the new business development team. We also rebuilt the corporate development team under Mark Keim's leadership to look at interesting M&A opportunities.
As we'll talk about later, we have the human resource capacity to do them and the skill. We've got the financial capacity to do them. Actionability of targets is the only issue. You just have to look harder. They're there. Coming back to the left side of the page. Early in the year, we had to rebuild the RFP process because obviously with the stunning news of New Mexico and Florida, then with the postmortem, having reviewed those, we knew we didn't have the right stuff. It was pretty obvious that the proposals were not responsive to the needs of the state. The proposals did not well articulate the skills and the capabilities we had, that Pam and her team really needed to rebuild that entire engine. Why? Because they had Washington, Puerto Rico, and Mississippi CHIP coming up, particularly Washington and Puerto Rico.
While your success is only what it is, we're at least three for three with the new team. Not only did our proposal win in Washington, but as you'll see in a few minutes, we were able to actually win more business in Washington through the strength of our proposal in showcasing our ability to integrate behavioral and medical care. It was an extraordinary win. Yes, I know what's looming large now for the next couple of weeks is Texas. I've been asked maybe a half dozen times, just as you were milling around this morning, and I continue to say we have confidence in our success in the state of Texas. Our standing in the state is great. We're performing well. There is no interaction between the team and the state. That is disallowed.
You're in blackout, and you're waiting for the answer, which should happen in a few weeks. We are still confident that not only will we retain our STAR+PLUS footprint that we have, but we have a reasonable degree of optimism that we'll win some or all of the additional seven regions. We're in six regions today. We're not in seven others. We have a reasonable degree of optimism we'll be able to win some or all the seven, and as I told you before, the math is very simple. If we had the same market share we have in the six in the other seven, that could mean an incremental $1.2 billion revenue opportunity for our company.
The pivot to growth happened in 2018 early on with the RFP process, about two-thirds of the way through the year with building a new business development team and a corporate development team to take advantage of greenfield opportunities, which have a very long gestation period, and putting people out into the marketplace, really rummaging around, looking for discrete M&A opportunities, bolt-ons, and tuck-ins. The last slide to set up the actual growth strategy is a really important data point. If you recall, at the top of my presentation, I said that we're national in scope. We are. We're in 15 states and territories. It's a diversified footprint. It's no more concentrated than any of our competitors. We have great incumbency status, which gives us a high degree of confidence when we go through a re-procurement effort.
We are still not as highly penetrated, in any of these products where we could be, just based on either a look at our competitor set or a look at what we believe is reasonable to aspire to. In Medicaid, we're number 5 nationally, 5% national share, but that's not really important because it doesn't mean anything. It really doesn't. It's too high level. Look down below. Our market share in-state is averaging around 9%, and our competitors are 15%-20%, which means many of our competitors have higher stakes of the business than we do in many of our states. You can't just hope that you grow market share. We're going to show you in a few minutes how we plan to grow it. We are under-penetrated in Medicaid relative to the best competitors in the business. Same thing in duals.
Nationally, it doesn't matter. With 8% in-state market share against 10%-30% of our competitors, and the same thing in Marketplace. In Marketplace, the math is actually easier. We were at $4 billion gross premium a few years ago. Granted, it was unprofitable, but it's possible to have that much business and keeping it perfectly in balance with the way we like to manage the portfolio. We know the Marketplace business can be one and a half to two times the size it is today and not be out of balance with the portfolio.
The three slides that I wanted to share with you to set up the growth strategy were the under-penetrated market share that we have today, even though we're scaled and national in scope, and the fact that we're geographically diversified, and there's this tremendous opportunity to take advantage, rather than looking at this as a risk, looking at it as an opportunity. Okay. I know you're dying to get into the numbers. You're going to have to suffer for five minutes through what we're calling our taxonomy of growth. As we build plans, they have to be structured. They have to be compartmentalized. They have to be actionable. The way we built this plan, as I was mentioning to a few this morning, is down to the ZIP code.
We're certainly not going to share that level of detail, we are going to share with you a structure of how we built the plan that makes it at least easy to understand, easy to follow, and it's the way we're actually executing our strategy, we call it our taxonomy of growth. It's going to have three dimensions. The first, the one we think is underappreciated, and maybe it was even underappreciated by us until we started analyzing it, was how much growth power there is in our existing geographic footprint with our existing products. The first dimension of the strategy doesn't have us venturing anywhere but in the 14 states and Puerto Rico where we are today and looking at the opportunities that exist today to grow the business right where we are. Tremendous infrastructural leverage, relationships, provider networks.
If you can do it's a highly leverageable opportunity. The first dimension of our growth taxonomy is leveraging the existing portfolio. The second dimension of our strategy is obviously to win new territories. Equally important, long gestation period. Can't control it. They either come to market or they don't. As I've said many times, we could have our eyes on these fantastic states, what an opportunity. Unless it's coming up for procurement, the point is moot. The second dimension of our strategy is how is Molina going to sort through the myriad of opportunities that exist over the next number of years, action them, and produce revenue? Of course, the third set, which we are not including in any of the growth rates you're looking at in our financial forecast, is inorganic opportunities.
How are we going to put our financial power to work in accessing bolt-on and tuck-in opportunities, particularly in our three core product lines? The three dimensions, leveraging the existing portfolio, winning new territories, and executing on inorganic opportunities. Let's take the first dimension. Without who, what, where, when, and how, you've got a vision, you don't have a plan. In complete concert with the way we've laid out our margin recovery plan for you last year, we're going to lay this out in a pretty detailed way, and the first lens is actionability. What are you going to do? What are the actions you are actually going to take in a market to grow the business? There they are, and we're going to talk about them in much more detail. If you don't know where you're going to do it, again, it's not a plan. We do.
We have this down to the rating territory, down to the ZIP code, based on competitive information, based on our analysis of markets, based on our broker relationships. We know the actions we're going to take, in what states and in what markets. In our growth plan, as I said, is down to the rating region of the ZIP code. Of course, the last lens is, okay, if you have identified the market opportunities in your various geographies, what are you going to sell to folks you've identified? Of course, it's across our core product line, including duals and LTSS, resulting in what we believe is a very predictable and stable growth rate. This is what we call sort of the core flow. As you'll see in a minute, winning new territories is lumpy, it's unpredictable. It happens, or it doesn't happen. You win, you don't win.
This should produce a regular cadence to a growth rate off of the existing portfolio. Actionability, how and what, geography, where, product, all producing a predictable annual growth rate that we'll talk about in a moment. Next, we're going to talk about the addressable markets. I think it's 14 states over the next three years, adding up to $60 billion of opportunity. We're going to talk about how we prioritize the opportunity and how we choose where we're going to play. Then we're going to talk about how we're approaching the RFP process. I've heard from many of you, I get it, the team knows how to execute on the operating fundamentals of the business, but now convince me you can win a proposal. Legitimate question, not offended by it, but we're going to talk about that.
All producing long-term annual growth is quite unpredictable, but we've got an estimate of what it can produce over the next four years. Lastly, inorganic bolt-on tuck-ins. We're not doing capability plays, strategic fit. We're not doing it for ego. These things have to be accretive. If they're turnaround opportunities, we'll hand it to our operators to fix the same way they fix the rest of the portfolio. It's opportunistic capital deployment. No M&A opportunities are in any of the growth numbers we're going to show you. It is all organic, leveraging the existing portfolio or new territory wins. That's our taxonomy of growth, that's how we've built our growth plan, and that's how we're communicating it to you. Right. Leveraging the existing portfolio. I was already asked this morning in sidebar conversations, what actions are you actually going to take, and how are you going to do it?
First, we believe we can increase our Medicaid market share, as it says on the slide. In many of the that are not statewide plans. We have the ability, through a re-procurement process, to expand our territory in states we already enjoy business. As I mentioned previously, not all the benefits, particularly the complex high acuity ones, are already in managed care. We believe that over the next four or five years, there will be benefit carvings, pharmacy, behavioral, LTSS, ABD. Lastly, in our two non-Medicaid product lines, D-SNP and Marketplace, we are nowhere near as penetrated in our Medicaid footprint as we can be, based on our analysis of the competitive landscape. Increased Medicaid market share, adjacent Medicaid geographies, benefits being carved into managed care that are currently in fee-for-service, and getting Marketplace and D-SNP fully penetrated in our footprint. That's the how.
Here's how we do it. National market share five, you saw the number before, in state nine. Our service area market share is only 16%. Even if you take it down from the state level and you say, we're only in these service areas, 16%, it's not 20, it's not 25. In many of our states, there's a big player with maybe 20, 25, even sometimes 50% market share. Ohio's a great example, like one player with 50%, four others with 12. We're not talking about going from 10% to 25. We're talking about go from 12 to 13. If you do that in every single geography, 1% of in-service market share across our entire portfolio is $750 million in revenue. Now, you can't just sit around and hope that it happens. There's real work that has to take place.
On the right side of the page, you see the operating actions we are going to take to increase our market share over the next four years. Don't know if you're aware of how Medicaid works, but there's an eligibility redetermination that happens routinely every year. It's constant. We believe that we've under-invested in many of the operating routines that allow us to hold onto membership. In fact, we believe that through the redetermination process, members are leaking out of Molina into other health plans because we don't capture them soon enough. We're not helping them in the redetermination process where we have the right to do so. We're not doing the outbound outreach to capture them. We know who they are. We know when they're going to be redetermined. We just don't have the operational chops to do this work. We're building it.
Capturing more members and keeping them in Molina upon redetermination. Second, auto assignment. In most states and in most geographies, auto assignment happens and is assigned based on your ranking on quality scores. When you don't rank highly on quality scores, you're lower in the hierarchy of who gets auto assignment. The higher quality score you have, the higher you rank, the more auto assignments you get. It's that simple. By improving our quality scores, we want to move up from fourth, third, and second place position in the hierarchy to one and two. We believe we can do that with all the work that Jim and Pam and their teams are doing to improve our quality scores. We believe we can do that. Next, community involvement, local marketing, community outreach, and provider relationships.
Providers may not help you enroll a member, but they can sure help dis-enroll one if they're not liking what they see in your service profile. By eliminating the provider abrasion that we've worked so hard to eliminate over the past year or so, by pushing more money that was spent in corporate down to the local level for community outreach, branding, and charitable contributions, we are spending more money locally on community outreach, network provider relationships in order to capture more members with media and marketing spend on the light side of a heavy investment. Local branding and marketing, provider relationships, auto assignment, and eligibility redeterminations are the operational activities we will undertake in order to grow our market share in most, if not all, our geographies, even Washington. Opportunity set two. Said we could add adjacent Medicaid geographies.
As I said, our in-service market share is actually still pretty low at 16%. Our state share is pretty low at 9%. There are various states, Texas is probably the best example, where we have these seven regions we're bidding on, and if we get them, it's $1.2 billion of opportunity. When California goes re-procurement later on, perhaps the ability to expand there as well. Not only through re-procurement, but there are certain states that we are statewide, like Ohio, where we play really well in Columbus and don't play at all in Cleveland. By rounding out, by looking at our infrastructure, where we are in states, and looking at the entire state, where are the MSAs, where are the populations, what's coming up for re-procurement, and where we can expand our footprint.
Opportunity set two is making sure we expand our reach in states where we already have great relationships and great business, but just cover more of the state. That simple. Opportunity set three. A lot of words on the page, but think behavioral, think LTSS. We've listed some of the states where we think that's going to happen. Michigan's a great example. LTSS and BH probably goes into managed care soon. As you know, Ohio recently was drafting legislation to go through it. They balked on it, but it'll come back at some point. When you look at where we are in MLTSS, managing $2 billion of spend, we believe we're the second-largest managed care player in LTSS spend. When it goes managed, we're in prime position.
