Health Net 2001 Annual Report Download - page 8

Prime for the Regions 9, 10 and 12 contract decreased by 6% to 356,106 while the total estimated
number of eligible beneficiaries, based on DoD data and excluding Alaska, increased by 1% to 612,523.
DoD estimated numbers of eligible beneficiaries are subject to revision when actual numbers become
available.
Under the TRICARE contracts, Federal Services shares health care cost risk with DoD for both
gains and losses. Federal Services subcontracts to affiliated and unrelated third parties for the
administration and health care risk of parts of these contracts. If all option periods are exercised by
DoD and no further extensions of the performance period are made, health care delivery ends on
October 31, 2002 for the Region 6 contract, on March 31, 2003 for the Regions 9, 10 and 12 contract,
and February 29, 2004 for the Region 11 contract. The DoD Authorization Act for government fiscal
year 2001 authorized DoD to extend the term of the current TRICARE contracts for an additional two
years. Federal Services and DoD have discussed the modifications to the contracts for the additional
two-year extension. The additional two-year extension was added to the Region 11 contract and, if all
option periods are exercised, the period of health care delivery would extend to February 29, 2004. If
the additional two-year extension is added to the Region 6 contract and the Regions 9, 10 and 12
contract and all option periods are exercised, the period of health care delivery would extend to
October 31, 2004 for the Region 6 contract and March 31, 2005 for the Regions 9, 10 and 12 contract.
Federal Services also expects to compete for the rebid of those contracts.
In December 2000, Federal Services and DoD agreed to a settlement of approximately
$389 million for outstanding receivables related to Federal Services’ three current contracts for DoD’s
TRICARE program and for the completed contract for the CHAMPUS (Civilian Health and Medical
Program of the Uniformed Services) Reform Initiative. Approximately $60 million of the settlement
amount was received in December 2000. Federal Services received the remainder of the settlement in
January 2001. The settlement amounts were used, among other things, to pay vendors, providers and
amounts owed back to the government, and were applied to the continuing operating needs of the
three TRICARE contracts. The settlement agreement also provided for additional payments during
2001 and 2002 for costs that have not yet been incurred.
TRICARE FOR LIFE. TRICARE For Life (‘‘TFL’’) was passed by Congress as part of the FY
2001 National Defense Authorization Act (P.L. 106-398) and became Public Law on October 30, 2000.
The program was implemented by the DoD on October 1, 2001 restoring TRICARE coverage for all
Medicare-eligible retired beneficiaries who are enrolled in Medicare Part B. TFL covers all uniformed
services retirees, spouses, and other qualifying dependents and survivors (including certain former
spouses) who are Medicare-eligible and enrolled in Medicare Part B, regardless of age. Eligible
beneficiaries receive all Medicare-covered benefits plus all TRICARE covered benefits. For most
beneficiaries, Medicare will be first payer for all Medicare-covered services and TRICARE will be the
second payer. TRICARE will pay all Medicare co-pays and deductibles and cover most of the cost of
certain care not covered by Medicare. TFL covers approximately 1.5 million beneficiaries, with
approximately 500,000 of those beneficiaries within Federal Services’ regions.
VETERANS AFFAIRS. During 2001, Federal Services administered 11 contracts with the U.S.
Department of Veterans Affairs to manage community based outpatient clinics in six states. Federal
Services also managed 55 contracts with the U.S. Department of Veterans Affairs, one subcontract for
the U.S. Department of Veterans Affairs and one contract with the U.S. Marshals Service for claims
re-pricing services.
Specialty Services
We offer behavioral health, dental and vision products and services as well as managed care
products related to bill review, administration and cost containment for hospitals, health plans and
other entities.
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