Health Net 2005 Annual Report Download - page 19

from paying dividends to their parent corporations under some circumstances. For additional information
regarding our regulated subsidiaries’ statutory capital requirements see “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Statutory Capital
Requirements.” Several states have increased minimum capital requirements, in response to proposals by the
National Association of Insurance Commissioners to institute risk-based capital requirements. Regulations in
these and other states may be changed in the future to further increase capital requirements. Such increases could
require us to contribute additional capital to our regulated subsidiaries. Any adverse change in governmental
regulation or in the regulatory climate in any state could materially impact the regulated subsidiaries operating in
that state. The HMO Act and state laws place various restrictions on the ability of our regulated subsidiaries to
price their products freely. We must comply with applicable provisions of state insurance and similar laws,
including regulations governing our ability to seek ownership interests in new HMOs, PPOs and insurance
companies, or otherwise expand our geographic markets or diversify our product lines.
Pending Federal and State Legislation
There are a number of other legislative initiatives and proposed regulations currently pending or previously
proposed at the federal and state levels which could increase regulation of and costs incurred by the health care
industry. These measures and other initiatives, if enacted, could have significant adverse effects on our
operations. See “Item 1A. Risk Factors—Proposed federal and state legislation and regulations affecting the
managed health care industry could adversely affect us.” We cannot predict the outcome of any of the pending
legislative or regulatory proposals, nor the extent to which we may be affected by the enactment of any such
legislation or regulation.
Intellectual Property
We have filed for registration of and maintain several service marks, trademarks and tradenames that we use
in our businesses, including marks and names incorporating the “Health Net” phrase. We utilize these and other
marks and names in connection with the marketing and identification of products and services. We believe such
marks and names are valuable and material to our marketing efforts.
Employees
As of December 31, 2005, Health Net, Inc. and its subsidiaries employed 8,976 persons on a full-time basis
and 310 persons on a part-time or temporary basis. These employees perform a variety of functions, including,
among other things, provision of administrative services for employers, providers and members; negotiation of
agreements with physician groups, hospitals, pharmacies and other health care providers; handling of claims for
payment of hospital and other services; and provision of data processing services. Our employees are not
unionized and we have not experienced any work stoppages since our inception. We consider our relations with
our employees to be very good.
Recent and Other Developments and Other Company Information
Acquisition of Universal Care Health Plan Assets
On January 5, 2006, we announced that we entered into a definitive agreement to acquire certain health plan
assets of Universal Care, Inc., a California-based health care company. This transaction is expected to close in
the first half of 2006, subject to customary closing conditions, including regulatory approval. Upon closing of
this acquisition, we expect to add approximately 20,000 Medi-Cal and Healthy Families beneficiaries to the
approximately 700,000 Medi-Cal and Healthy Families beneficiaries that we already serve in nine California
counties. Further, we will have the opportunity to enroll an additional 20,000 Medi-Cal and Healthy Families
beneficiaries in Orange County. In addition, upon closing, we expect to add approximately 5,000 Medicare
Advantage beneficiaries and approximately 75,000 commercial members that have received coverage through
contracts with Universal Care’s health plans.
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