If we convince the states, which I don't think they need a lot of convincing, to attach these benefits to the Medicaid contract, we're beautifully positioned. ABD is going to be attached to the Medicaid contract without a question. MLTSS doesn't have to be, but probably will. In behavioral, if they're smart, they'll carve in and have an integrated program the same way it works in Washington. The fact that we were so successful in Washington with behavioral carving and integration, the fact that we have $2 billion of MLTSS, and the fact that the states that are listed on the left side of the page are already contemplating it, gives us great deal of optimism that with our great relationships, strong incumbency status, and our proof points that we know how to manage these benefits, we can win as benefits are carved in to managed care.
Opportunity set 3, participate in increased Medicaid carvings. Opportunity set 4 is both Medicare and Marketplace. This slide covers Medicare. We've just stopped growing. We had a $600 million business a few years ago. It's still $600 million. As the company has gone through its issues, it just said, "Push the pause button, manage what you have." We didn't lose anything. We still have $2 billion of business in total. $1.4 billion is in the MMP program, $600 million in D-SNP. We have a great business. We just pushed the pause button two years ago and we let it atrophy. We're currently in 400 counties in the U.S. We're Medicaid only. We don't have Marketplace or Medicare. We filed this year, I know the number we initially reported to you was 170. We did file 170.
We decided not to go into 20 of them, so the number now is 150 new counties in 2019. We have a competitive product. It's priced well. We know who our competitors are. We've got great broker relationships who are also selling our Marketplace product. Our agency plant is working quite well, and we're leveraging those relationships. Because our margins are where they are, we've got some flexibility to price an attractive point, keep the price, the product competitive, and still keep our margins in the 5% after-tax range. Opportunity set 4 is making sure our Medicare D-SNP product is well represented and fully penetrated in our Medicaid footprint. Next opportunity set is the same issue with respect to Marketplace. I said before, I think the easiest metric is we had $4 billion of business before. We had great broker relationships.
I hate to just oversimplify this because it's a complex issue, but I will oversimplify it. Our product is overpriced, and our agents are underpaid. That's what happened. We put rich prices into the market because we felt we had to. We did not have visibility on the profitability for 2018. We put full trend into the market on top of a 60% rate increase in 2018 over 2017. Our prices were too rich, which gives us the margins we have, but we lost our membership. Make sure your product is priced appropriately. Make sure you pitch the metallic tiers the right way. We also under-clubbed Bronze, and we're not going to do that again. A lot of people are shifting from Silver to Bronze. We'll make sure we're representing Bronze, but we also have to make sure our commissions are well represented and competitive.
Our products are no longer going to be overpriced, our agents are no longer going to be underpaid, and that will get us back to full market share in the Marketplace. As you'll see on the next page, a condensed version of a slide we already showed you, our commitment is to make sure we grow the pool of profits. I never said we can hold on to 11% after-tax margins. In fact, you can't and grow. If you ease up on the margins, make sure the price of your product lines up with your competitors, and you do that by rating region, step by step, region by region.
We believe that by easing up on the price, easing up on the margin, we can grow the pool of profits, here illustrated as two growth rates easing up on the margins to nine and 6%, still demonstrating that you can grow the profit pool. Ease up on the margins, price the product competitively, make sure it's selected well represented with the agents, pay the agents a fair price, and we'll grow again. That's the thesis. Next. Geography. Just so I don't miss anything, I'm going to refer to a few cards here. As I said, if you don't know where you're going to do it, then it's a vision, not a plan. Every single one of our health plans has a growth mandate specific to if. Are you underrepresented in D-SNP? Are you underrepresented in Marketplace?
Have you not done a great job holding onto your membership and redetermination? Every single state has a growth plan. We've identified a few here that are contributing to the growth that we have. In South Carolina, we'll launch D-SNP next year, and MLTSS probably comes into managed care. Ohio is another D-SNP entry. Those are the two new D-SNP entries for next year. Ohio will see some Marketplace expansion. Marketplace is again underrepresented in Ohio. Michigan, as I said, MLTSS and behavioral probably come into managed care, and D-SNP is underrepresented, and so on and so forth. Mississippi has ramp-up. It has the new CHIP contract. Texas certainly has the potential for the seven new regions.
Even Washington has a growth rate that we actually, even though it has 50% and 55% market share, we actually think we can grow the business in Washington, certainly not to the extent we've grown in the past. We presented this slide just as testimony that if you focus on it, you can actually make it happen. When we took over the company in 2017, Washington and Illinois weren't where they are today. Illinois is bumping up against $1 billion of revenue run rate, which is extraordinary to me. When we inherited it was a little over half that and not profitable. Now it's one of our star performers in the portfolio and close to $1 billion in revenue through the activities you see here today. When Washington won their re-procurement, we bumped out some competitors, got membership in the regions.
Pharmacy was carved out, but behavioral was carved in. We were a net winner in that trade. Our D-SNP and marketplace products are still underrepresented and have grown. If you focus on it, we've done it before. It's happened before, and we gave you two case studies to illustrate that this is not a hope. Hope is not a strategy. This is actual. It's state by state. It's already happened, and we believe that on the chart we just showed you a few minutes ago, it's very, very specific, geography specific. Each state has a growth mandate that we expect them to execute on. Lastly, how are you going to do it? Where are you going to do it? What does the product look like? What does the product lineup look like? Without new RFP wins, that's coming on the future page.
Without new RFP wins, this results in 7%-8% Medicaid growth, some of which is market growth and yield, some of which is our strategy. 14%-16% Medicare growth, all off of our 2019 guidance and marketplace growth of the same number, again, off our 2019 guidance. Without new RFP wins, off the existing portfolio, leveraging the core business, 7%-8% in Medicaid without RFPs, 14%-16% in each of Medicare and Marketplace. How we're going to do it, where we're going to do it, what it'll result in. As I said, while maybe the leverage off existing portfolio might be slightly underappreciated, we know that what gets all the buzz in the market is winning new territory. It's value creating.
You know you can never make money out of the gate, but if you can get a reasonable price and a reasonable win, you can make money by year three, and with two successful renewals, you've got a nice long-term trajectory for great net present value. Back to our taxonomy. In winning new territories, the first thing you have to do is look at the addressable market. As I said before, we could have our eyes on the prize of some state which we think is fantastic. Unless it's coming up for re-procurement, it's an interesting point, but a moot one. What's the addressable market look like? We have three waves. 2020, you can see the map. $33 billion of opportunity. Louisiana, Minnesota, Kentucky, Pennsylvania, and Hawaii.
When Pam's up here on the panel, she'll put some color around how we approach these things, but let me make some brief comments. We have chosen, as we said, I think, on our earnings call, to play in Kentucky because we ran it through our screens and we thought we have a reasonable chance to win. A rational rate environment, strength of the competitors, ability to build a network, actual experience of my management team in that state from prior lives. We actually think we have a chance to win, and we're going to play in Kentucky. We chose not to participate in the Minnesota process or the Louisiana process. One, timing. We would have had to been on the ground in early 2018, and we were busy in 2018 doing other stuff.
There were structural aspects of the RFPs that gave us the feeling that timing aside, it was probably hardwired for the incumbents to remain being successful there. Structural aspects of the RFP, which caused us a little bit to pause, the timing just didn't work. We would have had to have a ground game going on in those two states early in 2018, and we were busy doing other stuff. Kentucky, we're there, and we're actively working on the RFP. Pennsylvania and Hawaii have not dropped yet, so we don't know. $33 billion of opportunity for contracts that are supposed to accept in 2020. Next wave, 2021-2022. You can see the states. I know I'm going to get asked, what are your favorites? We just can't discuss that right now.
You can rest assured that every state goes through the screens that we'll talk about in a few minutes: Missouri, Indiana, West Virginia, Tennessee, and Georgia. $17 billion of addressable market for the 2021 and 2022 vintage. Lastly, big land mass, few number of people in Nevada, Iowa. You can sort of scratch your head on that one. Delaware and District of Columbia, $10 billion for 2023. That's a light year away. I'm not even thinking that long-term right now. $60 billion of opportunity comes together pretty quickly, $33 billion of which is right in front of us. One of which we're absolutely approaching, two of which we agreed not to, and two which haven't happened yet. $60 billion of opportunity, our probability of success and how we prioritize is very simply a function of these seven criteria, as I mentioned before.
Is the size of the contract worth going? If you're going to end up with 10% or 15% market share, it better be a multi-billion dollar program so it matters. The last thing I need is an under-scaled property that I got to worry about. Getting scale and the ability to win against the strength of the incumbents. Who are the incumbents? What are the number of awardees? Are they shrinking the panel? If they shrink the panel, there's yet one more incumbent that has to be replaced in order for you to win. The strength of the incumbents, the number of awardees, the ability to build a network. Is the state looking for a plan to build a network? Are they looking for letters of intent, or are they actually looking for contracts? It matters, because those take much different time elements.
Of course, the rate environment, future growth prospects. Can we launch Medicare and Marketplace, et cetera. We look through a variety of screens in order to choose where we go. We're going to remain disciplined, and we're going to go. If we have a 50% chance or better of winning, we're going, and we're going to try. This gets asked all the time. I get the fact that you're operating the business well. I get all the operational stuff you're doing, this is a different deal. This is winning new business. I just fundamentally don't agree with that premise. Here's why. If the sales process in this business was some sort of secret sauce, like selling big-ticket life insurance, you need a general agency plan. Selling burial life insurance, you need door-to-door salespeople, or direct to consumer to sell certain things. That's not what this is.
This is a highly technical sale to a highly technical customer using the same folks that deliver these capabilities and services on a daily basis. The issue we had wasn't whether we had the capabilities, either table stakes or innovation. We didn't package them the right way and articulate them in a way that won. I'm absolutely convinced that when it comes to table stake capabilities and those things that states call innovation with a small I, LTSS, complex care management, transparency of PBM, et cetera, that our capabilities, based on our past performance, stack right up against the competitors. Where we were lacking was our ground game in the states to develop those relationships to get a foothold in that state and the ability to deliver a quality proposal.
This is a technical sale made to the same type of people we deal with every single day in servicing the 15 states we're in, judged and ranked by the same type of technical people that we deal with every single day. The fact that we're great technically at operating the business is exactly the skill set you package to convince someone to entrust me with your members. That leads to the value proposition. What do states actually want? Yeah, all the innovation things, they're really important. Social determinants of health is a real big buzzword right now. Opioid use disorder is an epidemic. It's incredible the amount of medical costs we're paying. What states really want gets back to the culture of the company. Durability, sustainability, reliability.
The last thing a governor's office wants is phone calls from a provider saying, "We're not getting paid appropriately." The last thing the Medicaid director wants are calls from consumer activists saying, "Your members aren't getting access to care. They can't get to see a PCP. They can't get a specialist. They're in a waiting line for service." That can't happen. Reliability, effective high-cost service, no friction or abrasion, and low cost, which gives us the ability to take their rates. That's what they want. Yeah, the innovation's really important, and we're as good at the innovation piece as any of our competitors. We have not branded it, we have not packaged it, and have we not delivered it to the marketplace in a way that's consumable and digestible. We have corrected that.
That's the Molina value proposition, and that's why I believe that we have just as good a chance at winning new procurements and unseating an incumbent as anybody else does. What does it all mean? Admittedly, we're conservative forecasters. By using a conservative set of assumptions, if you assume that we chase 40% of the opportunities, we win 40% of the $60 billion, and a market share of 15%-20%, when our plan is fully manifested in 2023 revenue, that could represent upwards to $2 billion of new revenue, bearing in mind the first dollars of revenue don't even hit until 2021, because we're starting today. It has to build over time.
