Health Net 2002 Annual Report Download - page 57

HEALTH NET, INC. | 55
NOTE 1—Description of Business
The current operations of Health Net, Inc. (referred to
herein as the Company, we, us, our or HNT) are a result
of the April 1, 1997 merger transaction involving Health
Systems International, Inc. and Foundation Health
Corporation.
We are an integrated managed care organization that
administers the delivery of managed health care services. We
are one of the nation’s largest publicly traded managed
health care companies. Our health plans and government
contracts subsidiaries provide health benefits through our
health maintenance organizations (HMOs), preferred
provider organizations (PPOs) and point of service (POS)
plans to approximately 5.4 million individuals in 15 states
through group, individual, Medicare, Medicaid and
TRICARE (formerly known as the Civilian Health and
Medical Program of the Uniformed Services (CHAMPUS))
programs. Our subsidiaries also offer managed health care
products related to behavioral health, dental, vision and
prescription drugs. We also offer managed health care
product coordination for workers’ compensation insurance
programs through our employer services group subsidiary.
We also own health and life insurance companies licensed to
sell PPO, POS and indemnity products, as well as auxiliary
non-health products such as life and accidental death and
disability insurance in 35 states and the District of Columbia.
We currently operate within two reportable segments:
Health Plan Services and Government Contracts. Our
current Health Plan Services reportable segment includes
the operations of our health plans in the states of Arizona,
California, Connecticut, New Jersey, New York, Oregon
and Pennsylvania, the operations of our health and life
insurance companies and our behavioral health, dental,
vision and pharmaceutical services subsidiaries. We have
approximately 3.9 million at-risk members in our Health
Plan Services reportable segment.
Our Government Contracts reportable segment
includes government-sponsored managed care plans through
the TRICARE programs and other government contracts.
The Government Contracts reportable segment administers
large, multi-year managed health care government contracts.
Certain components of these contracts are subcontracted
to unrelated third parties. The Company administers
health care programs covering approximately 1.5 million
eligible individuals under TRICARE. The Company has
three TRICARE contracts that cover Alaska, Arkansas,
California, Hawaii, Oklahoma, Oregon, Washington and
parts of Arizona, Idaho, Louisiana and Texas.
On August 1, 2002, the United States Department of
Defense (DoD) issued a Request For Proposals (RFP) for
the rebid of the TRICARE contracts. The RFP divides the
United States into three regions (North, South and West)
and provides for the award of one contract for each
region. The RFP also provides that each of the three new
contracts will be awarded to a different prime contractor.
We submitted proposals in response to the RFP for each of
the three regions in January 2003 and it is anticipated that
the DoD will award the three new TRICARE contracts on
or before June 1, 2003. Health care delivery under the new
TRICARE contracts will not commence until the expira-
tion of health care delivery under the current TRICARE
contracts.
If all option periods are exercised by the DoD under
the current TRICARE contracts with us and no further
extensions are made, health care delivery ends February
29, 2004 for the Region 11 contract, on March 31, 2004
for the Regions 9, 10 and 12 contract and on October 31,
2004 for the Region 6 contract. As set forth above, we are
competing for the new TRICARE contracts in response to
the RFP.
During the fourth quarter of 2002, changes we made
in our organizational structure, in the interrelationships of
our businesses and internal reporting resulted in changes
to our reportable segments. Assigned responsibilities for
applicable segment managers have changed as follows:
■One segment manager for the health plans has oversight
responsibility for our behavioral health, dental and vision
subsidiaries. These business units had been previously
overseen by our Government Contracts/Specialty Services
segment manager.
■One discrete segment manager has oversight responsi-
bility for the Government Contracts segment. Unlike our
previous organizational structure, this segment manager
does not have oversight responsibility for any of our
other specialty services companies.
■One discrete segment manager has oversight responsi-
bility for the employer services group operating segment.
This segment manager does not have oversight responsi-
bility for any of our other specialty services companies.
Notes to Consolidated Financial Statements