Health Net 2000 Annual Report Download - page 36

34 HEALTH NET 2000 Annual Report
Notes to Consolidated Financial Statements
NOTE 1 – Description of Business
On November 3, 2000, the Company changed its name
from Foundation Health Systems, Inc. to Health Net, Inc.
and changed its ticker symbol on the New York Stock
Exchange (effective November 6, 2000) from “FHS”to
“HNT.”The Company accomplished the name change by
merging a wholly-owned subsidiary, HNI Shell, Inc., with
and into the Company and, in connection with such
merger, amending its Fourth Amended and Restated
Certificate of Incorporation to change the Company’s
name to Health Net, Inc.
The current operations of Health Net, Inc. (the
“Company”or “HNT”) are a result of the April 1, 1997
merger transaction (the “FHS Combination”) involving
Health Systems International, Inc. (“HSI”) and
Foundation Health Corporation (“FHC”). Pursuant to
the FHS Combination, FH Acquisition Corp., a wholly-
owned subsidiary of HSI (“Merger Sub”), merged with
and into FHC and FHC survived as a wholly-owned
subsidiary of HSI, which changed its name to
“Foundation Health Systems, Inc.”and thereby became
the Company. Pursuant to the Agreement and Plan of
Merger (the “Merger Agreement”) that evidenced the
FHS Combination, FHC stockholders received 1.3 shares
of the Company’s Class A Common Stock for every
share of FHC common stock held, resulting in the
issuance of approximately 76.7 million shares of the
Company’s Class A Common Stock to FHC stockhold-
ers.The shares of the Company’s Class A Common Stock
issued to FHC’s stockholders in the FHS Combination
constituted approximately 61% of the outstanding stock
of the Company after the FHS Combination and the
shares held by the Company’s stockholders prior to the
FHS Combination (i.e. the prior stockholders of HSI)
constituted approximately 39% of the outstanding stock
of the Company after the FHS Combination.
The FHS Combination was accounted for as a pool-
ing of interests for accounting and financial reporting
purposes.The pooling of interests method of accounting
is intended to present, as a single interest, two or more
common stockholder interests which were previously
independent and assumes that the combining companies
have been merged from inception.
The Company is an integrated managed care organi-
zation which administers the delivery of managed health
care services through two segments: Health Plan Services
and Government Contracts/Specialty Services.Through
its subsidiaries, the Company offers group, individual,
Medicaid and Medicare health maintenance organization
(“HMO”), point of service (“POS”) and preferred
provider organization (“PPO”) plans; government spon-
sored managed care plans; and managed care products
related to administration and cost containment, behav-
ioral health, dental, vision and pharmaceutical products
and other services.
During 1999, the Health Plan Services segment con-
sisted of four regional divisions: Arizona (Arizona and
Utah), California (encompassing only the State of
California), Central (Colorado, Florida, Idaho, Louisiana,
New Mexico, Oklahoma, Oregon,Texas and Washington)
and Northeast (Connecticut, New Jersey, New York,
Ohio, Pennsylvania and West Virginia). During 1999, the
Company either divested its health plans or entered into
arrangements to transition the membership of its health
plans in the states of Colorado, Idaho, Louisiana, New
Mexico, Oklahoma,Texas, Utah and Washington.
Effective January 1, 2000, as a result of such divestitures,
the Company consolidated and reorganized its Health
Plan Services segment into two regional divisions, the
Eastern Division (Connecticut, Florida, New Jersey, New
York, Ohio, Pennsylvania and West Virginia) and the
Western Division (Arizona, California and Oregon).
The Company is one of the largest managed health care
companies in the United States, with approximately
4.0 million at-risk and administrative services only
(“ASO”) members in its Health Plan Services segment.
The Company also owns health and life insurance com-
panies licensed to sell insurance in 35 states and the
District of Columbia.
The Government Contracts/Specialty Services seg-
ment administers large, multi-year managed care govern-
ment contracts.This segment subcontracts to affiliated
and unrelated third parties the administration and health
care risk of parts of these contracts and currently admin-
isters health care programs covering 1.5 million eligible
individuals under TRICARE (formerly known as the
Civilian Health and Medical Program of the Uniformed
Services (“CHAMPUS”)).The Company has three TRI-
CARE contracts that cover Alaska, Arkansas, California,
Hawaii, Oklahoma, Oregon and Washington, and parts of
Arizona, Idaho, Louisiana and Texas.This segment also
offers behavioral health, dental, vision, and pharmaceuti-
cal products and services as well as managed care prod-
ucts related to bill review, administration and cost
containment for hospitals, health plans and other entities.