Chase 40% of the opportunities, win 40% of them, build up to 15%-20% market share, which hits a revenue number of nearly $2 billion by 2023, which then has additional ramp as it achieves its full run rate. Conservative set of assumptions, and as you'll see later, because it happens only halfway through our projection period, it only adds about 2 to 2.5 points to the growth rate. It certainly is a very significant set of activities, and certainly value-creating, because once you get the first re-procurement and the second re-procurement, you're building a portfolio of lasting value.
Conservative set of assumptions, yes, but purposely done to suggest that even with a conservative set of assumptions on $60 billion of opportunity, nearly 9% of our 2023 revenue can be represented by business that doesn't exist today. Since we can't and won't talk about specific opportunities, we're going to talk about inorganic growth just generally before we get to the numbers, and I'll skip through this pretty quickly. We have the M&A talent under Mark Keim's leadership. We have the financial capacity. We actually do have a fairly robust inventory of targets. Questionable whether they're all actionable or not, but we know where they are. Provider-owned plans, underperforming health plans, single state, single city health plans. They're out there. Special situations, they're out there, and you just have to rummage around and find them. Again, no capability plays.
Our first foray into M&A will be in-market or a new market plays in our existing product portfolio. Give me Medicare, Medicaid, and Marketplace membership. Give me an underperforming property I don't have to pay a lot for, and we'll hand it to Pam and Jim, and they'll make it perform. It'll be incredibly value-creating. I skipped a page just in the interest of time. One of the things we did want to showcase here is the capacity we have for M&A. Because I think the first thing is going to be like, "Geez, if these guys are talking about M&A, are they going to dilute us with an equity raise in order to do it?" No. Not in the size and scope we're looking at right now.
If you recall, by the end of the year, I'll have $1.8 billion of dry powder on the balance sheet, either in parent company cash or unused debt capacity in our term loan A facility and our undrawn revolver. $1.8 billion of capacity existing this year. This chart actually shows another very interesting point. That every single year, if you maintain the level of margins we enjoy today, if you reserve some of those earnings to fund organic growth, your remaining deployable capital leverage is over $1 billion. Every single year, you're producing totally levered capital of over $1 billion. Interesting point. What is the point? The point is, at today's multiples, that gives you the ability to buy every single year about $2 billion of revenue at today's margins.
Multiples are right now about 50% of revenue in terms of valuations. The capacity is there. It's on the balance sheet today. If we can maintain this margin and capital profile every single year, we are building the capacity to do small tuck-ins and small bolt-ons. What are we looking to do? Provider-owned plans, they're all across the country. If you talk to providers that are not in the business, they want to get in. If you talk to the ones that are in, they want to get out. It's hard business. None of them are very good at it. A lot of these are 501(c)(3)s, all types of conversion mechanics. It gets complicated. We have a team really surveying the landscape to make sure we identify underperforming plans, single state plans, provider-owned plans. We will not pursue capability plays.
I see no reason in order to take advantage of the incredible skills of a vendor where I might represent 2% or 3% of his revenue to buy his equity. Why would I do that? I'm not trying to build the Optum of Molina. That's not what we're here to do. This is underwriting membership premium leverage. We're not going to buy capabilities. Hard book value, tangible book value plays, membership, give me some premium. That's what we're after, and we have the capacity to do it. A quick spin through the numbers. First, a word about 2020. We are not giving earnings guidance for 2020.
Since we're telling a growth story, and since the work you do in a year is usually producing the revenue for the following year, I thought it would be a credible thing to do that here we are almost in the middle of 2019. You sort of better have a good idea of what your revenue flows are going to look like for 2020, because you've already acted upon them. The events that needed to occur to generate 2020 growth have occurred, or we've caused them to occur.
Although we said long-term 10%-12%, we're saying next year, 7%-9%, and I would posit that the first year out of the gate, in an incredible $1.5 billion margin turnaround, the unfortunate loss of two legacy contracts by the legacy team that resulted in 10% decline of revenue for 2019, that out of the gate at 7%-9% is a really good start to the long-term 10%-12%. There's growth in all three lines of business. We have not counted any new RFP wins. In fact, I think that includes Texas expansion is not counted. It says it right there. It says steady state in Texas. Yield is 2-ish, buy in the next six, and Health Insurer Fees just for comparative purposes are not included.
If I go through the wheel of what's included here, many of our states, Illinois did a great job of building membership this year as some of our competitors went into sanction. South Carolina did the same. Mississippi has ramp that'll go into 2020 off of 2019, and it's not at full run rate. Then there's the Mississippi, the CHIP award, that hasn't even happened yet. Washington has some growth next year on some new programs that'll manifest itself in 2020. You don't need headlines. I don't need headlines. I need revenue growth. Before any of the big tickets happen, to produce 7%-9% revenue growth off a 10% decline in the first year of your growth strategy, not even accounting for some of the big-ticket items that can happen, we think is a really good start.
We wanted to give you visibility at this early stage into how we're thinking about 2020 revenue growth. This is the page that I talked about at the top of our remarks. Compound annual growth rate, think of it as three to five years, off of 2019 guidance to 2023. As I said before, 10%-12% revenue growth, 4.5% of which is in market growth and yield, 4.5%, which is light emanating from the actions we've taken in our strategy, and about 2.2% on the $2 billion of new territory growth, adding up to 11 to 12.
Admitted long-term premium growth of 10%-12%, holding serve on our margins at a midpoint of four, which produces net income growth almost equal to revenue, and with the extra juice by deploying some, only a third, of our excess capital produces an additional 300 basis points of growth to EPS. 10 to 12 in the revenue line, hold serve on margins, net income almost equal to revenue, 12%-15% EPS without deploying nearly two-thirds of the excess capital we're generating. That's the commitment. Here's the tail of the tape by product. This is just a recap of everything we showed you in the prior slides. There's the 7%-8% Medicaid growth rate we previously showed you without RFP wins. There's the $1.5 billion-$2 billion of projected RFP wins.
They only start happening in 2021 and build slowly to 2023, all producing a 9%-11% Medicaid growth rate. There's the 14%-16% for each of our non-Medicaid products, Marketplace and Medicare, adding up to the 10%-12% premium growth we're projecting over the long term. We'll remain disciplined. Our margins give us tremendous flexibility to have competitive products at the right price in order to produce these growth rates. A quick spin by product, just to give you a view of, okay, if I'm looking at Medicaid, Medicare, and Marketplace, and I'm trying to understand it by how much is just there inherently versus how much are you guys actually producing? We cut this by product line and saying, okay, in Medicaid, eligibles might grow 2%, modest, maybe a little conservative. Yield is probably about two.
That's the way it's been trending, which means that we're producing six percentage points of growth through the strategic initiatives that we talked about. Increasing Medicaid market share, the adjacent geographies, card wins, and winning new RFPs. 6% of the 10% growth rate at the midpoint is our strategic initiatives. Same thing in Medicare. Yields a little more, 4%. Eligible, same 2%. Our strategic initiatives produce 9% growth, and that's off of our D-SNP line of business, which is a smaller component of our total Medicare book. 15 points at the midpoint. Increasing market share and increasing our Medicare penetration in our Medicaid footprint. 9% of the 15% growth rate are specifically tied in the initiatives we said we would undertake to grow the business. Same thing in Marketplace. There is no membership growth in the Marketplace. It's pretty flat by everybody's definition.
The strategic initiatives, which is basically to just get better penetrated, to get back to where we were, to get back up to the $3.5 billion, $4 billion, to make sure our Marketplace business continues to track our Medicaid book of business. It leverages the same network, it leverages the same network rates. We're servicing the working poor. These are highly subsidized members. There's more of them out there. As I said before, we overpriced our product, underpaid our brokers. It ain't any more complicated than that. We can get back to the 15% growth rate mostly through just additional focus on pricing and commissions and getting back to the market share we enjoyed a few years ago. Coming back to our long-term trajectory, really repetitive, but this gets back to the sustainability question.
Why do I then believe that if you can grow revenue at those rates, can you hold margins somewhere in the 3.8%-4.2% range? As I said before, Medicare is operating really, really well right now. We think a better view, a more credible view of Medicare performance is 5%-5.5%, which is hardly backing up. I wouldn't say those margins are backing up. I would say they're reverting to the mean. They're probably still top decile at 5%-5.5%, so they're not backing up. Of course, in Marketplace, we're purposely going to bring them down into high single digit so we can grow the business again. In Medicaid, sorry, I know 3% sounds high, and it sounds way at the top of where everybody is, but we actually think we can hold our Medicaid margins in the 3% range. Why?
If we can grow the business and 50% of your costs are fixed, we can leverage the heck out of the fixed cost base. I think our IBNRs, our MLRs are right where they need to be. There's tremendous leverage in the SG&A ratio. If the rate environment remains rational and we remain a smart rate taker, leverage the G&A, the margin improvement activities, the $450 million portfolio that I showed you earlier, we continue to action, add up those factors and teasers and make your own judgment. Is this margin picture sustainable? We believe so. Rate environment remains stable. Continue to harvest the $450 million of profit opportunity, and the G&A leverage brings down our G&A ratio substantially over time if you assume 50% of your costs are fixed. That's why we believe our margins are sustainable at this level.
The last point, if you recall our guidance page, was how did you get to 12%-15% EPS? Again, in sort of the realm of conservative assumptions, here's another one. This plan produces about $4 billion of cash, $2.5 of which is raw earnings. Add your leverage on top of it. You'd lever up to keep your leverage ratio at 45%. If you only assume you use 35% of that cash to buy back shares at a trailing multiple, you reduce your share count, you're going to get 300 basis points of lift your EPS growth. The reason that's a conservative assumption is after doing that, there's still $45 of cash per share on the balance sheet at the end of this period, so there's cushion and margin for error in all these calculations. Conservative assumption on the capital deployment assumption we've used, but it's there.
Every managed care company that has a share repurchase program has earnings per share that are 300-500 basis points higher than its earnings growth. We're positing that the amount of capital deployment juice we get in our EPS could actually be the highest in the industry since our ROEs, at least in our view, are planned to be higher because our margins are higher, our capital requirements are lower. That's how we get conservatively pitched and viewed an EPS assumption that's 300 basis points higher than earnings. It's through the effect of deployment of capital pitched in an incredibly conservative way. Those are the numbers. That's the tale of the tape. It was really hard work getting the margins to where we needed to get them.
If we recall, we said maybe by 2020 we get to two, maybe by 2020, I think it was, we get to 2.7. Getting close to four in the first year was hard work, discipline, rigor, improving processes, harvesting performance improvement, and just managing the business more effectively. I don't think we proved anything in sustainability because sustainability by its very definition has a long-term feature to it. With the guidance we've given this year, with the first quarter we've reported, we have a belief because the rational rate environment, $450 million of continued profit improvement opportunity that we have a margin picture that is truly sustainable at the current levels. All of which give us a really, really strong foundation to begin executing the growth phase of our strategy. That's our story in a nutshell.
In a few moments, you're going to meet three members of the team who make a lot of this happen. Right now, thank you for listening to me for the last hour and a half. I hope it was instructive and helpful. Let's take a break, and we'll come back for the panel discussion. Thank you for listening.
All right. Are we ready to kick it off and circle back up after the break? I will ask everybody to come on in and retake your seats. For those of you, give us a minute to get settled, and we will kick off our panel discussion. All right. We are going to get settled. Welcome back from the break. Before we have Joe kick off our executive panel discussion, I just want to remind you all of our forward-looking statements, that we made remarks today that include forward-looking statements, and our actual results in the future may differ materially. Again, we have our forward-looking statement in your PowerPoint, so you can read it yourself. With that, let me turn it over to the team. Joe?
Okay, welcome back. Still gone? We are good? Okay. Welcome back. First, I do not think I need to go through the resumes of Jim Woys, Ken Sedmak, and Thomas Tran, but highly accomplished managed care executives and the ones responsible for really executing a lot of the hard work that has created value for us up to now and will create in the future. Jim is going to offer some thoughts, maybe more detail and color around some of the margin sustainability questions that come up and that we discussed during today's meeting. I think one of the areas that has created a tremendous amount of value for us, manifesting itself in earnings, for 2018, 2019, and continuing in the future, was the generic category of profit improvement we call payment integrity. Jim's team was primarily responsible for rejuvenating the entire program, making it work, and harvesting that improvement opportunity.
Jim, more color, more detail, give the audience your view of what you are doing in payment integrity to create that value.
Sure. In our business, a high-performing payment integrity program, it is really integral to great operating and financial performance. The first thing we did last summer is we went and looked at our payment integrity programs as they existed last year. Through that review and our prior experience, we determined that they were underperforming. It was partly an opportunity for us to figure out how we are going to change the underperforming capability to a high-performing capability, which is so important for our success. When I think about payment integrity, it really is, are we paying the most appropriate amount, so accuracy in claims payment, and are we actually paying, have the right responsibility for that claim payment? Who does have the actual financial responsibility for the payment of that claim?
When we think about this and we think across the work streams, it really starts with coordination of benefits, prepayment claims review, post-payment claims review, that we have disaggregation and classical sort of fraud, waste, abuse programs. Let me give you a couple examples of our early success. One of the areas in which is really important to Medicaid plans is determine who's got primary financial responsibility for a member's care. It's acutely important for Medicaid because Medicaid is usually always the payer of last resort, so they're always secondary to any other coverage. Normally, in a Medicaid population, you would normally see that there would be some evidence of some other coverage in the range of about 8%-10% of your population.
When we first looked at this metric back last summer, we were tracking to about 4%-5%. You can see we're substantially underperforming in identification about where there was other coverage. To date, through our efforts, we're sitting right just below 8%. Still some room to go, but I think we've made some pretty substantial progress in the coordination of benefit area. Another example would be in the prepayment area, specifically around medical policy and medical necessity edits. As we looked at it last summer, we looked at those edits and said that we weren't really performing at a market level. It's really important in our business that when we look at medical policies or actually medical necessity, that we are performing consistent with everybody else in the market. We looked at those. They hadn't been updated in a while.
The last few months, we've been updating those edits, and we've moved from a point to where we were last summer to today of improving our financial performance somewhere in the range of about $25 million-$30 million on an annual basis as a result of updating those edits. In summary, we've built a sustainable payment integrity organization. We've partnered with best-in-class vendors, as you saw in Joe's slide before. We've also established a continuous improvement program because this is a piece of our business that continuously evolves, and we have to be continued and capable of meeting those needs. At the end of the day, I feel really comfortable that we've made pretty substantial progress, but we still have some work to go.
Great. Thanks, Jim. Another area we talked about that gives us great confidence in our ability to maintain our margin profile was in the area of risk scoring and quality. As I mentioned, you cannot be in the three products we're in without being really good at this. It was clearly an area that you had identified when you came in that was undermanaged and under-invested in over the years. We just weren't keeping up with the competition, and therefore we are eroding our position rather than improving it. You've done a lot of work in the area, and maybe, again, share with the audience your perspective on how much you've done and how much more there is to go.
Sure. Similar to payment integrity, last summer we went and took a look at the appropriateness and the level of risk and quality scores that we were achieving and where we at market. Again, just like payment integrity, we determined that we were underperforming in this area. At this time last year, we estimated that we had a substantial opportunity to improve, get to market level risk and quality scores. Our work to date has proven that that opportunity is real, it's achievable, and most of it is yet to be realized. What we've been focusing on is building sort of organizational capabilities to be able to achieve those goals, to enhance our analytical and technical capabilities, to be able to identify those opportunities where we can drive to better risk and quality scores. We've been using best-in-class vendors.
Let me just give you a couple examples of when we look at why this opportunity is still yet to be realized. There is just purely a lag factor from the time that when the work is performed and when those final results will end up in your financial results. In Marketplace, the work that we're doing in 2019 to get appropriate risk scores in Marketplace will actually show up in our financial results here in 2019 and a little bit in 2020. The risk adjustment in Marketplace affects the current year risk transfer payment. However, in Medicare, the work that we're doing in 2019 will really affect the risk scores and the revenue in 2020.
In Medicaid, the time lag is even farther, that the work that we do in 2019 in risk and quality scores will basically show up in our rate development probably in 2021. You can see that it takes approximately three years to get a full run rate of the work that we're doing in 2019 to get the full impact to our financial results. What it tells us is that these future opportunities can give us some really benefits. One, in Marketplace, these improvements can allow us to price our product more competitively. In Medicare, it allows us to enhance our benefit options, again, improving our opportunity to grow in Medicare. In Medicaid, it gives us some opportunity to sustain any future margin pressure. All three of these areas really enhances our ability to grow.
I'm extremely confident that we've built the right sustainable organization to achieve these results, and we'll look forward to further improvement in this area.
Great, Jim. Thanks. One of the other aspects of our profit improvement plan that gives us, again, great confidence in our ability to sustain margins, is our continued progress in utilization management, whether it's medical costs, behavioral costs, or pharmacy costs. We've done really good work here to improve our operations, but there's more to do. As we said, we always want to make sure our members get the right service in the right setting at the right cost. We obviously have a financial profile to protect as well. Can you maybe shed some light on how we balance those two phenomena and the work that we've done and the work we continue to have to do?
Sure, Joe. Most of our medical management activities in the area of utilization management and case management are done on the ground, in the field, in the local markets. Though it's not completely standardized, the results have been very good, as evidenced by our first-class medical loss ratios. The job of the enterprise is to develop medical management programs that are standardized, that are consistent, that can be deployable to our markets in a sort of consistent, standardized way to achieve better results. It's the opportunity to identify best practices at the corporate level, and be able to deploy both operational and technology advances to the enterprise consistently across the board. In partnership with Pam and our health plans, we've identified several medical management opportunities that will improve our future operational performance.
They include things like a NICU medical management program or a kidney disease medical management program, or programs that will integrate behavioral health and physical health. These programs, like other programs, similar programs, will allow us to not only improve our financial performance, but also improve the health outcomes of our patients. Another area that we looked at was in the area of utilization management, in particular activities like advanced imaging or radiation therapy, where we just didn't have the skill or the capacity or scalability to perform these in the most effective and efficient way. We did look outside of our own walls and look for best-in-class partners, in this case, E viCore, to help us deliver these programs in a much more effective way and integrate with our operations. These will result in sustainable improvements in our healthcare costs.
Lastly, as an enterprise, we look at utilization metrics daily. We look at them from the perspective of what happens by market, by segment. We look for any variations in those practices and then make real-time adjustments to the decisions to make sure that we fall on track with what those medical management activities are occurring, both in the field and at the corporate level. Joe, I think we're well on our way of building a really first-class medical management capability at Molina.
Another area that got a lot of play early on was, as you came in, you and I got together to try to decide what to do with what was at the time, a pretty disheveled IT operation. It had gone through a lot of turnover. There were a lot of gaps in our capability. It became pretty obvious to us early on that in order to stabilize it and in order to deliver on our commitments, we needed a world-class partner. Then you took us through a process to analyze the market, identify a world-class partner, and begin with outsourcing our infrastructure. Maybe specifically with respect to the Infosys deal, but also with respect to our future strategy for IT, cost savings, and effectiveness, put some color on it and shed some light on it.
Sure. As you said, Joe, when you got here last year, you and I had a discussion around what we should do with our technology assets. We started at that time a pretty extensive procurement process to look at best-in-class IT partners to help us with infrastructure, application development, application maintenance, and testing. The purpose of this procurement was to find best-in-class partners to help us enhance our performance and to prepare us for future growth. At the same time that we were doing the outsourcing activity, we took the opportunity to right-size our IT organization, to look for enhancements into our capabilities and see efficiency gains within the IT organization, and at the same time build what I call critical retained organization skills in order to manage the company and the IT structure in the future as we move to an outsourcing model.
The combination of these activities and our outsourcing efforts is reducing our ongoing run rate IT costs by $85 million-$90 million a year. Again, the purpose of this outsourcing is to get best-in-class capabilities to improve our performance substantially, to get substantial improvement in our reliability of our performance, to get capabilities around scalability for future growth, and to improve our security position. I think we're now able to use technology as a strategic asset to fulfill our objectives.
You, for one, are one of the few people in the industry to claim to have real-time experience doing this with a vendor we selected, correct?
I have. I spent a big chunk of my prior career doing just this activity.
Shifting the topic area to growth. We've asked Pam to put some color around and some depth and detail to some of the topics we talked about this morning. Pam, first topic is we talked about the RFP pipeline, $60 billion, 14 states, and the process of evaluating where we go, where we have the ability to win. I thought since you're responsible for executing on the growth strategy in those areas, tell us how you're going to do it, how you're approaching it, and what the outlook is.
Thanks, Joe. You really touched on much of this earlier, but I think it's important to go over it again. We actively look at every RFP opportunity in the pipeline. As you noticed, about $60 billion as we see it today, that certainly can ebb and flow at any point in time. We're very selective and disciplined now in our approach on how we look at the opportunities. We meet together regularly as a leadership team to go over those and prioritize and target the markets which we're going to focus on based on our confidence and our ability to win in those procurements. What's the process of evaluating? What do we go through? First is, what's the state's desire for change? Is it a state with a new administration that has new goals for the program and they want to put their imprint onto that program?
Is it a state where the administration has a stable program and has no desire really for change? What's the regulatory and rate environment like? Are the requirements onerous, punitive, or reasonable? Are rates reasonable? Ability to attain a decent margin over time is critically important. What's the competition framing? Every market's in a little different state. Is anybody being challenged, having challenges, in a little bit of hot water potentially with the state? What's an internal recurring within the state? Are any plans leaving the state, as an example? Boots on the ground. What are we hearing from the advocates, from the providers, from our state partners, from legislators and Medicaid directors and so forth? What are they telling us in terms of what that opportunity framing is going to be?
Our ability to foster strong relationships, especially with the providers and the community-based organizations and the advocates, as well as with the administration and the legislature. Just as importantly, and last but certainly not least, what's our ability to build a low-cost provider network that provides the access to the care of high-quality care that our members need.
Along the same lines, getting a little more specific now. We've chosen to participate in Kentucky. That sort of became public information because of our being awarded a certificate of authority. We also decided not to participate in Minnesota and Louisiana, a couple of states where you've had prior experience in evaluating. I think just to give the audience a flavor of when we do decide to go somewhere, why, and when we decide not to, why, using those two states as examples, can you give us some color around them?
All right. Let's first touch on Kentucky. Why Kentucky? It's a large market. It has about 1 million three eligibles, about currently $7 billion in managed care spend with the current populations that they have. They have additional populations and benefits that have not been carved in yet. Our leadership team has direct experience in this market. Several members of our team does. We view this as an open, receptive regulatory environment, new Medicaid Director, who we know, as well as the administration that seems open to hear from new players. The rate environment has been stable. Many of us remember when Kentucky first went live, right? It was a really, really challenging environment. That's not the case today. It's a much, much more stable environment than it was when it first went into managed care.
The timing of the RFP here was also important for us because it gave us the opportunity to begin the critical pre-RFP planning activity that you need to do within the market in order to get to know the market. Also, we didn't know whether we were going to require a fully contracted network or not, so we just assumed we did need one, and we need to go and start building on that network and get ahead of the game. The competitive dynamics in that market are highly fluid right now, which we view as a potential opportunity. Where are we? The RFP dropped on May 16th. The due date of the RFP is July 5th. They haven't said when they're going to make an award, likely third quarter or fourth quarter, and with a go-live date of 7/1/2020. That's Kentucky.
What about Louisiana and Minnesota? Again, we evaluated all the criteria that we had already discussed. De novo Medicaid RFPs are a long sales cycle. Typically, you need boots-on-the-ground planning 12 to 18 months well ahead of those procurements. Both Louisiana and Minnesota RFP dropped in the first quarter, Louisiana in January, Minnesota in February. That would mean about this time or earlier last year, we would have had boots on the ground cultivating those markets and beginning to prepare for those RFPs. We were a little busy focusing on other things at this point last year. The timing of these RFPs was not ideal for us, first and foremost, again, assuming they would have met our criteria. However, there are a couple other footnotes I also want to make about both of these. In Minnesota, as the RFP dropped, guess what?
It required an attestation and a fully contracted network upon submission. That takes at least a good solid six months to build. You're not going to build that at the time you drop an RFP. In Louisiana, the RFP required letters of intent. That was different, actually, from the last procurement that they did, where they just asked for a plan of how you were going to build that network, and Joe kind of mentioned the nuances within that. Neither RFP mentioned how members would be allocated to a new MCO.
One of the obvious popular topics is pre-procurement. I don't know how many times I can actually voice confidence in Texas, but I think I did it three more times today. You can do it yet another. The question's often been asked. It's three weeks away, three, four weeks away, we'll know soon. Talk about Texas, but we also have some recent news on the timing of Ohio, and some not so recent, but fairly recent news on California. Maybe in that order.
Okay.
Texas, Ohio, and California.
California. Got it. Okay, Texas. Again, take us back a year to where we were at this time last year. Can you go back? Thank you. We had just come off losing two re-procurements when Joe and I joined the organization. We knew we needed to put together a high caliber RFP team in place, but we already had a bunch of RFPs in play, Texas being one of those, along with certainly Washington and Puerto Rico. Before that team in place in Texas, what we had to do was change the approach on the RFP, completely 180 it. First and foremost, we co-located the RFP team along with the subject matter experts in the plan with the plan team.
We ensured executive support with touch points regularly with the executive team, making sure we were bringing to bear every resource in the enterprise to ensure we could write a winning bid. Thirdly, we brought in third-party reviewers to read our early versions of the draft and critique us along the way. Where are scores at? Where can we punch it up and do better? Where can we bring in more proof points to make our point? Really important to get that iterative feedback from someone who's a third party, not just us talking to ourselves. Lastly, we review every RFP, every single word before it goes out. Today, we're in a much different place. We still won three RFPs with that approach. Today, as Joe mentioned, by the back half of last year, we now have built in what I call part of the growth team.
We have a new RFP leader and writers. We have a new Medicaid business development leader, and we have a new implementation leader and partnering very closely with our government affairs team and Carolyn's team. It's really a whole new approach for us going forward. We'll still leverage the best practices we did and co-location and third-party reviewers, but now we have the growth engine on top of that. This enables us to fully engage in pursuing new procurements. Like I said, we're three for three, even before this growth engine was put in place, winning the state of Washington statewide, the island-wide of Puerto Rico, and the new RFP, unseating the competitor in Mississippi CHIP. What gives us confidence? How do we view Texas? We feel confident. We don't know for sure, right?
We're pleased with the value add that we brought in to our Texas state partner. We know this market. We serve this market well, we remain in good standing in the state. With every re-procurement, there's an opportunity for us to increase our footprint. In this case, Texas, Joe already touched on this. Just in STAR+PLUS, if we maintain our market share in the seven new regions on top of the six we already have, that's $1.2 billion in annual incremental revenue. STAR CHIP, similarly, is just incremental on top of that if we did the same. We're continuing to participate in the STAR+PLUS and STAR CHIP re-procurement process, and remain confident going forward. The award date for STAR+PLUS, just as reference, is June 28th. STAR CHIP to be August 24th.
The go live for STAR+PLUS tentatively is June 2020, and for STAR CHIP, September 2020, if the state holds to that schedule. Okay, let's touch on Ohio. Governor DeWine, new administration, announced intent to re-procure the program as the program stands today. That meant they were looking at LTSS and whether to carve that in. Legislative committee did not recommend doing so at the end of last year. It is within the current footprint. We just got some new news yesterday, the one I shared, and they had a meeting with the managed care organization, and they set out a proposed timeline. Here's the updated timeline from the state. They're looking to drop an RFP in early 2020, probably January. Award date likely by July, with a go live date of 1/1/2021.
Ohio was the first to file for an extension of the MMP demonstration program with CMS. Now CMS has approved that extension through the end of 2022, and we're waiting just for finalization of the three-way contract between the state, the plans, and CMS. Let me touch on California. New administration as well. What they have announced on their website is they intend to re-procure in 2020, with an effective date out to 2023. That's the timeline that we're working through as we speak.
Great. Thanks, Pam. We made a point during the prepared remarks this morning on what states are really looking for, both in table stakes and in innovative capabilities. You spent a lot of time working with your BD team, packaging up the why Molina story. What is our value prop? Why select Molina over one of our competitors? Maybe just put your spinning color on that.
You really touched well on this. I want to hit on it one more time, Joe. Our overarching goal and our overarching value add proposition is, one, to provide members access to high-quality care. That's evidence-based care in the right setting at the right time. We want to provide for our states, our members, and their providers, a seamless and reliable experience. That sounds so simple, but it's so critical. I don't want the phone to ring in a Medicaid director's office, as you mentioned, or the Governor's office. I don't want providers being upset because we didn't pay a claim right. We don't want members upset if they can't get access to the specialists that they need. We want to be efficient cost stewards.
We want to be low cost and affordable for the states, we also are entrusted with taxpayer money, we want to be good stewards with those monies. We want to be the partner of choice for our states and the plan of choice for our members and our providers. What does it mean when we say we want a seamless, reliable experience? It's taking care of our states and our members and providers in a consistent manner. Choosing Molina varies by state, what their priorities and pain points are, and what their goals are. Are quality scores low? Are diabetes, Opioid Use Disorder significant concerns? For instance, Ohio, Opioid Use Disorder is a significant concern.
We need to craft an outline to those pain points or to their goals, how Molina helps the state achieve their objectives, also show our track record and proof points on how we've done it before. We strive to be the best responding to the voice of a local plan. That's why cultivating these markets is so critical in advance. We have to talk in the nuances of that local market. We have to be Kentuckians in Kentucky, Texans in Texas. Who are the important community-based organizations in serving disadvantaged populations? How can we partner them to help the goals of the state, whether it's rural access to care, food insecurity, self-empowerment.
Whatever the goals of the state are, we want to make sure we're partnering with the best community-based organizations to help to achieve those goals, because they truly understand local community needs and the local nuances of the community. Who are the critical access providers and key member advocates we need to work with? Being that voice, doing focus groups, having the conversations is so critical. Understanding the nuance of markets. Cuyahoga County, making sure you pronounce that right, and you know what that means in Ohio. The Appalachian area within Kentucky and how that differs from Louisville. Significant night and day. We understand and know how to manage the full spectrum of managing the Medicaid population.
That's a very wide spectrum, from temporary aid to needy families to the Children's Health Insurance Program, expansion population, Aged, Blind, Disabled, Managed Long-Term Services Supports benefits, working with dual, the intellectual or developmentally disabled, those with serious persistent mental illness, foster children. We know how to successfully work across that spectrum of the Medicaid population, especially those of high acuity populations. Couple footnotes, Joe mentioned this. MMP, the Medicare Medicaid Program demonstration. We are the largest in the country. We're in six states. We manage over 225,000 members who have Managed Long-Term Services Supports benefits, about $2 billion in spend. We have tremendous success in managing high acuity populations for states like Texas, Ohio, Illinois, California, South Carolina. We've long recognized the importance of integrating truly clinically for a member, the integration of physical and Behavioral Health.
We don't have a separate behavioral health entity standing over here that we contract with and they manage that. We look at it holistically from a membership perspective. We have a clinical team and a model comprised to support them on both sides of that in an integrated fashion, doing clinical rounds together. Washington is a significant reference point for this, as Joe mentioned, because they're fully integrating BH into their physical health across the state.
Agree, Pam. You really put a point on it. We, in my view, and in your view, we've always had the capabilities to do what states need to happen in order for us to win. We didn't, A, have an advanced ground game, which we now have, and B, we actually just weren't really good at packaging it and delivering it in a coherent way, and I think we solved that one as well. Thanks for putting a point on that. Question came up during the break as we were milling around about the aspect of our strategy where I mentioned growing market share, Medicaid market share in our existing markets. One of the areas was the suspicion we have, a very well-grounded one, that we have members leaking off the Molina rolls during the redetermination process.
The question came up as well, is that true, and how do you solve it operationally? Do you have the ability to solve it operationally? You're the one who's managing that aspect of the business. You're the one who owns that strategy, maybe helping the audience understand that would be helpful.
Okay, great. I'll touch on that specifically. First, let me frame it. Market share growth within your existing footprint in Medicaid means you have to excel in two parameters. One is in auto-assignment enrollment and optimizing your position relative to that, and the other is involuntary selection, member share of choice. You want to make sure you are the plan of choice for members. That also includes those being that plan of choice for providers because they can have influence relative to that member choice. Let's first start on the redetermination question. We just have to be better than our competition in holding onto members before, and not letting them fall off the roll. Right now, that had not been something, an area of focus for this organization. It's a hyper-focus for us, and we have a disciplined process we're putting in place.
States give us a file about 90 days in advance of when a member's going to be falling off the rolls if they don't redetermine. We actively take that list and outreach, both from Jim's organization and then down through the health plan, to ensure those members hold onto their eligibility status. We just are hyper-focused on that, and we have metrics that we measure to ensure we are improving on that redetermination process. We know who they are. We know when they're going to roll off. We have to go and find them and outreach them to, whether it's locally in the community or if we can reach them by phone. We want to make sure that we're doing better than we did before and also better than our competitors are doing. That's really the process of how you do that. It sounds easy.
It's hard to do, but it's critical. It's just a productivity and efficiency, and then ensuring you've been able to outreach to members and help them through that process. On the auto-assignment algorithm, there's various ways in which states do this. Increasingly, they're putting quality as a key element into that auto-assignment algorithm. We have to make sure that we're best in class relative to our performance on those metrics to ensure we're at the top tier relative to that algorithm. We have to improve the consistency and efficiency of our core operations. Again, I want to use the word delight our members and our providers. We want to have high satisfaction in their call center and their claims payments, and just the overall experience they have in interaction with Molina. We want to increase our member and provider satisfaction scores. Super critical.
CAHPS is usually the one for members that are used. We are very keen and focused, and we have game plans in every single state on how to work to improve those scores. We want to create strong buy-based relationships with our providers. If we're going to be the plan of choice for them because of that arrangement, that has influence relative to member selection of our plan. Finally, and certainly not least, we want to have compelling value-added benefits for our members. The ones that are impactful, important to them in that local market, and that varies by market, but we want to make sure we're hitting on what's important to them and differentiating to them.
Great. Thanks, Pam. Mr. Tran, we talked a lot about our financial profile. Particularly, in one year, you working with Mark Keim, really reconfiguring the balance sheet and making it a strength rather than a weakness. One of the areas we talked about this morning was the return on equity model. Having best-in-class numerators and moderate denominators, we're producing ROEs that are going to produce significant excess cash flow. As the CFO of the company, how do you think about it? Maybe put some color around it from your perspective.
Sure. Absolutely, Joe. Joe commented earlier, in your deck, there are a couple pages in there, maybe page 70 to 66, as we talk about the ROE and deployment of capital. Let me just provide a few, a little bit more color on that. In our business, managed care business, the capital required for growth is not that significant. Typically 8%-10% of revenue that you need capital to support that. If you look at our guidance we provided, after-tax margin of 4%. On an unlevered basis, that's like a 40% ROE. If you put leverage on top of that, let's say debt to capitalization ratio of 50%, you can get ROE up to 75%. That just illustrates the power of the business model. When you think about it from our guidance that we provided, I take that as true illustration.
We have $16 billion in premium 2019 full year. Let's just say you grow the business 10%, that's $1.6 billion. Capital need to support that, a little bit less than 10%, let's call it $150 million round number. Our guidance for 2019, we have $700 million of net income at a midpoint. You need $150 million to support growth. You have $550 million left as excess cash for deployment. This is what Joe illustrated before, the power of excess cash, that you can generate it and get a lever on top of that to really grow.
Similar topic. We believe our model produces significant excess cash flow. The question always becomes: what are the lenses you look through to deploy it? How do we think about it? What is the highest and best use of our excess capital? Maybe just give us, from the CFO's chair, your spin on that very issue.
Sure. Before I dive into capital deployment, let me talk a little bit about what we have accomplished over the past year or so in terms of really, I would say, to put a balance sheet and cash structure in a great position. We have lowered our leverage ratio, essentially, debt to EBITDA, from 2.7 times to 1.0 times today. That we have also improved our interest coverage ratio from about seven times to 15 times. During that period of time also, we have reduced the convertible notes that provide a lot of volatility in our share count from the original amount of $550 million, down to about $78 million. As you know, these convertible notes will be out of our capital structure by January 2020, that's when they mature. We've done a lot of things to really put ourselves in a great position.
As Joe commented earlier, in one of the slides, maybe slide 18, that at the end of Q1, we had cash at the parent company of $440 million. In addition, we expect additional dividends from the sub between now and the end of the year of about $500 million. It could be more. That we have untapped capacity in our debt, and it's about $900 million. There's about $1.8 billion in total that we can deploy, essentially for any purpose, and especially for M&A acquisition and so on. Obviously, for capital deployment, the top priority for us is really to support the growth, organic growth in our Medicaid, Medicare, and our Marketplace business. Second, we maintain capacity for acquisition. We have demonstrated that before in discussion about excess capital we generate every year.
If we exhaust those opportunities, we have to look at potentially return capital to our shareholders, probably primarily through share repurchase. Those are really our capital deployment strategies.
Thanks, Tom, for that additional color. Our growth strategy relies on us growing the Marketplace of 14%-16% of the top line. I think one of the areas that you and I often have to discuss with investors, and to be very clear, we actually never claimed that we could hold on to the double-digit after-tax margin position we enjoy today. That was a function of a necessary approach to pricing before we understood the profitability of the product in 2018. We put yet another year's worth of trend on top of the price, which made us slightly uncompetitive. We lost some membership, but it was the right thing to do at the time.
Can you maybe just go through one more time of the dynamics between pricing the product appropriately, making sure it's competitive, giving up a little bit on the margin, growing the profit pool, and maybe Pam can add some color around our distribution strategy, our product profile in order to get that done?
Sure. Just so maybe lay the landscape for a second. We finished Q1 in Marketplace with approximately 330,000 members at the end of Q1. We expect some attrition monthly from there to the end of the year. We provide guidance that membership will be roughly about 280,000 by the end of 2019. The business is highly profitable. In the first quarter, we provide, obviously, margin somewhere in the mid-teen, and we expect for the full year margin of around 11% on an after-tax basis. From that perspective, it will generate about $165 million in net income. Obviously, Joe said already that that's a very high margin today that we don't expect to be able to hold on to that for a longer term. We're in the throe of basically pricing our products right now. In some markets, we already submit pricing for 2020.
Some markets, it actually happened in May. June and July will be very busy months for all of us to really submit pricing for our Marketplace products. In addition to existing counties that we're in, we're expanding counties in the current geography for Marketplace, and in addition to that, we're entering into existing Medicaid states that we don't currently have Marketplace products. We expect to grow this business in 2020. Obviously, we're very mindful that we want to maintain a decent profit margin. I won't go into the detail of what that is from a competitive viewpoint, but certainly, we expect it to grow next year and also to really maintain a decent margin. With that, I'll have Pam talk a little bit more about our product strategy and distribution and things that we see as opportunities.
All right. Well, thanks so much, Tom. Marketplace serves the working poor, as Joe had talked about, and it's an extension for us and priced off of our Medicaid network. The working poor access the Medicaid-like network, it's important that we have our network priced from a Medicaid
Our view, not from a commercial down view. We have a specialized vocal channel specific to our population, and we have room to grow. As Joe mentioned, back in 2017, Marketplace was a $4 billion revenue for the organization. How will we do all this? Our first pillar, our network, our unit costs to match our pricing. Really important. We engaged in intense analysis of our competitive position. We went and looked at, in every single county within our existing footprint and then those that we were targeting, where our rates needed to get to and how we could get there and put a plan in place to do so. That could then be informed also to our rate setting that we're going through that Tom mentioned right now.
We're refreshing our product suite as we speak, with more products, new benefits, then going into, as Joe mentioned, back into the branch products, where we have walked away from that a little bit in this year. Just continuing to believe that this business can grow with slightly lower margins, but more profitable. Again, it's a blind auction, right? Our competitors are also going through this framing as well. We believe, with a great deal of intensity and planning, that we're well-positioned for growth here in Marketplace.
Great. Tom, Pam, thanks for the color on the Marketplace. Tom, from the CFO's chair, any last words on the financial outlook that we conveyed to our investors this morning?
Sure, Joe. Before I go into our longer-term outlook, let me just, again, provide some additional viewpoints here and comments that Joe already said earlier today regarding 2020. The business model we're in provides us with very good visibility into 2020 revenue from the existing block of business. We're not even talking about new RFP wins or any potential Texas outcome. From that perspective, we're looking at next year, 7%-9% premium income growth. That's between $17 billion-$17.3 billion. Now, if you add premium tax, investment, and all the income on top of that will be another half a billion dollars on top. Total revenue will be $17.5 billion-$17.8 billion. Now, these numbers are without the Health Insurer Fee. We want to provide that on the same basis for ease of comparison.
To put a Health Insurer Fee on top of that, obviously, we price that in our product, the Marketplace and Medicare as we speak. However, we didn't put that into the numbers, for same basis of comparison. Look at a longer term, as Joe already commented, we're looking at growth, top line, 10%-12%, net income, 9%-11%, after-tax margin, 3.8%-4.2%. Some years might be more, some year it will be less, but over a period of time, it will be in that range of 3.8%-4.2%, and that EPS growth of 12%-15%. With potential excess cash and capital deployment, either through accretion, through share buyback or any other means, it could be upside from that 12%-15% range as well.
All the numbers we talk here are GAAP numbers, all inclusive, and don't include any, especially for 2020, potential development.
Great, Tom. Thanks. Before we go to executive Q&A, it's almost like you can't have a managed care investor day without some commentary on the political and judicial environment. We chose not to regale you with tons of information on that. We thought we'd at least get on the record our official view of what's going on with the Texas Supreme Court decision, our view of that, and also the sort of the rhetoric around Medicare for All and those types of programs. I asked Jeff Barlow, our general counsel, to provide some commentary on those issues. Jeff?
Sure, Joe. Thanks. With regard to the Medicare for All question, it's kind of striking the disconnect we perceive and a lot of other commentators have perceived between the political reality of actually getting it done and the reaction that we've observed in the sector with regard to the healthcare stocks. Sure, the Democrats could recapture the House or the White House and retain the House of Representatives. I think the big impediment is going to be getting the majority necessary in the Senate to get anything passed. The current political thinking is it'll be a struggle for them to even get a majority in the Senate, let alone to the 60 Senate mark that would be required to do something so sweeping and major in terms of $30 trillion in expenditures as required under the Byrd Rule.
A lot of Democratic politicians and congressmen themselves oppose it. A lot of media play has been given to those more prominent presidential candidates who are advocating for it. There's still a large number of very powerful Democratic politicians who actually oppose Medicare for All, and that's not been accentuated as much in the media. Finally, the political opposition that would come out of nowhere if it actually were perceived to be a viable possibility would readily squelch it. Just in terms of the practical politics of it, we just don't see it happening, and we think it's just been exaggerated too much in the media. With regard to the Supreme Court case or the Fifth Circuit case, oral argument for that is now set for the afternoon of July 9th.
This is a case that goes to the constitutionality of the Affordable Care Act. Just last week, both the intervener states and the House of Representatives filed their appellate briefs.
They're actually pretty good reads. The point being that this was involving the zeroing out of the tax penalty for the individual mandate. If you think back to the NFIB case that the Supreme Court decided back in 2012, a big element of the unconstitutionality was the coercive mandatory element of purchasing insurance. That now is gone, and as the state AGs point out in their brief, it's now effectively become a precatory provision in the law encouraging people to buy health insurance, but there's no consequence if they don't. The constitutionality question is, we think, is actually going to be decided in the favor of those intervener states. A lot of political commentators take the same view. Other possibilities is a finding that the states that are opposing the law actually don't have standing.
Again, we're confident, as with the great weight of political or judicial commentary, that that case is going to be overturned. Again, that concern is sort of a red herring.
Right. Thank you for that commentary, Jeff. Well, we're in the last half hour, the panel is going to remain up here with me, and we are going to respond to your questions. Please wait for a microphone folks on the webcast can hear it. We'll go Matt, Peter, and Anna. Matt?
Joe, while we wait, for those on the web, let me provide my new email address with the newest team. It is Julie.Trudell@molinahealthcare.com. If you send me your question, I can ask it here in the room.
Matt?
Joe, if I could ask a question on the excuse me, the sustainability of margins, and what I'm looking at is comparing your margins on a business mix adjusted basis with some of the larger companies and asking how do you outperform them at your size relative to them, and I know you were with one of the larger companies, when in fact you even have places to go that you haven't gone yet where you've got-
Sure
more work to do.
What's really interesting, and we've done all the scale map. In developing our strategy, we've actually done in-depth work at the local market level on scale. With our margins, it's hard to argue that even though we're under-penetrated, that we don't have local market scale. Me implying that our MLRs could get better because the purchasing power and SG&A ratio get better if we were bigger in Ohio and Texas. We think that's just untrue. We actually have local scale. I think what folks generally miss is everybody says, "Well, everybody gets the same rate, so therefore your margins have to be the same." It's completely untrue. Particularly when you only have 15% or 20% market share.
If our cost structure is better than everybody else's, and whether it is or not arguable, but let's just say it is, you're getting a rate that is benefiting with the higher cost structures of the rest of the competitors. The best position you can be in is to have 15%-20% market share, have the best cost structure in the geography, get the benefit of the higher cost structures in your rate, and have the best-in-class margins. That's what we think is happening. The fact that we actually can grow in our local markets, we think adds upside to that. The real upside is here is a rational rate environment and the $450 million of additional profit improvement opportunity.
I think generally what is missed is the idea that if you make money, you just give it back to your customer because it's like a retrospectively rated product. It's not. It's prospectively rated, and if you're operating at a better cost structure than your competitors, you're getting the benefit of their cost structure in your rates. That's what we believe is the truth.
Thank you.
Thanks. I think Anna, and then Peter had his hand up.
Yeah, thanks. The questions on margin sustainability, Jim talked about the kind of real-time feedback loop and daily monitoring of your cost base. Have you tested that against new contract onboarding and/or MLTSS or behavioral integration and other stuff? As you pivot to growth, what gives you confidence that you're managing against the risk of the top-line growth that you haven't seen so far?
Sure. Any time you get new premium, either on new members or new benefit, you're pitting your actuaries against the state actuaries, and you're trying to come up with a reasonable view. Now, the interesting thing about that is if you actually miss, the states are actually pretty reasonable about recognizing the fact that, oh, the population is higher acuity than we thought, or this benefit on which we gave you this much premium was inadequate. In fact, on the higher acuity population in Ohio, Pam, we're going through those types of discussions with the state right now, recognizing that if the healthier lives went back into employment, leaving the unhealthier lives in managed care, shouldn't there be a rating adjustment?
On whether it's new benefits, new members, or different acuity of existing members, the states actually readily entertain a discussion about getting the rates right, certainly prospectively, but hopefully retroactively. Now, we're not promising retroactive rate increases on some of those issues we have in our portfolio. We're hopeful that they'll be retroactive, but we know they'll at least be reasonable in prospective, right? Every time you grow and you're taking on a new member or a new benefit, you're trusting your actuaries to be smart rate takers, and so far, I think we've proven that we can do that. Peter? Go here, and then we'll go Sarah and Scott. Peter, right over there.
Thanks. Your 7%-8% growth without any RFP wins seems fairly aggressive. The story you tell is quite good. You've had some good execution here recently. If I compared you to, say, United or Anthem or Centene, somebody else who's big and strong in Medicaid, and I put all of you guys at 7%-8% growth, that wouldn't happen. I'd be wrong. You've got to actually outperform some other good competitors to do that. To the extent that some of your other estimates, maybe in terms of RFP wins, was maybe on the conservative side, have you considered what would happen if you didn't make the 7%-8% growth, and you were more like 5% or 6% or 7%, 5% or 6%, and then perhaps made it up in terms of membership from RFP wins?
What would that do to your EPS growth rate of 12%-15%?
Well, certainly it's highly leveraged to that. Let me comment. I'll take your questions in sequence. First of all, in that 7%-8% growth rate, bear in mind that there was some slight growth in membership just generally, even though the membership rolls are challenged right now with redetermination, and I think we put a 2% trend factor in. A third to half of it actually is just the lift of the market. The rest of it actually is gaining ground on our competitors.
The reason we think we can do it is if we're in a market and we're at 12% market share, and we have the two top competitors in the market share with over 20, we believe that by doing the four things we said we needed to do, be higher in the hierarchy of auto assignment, and we're not today, doing a better job of not allowing members to leak out of Molina rolls on redetermination, we actually believe we can incrementally grow market share. We're not talking about huge double-digit gains here. When we said that 1% market share on our in-market share is actually $750 million of revenue across our portfolio, we're talking about going from 11 to 12 in a market, 15 to 16 in a market, not 15 to 25.
Clearly, there are some gains in our growth rate on performing better than the market. About half that growth rate actually is just membership and yield, leveraging off a trend. Plan B, look it, we're conservative forecasters. Maybe some of our forecasts were conservative, maybe some of them were more liberal than you'd like to see, and certainly our new business forecast was purposely conservative. Our view is, in total, none of that stuff is going to become perfectly true. The real story here is there is so much opportunity across the entire portfolio, existing and new, that we absolutely believe that double-digit revenue growth and mid-double digit, mid-teens earnings per share growth is possible across this wide portfolio of opportunity. Whether one falls short and one comes in heavy, we'll be the judge of that eventually.
there's so much opportunity that we believe these numbers are actually reasonable and somewhat conservative.
Just to put words in your mouth, if you swap 2% of that same store growth for 2% new wins, your EPS growth would still be the same?
No, it wouldn't. When you gain $1 of market share in a market, you're leveraging infrastructure, you're adding no fixed costs, you're not even adding any variable costs. When you win a new market, you're investing in the program. Generally speaking, in our forecast, I actually believe in our forecast, new business doesn't actually produce a black ink until the fourth year. We build from a deficit to a lower deficit to breakeven in the third and make some money in the fourth. To be honest with you, the $2 billion of new revenue, 9% of that 2023 number is new, actually doesn't have much of a profit at all in EPS. You're right. The EPS is sort of leveraged to leveraging the existing business.
Thanks.
Yep, you're welcome. Sarah, then we'll go to this gentleman, and we'll come back to Dave and AJ over here. Kevin's got a question, too. We'll try to get all of them in. Oh, I'm sorry, Scott, your hand went up before. Sarah, then Scott.
Thank you. On SG&A, the 50% split between fixed and variable costs, I was doing the math, and it worked out to be about 22 basis points leverage on a $1 billion revenue add, which is really great because previously Molina had given guidance of 10-20 basis points under the last management team. It kind of shows the effort that you guys are doing here. First, is that in the right ballpark or the right way to think about it? Second, the idea of fixed cost leverage was your assumption of maintaining Medicaid margins. As we think about this 50/50 split, does that exist in Medicaid? Because I imagine HIPAA might have a little bit more variable costs with the broker fees. Can we think about that fixed cost structure applying also to your Medicaid book?
I actually think I'll let Tom. This is Tom, but I'm trying to process everything you said. I think it actually works even more dramatically on the Medicaid book. As I said, you're in Ohio, you got business, you get one more member in the same infrastructure, there's no fixed cost, there's no variable cost. It's all pure contribution margin. We think there's tremendous lift in the portfolio, and Peter raised the right question. That new business, meaning it's new membership on existing infrastructure, is highly leveraged in our EPS, and it's not an even swap between $1 of new and $1 of existing old. It's not. Tom, any comment on the leverage effect?
Sure. If you think about Medicaid, which is about 75% of our premium today, it doesn't have commission, right? Much of the growth that we're talking about over the next couple of years will be in existing market where we already have infrastructure. We add counties to that to develop a network. We have the same management team. You can provide a network service. The add-on cost is not significant at all. Now, when you enter into a new market, like a new RFP, for example, Kentucky, definitely there is upfront startup expenses that will chew up some of your margin in the beginning.
From a leveraging perspective, we expect that to play out for us over the next few years, and then new business, as you can see, about $2 billion over the next three to four years, will just be a small portion of our total. We still gain leverage over the next several years, definitely.
Scott? Then we'll go to Kevin. We'll get everybody in. We have time.
Thanks. I want to ask a question just on the M&A pipeline. I know you don't want to go into it too specifically, just thinking philosophically right now, in terms of how opportunistic you could be, because think about a couple of things just over the next year or so. One, while your Medicaid margins are very strong right now, overall industry Medicaid profitability is a lot softer. I think the overall industry, including all the nonprofits, are barely profitable in terms of Medicaid margins. When you think about your competitors for assets, particularly in things like underperforming plans, you tend to think about Centene and WellCare being typically two of your primary competitors. Obviously, they have other dynamics in play right now with their deal pending and then even afterwards, initial integration.
You tend to think about a couple of things right now, providing more of this near-term window over the next 12, 18 months or so. Just interested in how you think about that and how opportunistic you would be around those types of factors.
No, that's exactly the environment we're in. We now have the capital. We have the business development team under Mark's leadership, we're scouring the universe. We're talking to everybody, trying to find either underperforming plans, provider-owned plans in bolt-on tuck-in markets where we already have membership and infrastructure, to light up new markets. You're right. With two of the top competitors who would be acquisitive tied up with their own deal, it sort of presents a unique opportunity. Look, right now, I would say, Scott, that the biggest challenge isn't the financial capacity or the human resource capacity to do it's actionable inventory. The fact that they're not-for-profits is good in a way because they're underperforming probably, and the fact that they're not-for-profits is difficult in ways because it requires conversion and social issues and those types of things.
We're out there hunting and scouring, and we're willing to deploy capital, and we believe we don't have to deploy capital at much above tangible book value in order to action some of these things. We're actively looking at it. The pipeline is very robust and we're working on it. Nothing close to being announced or actioned, but we're at it every single day. Hand it to AJ, and then we'll come back to Kevin, and then we'll go to you next, Dave, and then we'll go across. We got it. We got plenty of time.
Thanks for the question. Maybe trying to get behind the expectations around the marketplace growth for next year, the 15%. Obviously, some of that could, it sounds like it's coming from just expanding your footprint into all the other Medicaid markets where you're at. Can you tell us how much of the 15% you think comes from that as opposed to the other? Because I think if you expand in the markets and get your normal share, that would be easy to sort of accept that. The other dynamic, and I'd be interested in your thoughts about this, is it seems like the marketplace is stabilizing now, the cost trend's stabilizing. This year, we think we saw competitions. People that had left the market, Blue plans and so forth, come back.
Are you assuming for 2020 and your 15% growth sort of a steady state competitive landscape, or are you assuming more competition comes back into the health exchanges next year?
Let me just set up the answer, and I'll kick it to Pam and Tom. First of all, when we say there's going to be additional competition, I think it's really important to focus on the segment of the marketplace we're playing in. It's Medicaid. They just happen to make a little more money, to qualify for Medicaid. It's the working poor. 25% of our members are fully subsidized, 95% of them are highly and partially subsidized. It's leveraging off our Medicaid network. You can't price down from commercial and be in the business we're in. You have to price up for Medicaid on your network. That's number one. Number two, we assumed a highly competitive environment for next year, the third thing I'll say before kicking it to Pam is I wouldn't actually even calling it expansion. I'd call it reestablishing ourselves.
We already had business in many of these markets with many of the brokers. Brokers wanted to see us back, but they said your prices are too rich. We're actually just reestablishing ourselves in our Medicaid footprint where we were before. Anything else on that, Pam?
To build on that, Joe, keep in mind, we reentered Utah and Wisconsin. We were too highly priced there. We're going to get focused and gain more competitive. We're looking across county by county, competitor by competitor, determine where we need to be in order to inform our rate setting for 2020. A very detailed plan around that. On the expansion side, we don't have as much experience in that, right? We did the same process. I'd probably say we're pretty conservative in terms of expansion areas of what our estimates are. We do have clear line of sight of what we need to do within our existing geographies, and then put laser focus relative to growth on that.
Again, just to put a point on it, because this executive team crawls through this stuff every single week as we're right in the pricing cycle. This is rating area by rating area. Here's our product across all the metallic tiers. Here are our top three competitor products across all the metallic tiers. Here's their price point. Here's our price point, gross and fully subsidized. We know exactly where we are. What price point do we need to hit in order to be more competitive? Does that require us just to drop our margin by a couple of points, or do we have to go back and get more weight out of our network? It's that granular and that detailed, and it's zip code by zip code. Now, the swag factor in all this is what are your competitors doing that you don't know about? That's the business.
You're making a blind bid against your competitors, we're assuming that it's going to be a fairly competitive environment.
Just to follow up on one thing you said there. In the end, they're price sensitive, but they're nearly 100% subsidized. That seems like they wouldn't be-
I know. On fully subsidized, it doesn't matter. It's actually a really weird dynamic. If you draw a curve, a member that is partially subsidized is more price sensitive than a member who's not. You say, "Why?" Because if I'm only paying $20 and I'm $10 off, it's 50%. If you think about the leverage effect of what I'm paying out of pocket, if you're $10 off on $20, it's a 50%. That's next week's groceries. That's the way the market works. Fully subsidized doesn't matter. Completely unsubsidized, it matters, but to a price point. Right in the middle, it's highly leveraged to that subsidy. Let's go. We're going to get Kevin in, and then I'll go to Mike, get Kevin, and then we'll go to Dave. Kevin, and then Dave.
A quick clarification question before I ask my other question. Tom, you mentioned that the guidance revenue doesn't include HIF. The margin target, the 3-5-year margin target, are those also excluding HIF, or do those-
Yes. For those on after-tax, HIF really doesn't play a factor, right? On an after-tax basis, it really doesn't.
I guess that applies to higher pre-tax margin.
On the pre-tax, you're absolutely right. There'll be some impact because it'll inflate your pre-tax number, right? Because you inflate your revenue, inflate your pre-tax. After-tax, when you kind of exclude it out, it will be about the same.
Okay. That's helpful. Going back to the kind of dedicated long-term growth, the organic part of it, I liked how you guys framed the new win opportunity and kind of said 40% or 40%. In that carve-in side of it, where you kind of do have to win a re-procurement to win the carve-in, is there a similar math behind that? I guess I'm assuming you assume you win all of your re-procurements, as far as the incremental revenue from carve-ins and things like that, is it kind of similar way where you assume a certain percentage win on the new ones? Or how do you think about that?
Yeah, we did model it. Tom or Pam, you want to talk about? We can't tell you exactly what's in the model, we did have an assumption about how much of that we would get.
You talk about a margin for new business. You're talking about, right?
He's talking about.
Carve-ins. Right.
On the carve-ins.
Oh, carve-ins.
How much of the carve-ins, the same way we modeled new business and our growth rate, how do we model carve-ins in our growth rate?
Right. A carve-in will be a small component of our total growth. It is a component. We know in certain particular geographies, there are potential carve-ins. Let's say LTSS is one of them, or ABD is another one. They're tied in together. We factored that based on certain geographies that we know about, right? We know based on experience what the potential revenue PNPM is for these particular carve-ins, and that's how we ought to model that in our growth rate.
In Michigan, if they're going to carve-in BH and MLTSS, we're assuming within our existing geography that we would capture those. Because they're talking about those, not doing an RFP for them, but bringing those into the program. In that case, that's where we have line of sight relative to that. Others where we're unsure, we took an adjustment for that. We were really conservative, only on those what we knew about. We didn't include, for instance, Ohio on MLTSS, because we knew at this stage, they had not decided yet to do that.
The two major assumptions are, one, they attach the benefit to the Medicaid contract, meaning the Medicaid players get first dibs. Second, the second assumption, why wouldn't we assume we get equal market share? Whatever our Medicaid market share is, we'd at least get that market share, is probably the way to think about it.
I can follow up a question on the marketplace. I think I've heard you say that you're really not assuming growth in the overall enrollment marketplace.
Correct.
You're kind of giving on margin to pick up on enrollment.
Correct.
You're pricing from a Medicaid up standpoint, et cetera.
In the network.
There's at least one other competitor that comes out in a very similar fashion, very dominant market share.
Yep.
Over-earning has to bring kind of margin down over time. We'll give on price to do that. I'm also thinking about the blues and them re-expanding in states where they had kind of pared back after losing money. I'm struggling to understand how this doesn't end up kind of being a stalemate and you give on margin, but you don't pick up the enrollment.
Clearly not offended by the question. It's legitimate. That's the math. You can't give up margin on it. You're purposely giving up margin on the entire book in order for the entire book to grow. That's what you're doing. It's very local. It's very local market knowledge driven, knowledge of what the competitors are doing, where they choose to play, how they choose to play. Some of our competitors just love to occupy a ton of real estate on .gov. That's how they do it. They splash their product everywhere they can on .gov, hoping somebody picks it. We know all these things. We know how the brokers are compensated. Don't think that broker compensation doesn't matter. I've been in insurance a long time. It matters a lot. In many places, we've just underpaid our brokers. We weren't competitive with the commissions.
They want us back in the fold, we think a lot of the business is going to move back because we're now paying the brokers more fairly. We understand exactly the competitive set locally. We understand where the competitor you mentioned and others are priced. We think we know where we need to be priced. In many cases, we think all we have to do is ease up on price and margin and don't have to recontract the network. If we came to the conclusion in order to win, we actually had to get a couple of points of rate out of the network, we'd go back out into network and try to get the rate. You're raising the strategic questions.
How do you know when you put that price into the market to try to target that margin, to try to grow your membership by 50 or 70 or 100,000, that the whole thing is going to work? It's not a bet. It's a calculated strategy. It's backed with great actuarial data and science and the attention of this management team. It's a very legitimate question. We actually think the math works.
Okay. Thank you for that. If I could pivot and ask a question on your rent-to-own strategy. In those capabilities, this is a two-part question. Are those vendors, do they have skin in the game? I know like an HMS model is a contingency-based model. Are many of those vendors on a model similar to that? Can their efforts get you to an industry-leading level in the things that they're doing for you, or do you sacrifice? Do you have to take a discount off a ceiling in those services relative to what you can do? Thanks.
Want to take that?
Sure. I think across the board, whether it's in payment integrity or risk and quality scores or whatever you're doing around outsourcing technology or some of our operations, we've orchestrated all those contracts where our vendors have skin in the game. Absolutely. It's really important that they're in the same path with us, and we intentionally don't call them vendors, we call them partners. Because we have monthly, quarterly meetings with our partners, we do quarterly business reviews with our partners. We sit down, and we try to make sure that we're all sort of aligned in the same path. So we want it to be a win-win relationship, because otherwise they're not in the game with us. So each one of our partners knows what our strategy is, and they're quite frankly, embedded with us.
I mean, we actually have their people embedded in our facility, and we're working these issues every single day with the same process around how are we going to improve our financial performance, how they win, how do we grow our business together?
Josh, then we'll Carol. There's a next question will be behind you. Josh?
Yeah. Question, or I guess questions on Centene. So first would be, where are we in the progress of their divestitures? Second would be, should we think about that as the typical divestiture process where it's a pretty good deal for those that end up as the buyers? Then third, maybe a little bit more globally, is there a change in the way you think about the dynamics of either the markets or Molina as an entity with those two coming together, leaving.
Sure
a relatively large standalone-
Sure
auction?
On the first issue, I come at it quite simply. They have said in many public forums that they're likely going to have to divest some properties to get their deals on. They're going to be the ones that determine whether they have to do it and which ones they are. I've said that we would work hard to get invited into that process. Whether I could assure we'd get invited to that process is an inappropriate statement. We'd work hard to get invited into that process. If there were properties where we were not conflicted, meaning where we also had business, we would try to compete responsibly but vigorously for those. You're right. To get them done, typically, I'm not commenting on Centene, so I'm not making comments respective to competition right now.
Generally speaking, having been in that position myself, yes, certainty of closure is paramount to make sure you get your own deal done. You'd hope that that meant the prices and values would be reasonable. Sure, we hope to get invited in. We compete responsibly and vigorously and hope the deals are well priced. From the market dynamic point of view, I think the math is quite simple. First of all, two great competitors, fine companies that execute really well are, I won't say tied up, but doing a major deal is an endeavor that ties up resources for a period of time, one. Two, it's the game theory math. If every state has four parties on their panel and there's six people competing for them and that number goes to five, your chances of winning are higher, period.
Having two competitors that you're always going head to head with on new procurements combining and making two strong competitors one just makes the game theory math easier in a market. Yeah, I think long term, having one competitor combine with another makes great new procurement math work for us. Here, and then we'll come back. Please, sir.
Yeah, it's Steve Adalikaze at Barclays. Not to get too granular on the Medicaid RFPs, but for the Texas one, since it is coming up here pretty soon, you did mention we should all assume a steady state for Molina. I think if I heard you right, you mentioned seven new potential regions.
Right.
I guess around that part, can you remind us just around any revenue potential from Molina, their total spend in those regions? If you have some market share assumption, could you remind us of revenue potential?
We do. We do, actually. Bear in mind, we just not putting in our 2020 forecast in no way should be viewed as a diminishment of our confidence in the win. It's just binary, putting it in the growth rate was just the wrong thing to do. We'll increase the growth rate to 2020 should we be successful. We've given the math, if we won in all seven regions where today we don't play, and we were able to climb to the market share we enjoy in the six regions where we do play, that would be an incremental $1.2 billion of revenue. Take the seven regions in total, apply our market share at its ultimate end state, could be upwards of a $1.2 billion opportunity. I think on the smaller award-
For STAR and CHIP, it would add another couple hundred million.
$200 million on the STAR CHIP Award. $1.4 billion-$1.5 billion of total new opportunity should we be successful in the new regions.
A quick question. We didn't hear one word about Medicaid expansion today.
I'm sorry?
Medicaid expansion.
Yes.
Is it happening in some of the states that didn't expand? We had a big election where states voted. Are you participating, or what's happening?
Sure. The one state where we're in, it expanded already. Utah is the one where it has expanded, and every couple of weeks they get an update. If they're going to go do it in fee-for-service, they're going to do it in managed care. Pam, do you have a recent update on Utah Medicaid expansion?
As you know, the voters voted to expand Medicaid in Utah to your question. Right now they're in the process of getting their program implemented. They do indeed plan to implement it first in fee-for-service, and then bring it into managed care likely sometime next year. I don't have a specific date yet. That's the one we do know about right now.
One more. We have time for one more question. Harry, back row.
Thanks, Joe. Can you give your best guess in terms of what you think the 3-5 year industry targets would be for after-tax margins for both Medicare and Marketplace?
The industry?
Yeah, just best guess where you think the industry-
I think we have said our aspirational goal here is to operate, I hate to say top decile, but at least top quartile. Clearly, I think the margin profile that we said we've aspired to and have projected here at this growth rate is at the top end of where the market is. Now, whether we can hold that position or not depends on a lot of things. As I said, stable and rational rate environment, our ability to drive on the $450 million of profit improvement opportunity, and leveraging our fixed cost base if we're growing it at 10%-12%.
I don't know exactly where the industry rates are going, but I will tell you that I believe, just asking me as a general business person, that these margins that we're forecasting to be sustainable would be operating at the top end of the market, probably top quartile. We've come to the end of our time. Thank you for attending today. We've enjoyed having you here. If it bears repeating. It would if you could hear me, please. We've crafted our own investment thesis, which we think is very easy to understand, and we tried to present to you today with specificity, granularity, and with complete transparency.
We do believe that long term, we can achieve a double-digit revenue growth rate, that we're in the right segments and in the right markets, riding both the vortex of incredible growth engines in these markets, but also growing faster than the market due to our operating initiatives. Second, we believe we can do so by aspiring to have the best cost structure in the industry, and therefore the highest margins. Having the highest margins in a high-growth industry is just an incredibly attractive investment thesis.
Extrapolating that to a best-in-class numerator and a best-in-class denominator, our ROEs are going to be incredibly attractive, which throw off a tremendous amount of excess cash flow, more dollars of excess cash flow per dollar of earnings than our competitors that we'll redeploy to shareholders in an accretive way, either through additional organic growth, M&A opportunities, or financial engineering and just giving it back to you. Lastly, an accomplished management team here on stage and here on my left that has done phase I, is doing phase II, and I have a great deal of confidence will accomplish phase III. Lastly, as I said, there's no glitz here. There's no glamour. There's no delusions of grandeur. There's an incredible amount of practicality and a strategy that says, "Stick to your knitting, stay in your lane. Don't venture far from the core.
Do what you do really well and just do more of it every single year." On behalf of me, my management team, and our board of directors, we know we serve at your pleasure and we're privileged to have this opportunity. Thanks for being here today.