Health Net 2005 Annual Report Download - page 5

The following table sets forth certain information regarding our employer groups in the commercial
managed care operations of our Health Plan Services segment as of December 31, 2005:
Number of Employer Groups ........................................... 27,413
Largest Employer Group as % of commercial enrollment ..................... 4.3%
10 largest Employer Groups as % of commercial enrollment .................. 18.1%
A general description of our health plan operations in Arizona, California, Oregon, Connecticut, New Jersey
and New York is set forth below. See “Item 7. Management’s Discussion and Analysis and Results of
Operation—Health Plan Services Segment Membership” for a discussion on changes in our membership levels.
Arizona. In Arizona, we believe that our commercial managed care operations rank us fifth largest as
measured by total membership and second largest as measured by size of commercial provider network. Our
commercial membership in Arizona was 117,245 as of December 31, 2005, which represented a decrease of
approximately 9% during 2005. This decrease was primarily due to decreased sales of our POS products in the
large and small group markets. Our Medicare membership in Arizona was 30,997 as of December 31, 2005,
which represented a decrease of approximately 10% during 2005. We did not have any Medicaid members in
Arizona as of December 31, 2005 or 2004.
California. We believe that Health Net of California, Inc., our California HMO (“HN California”), is the
fifth largest HMO in California in terms of membership and the largest in terms of size of provider network. HN
California holds a license in California under the Knox-Keene Health Care Service Plan Act of 1975 (the
“Knox-Keene Act”) as a full service Health Care Service Plan. Our commercial membership in California as of
December 31, 2005 was 1,456,705, which represented a decrease of approximately 7% during 2005. The
decrease in commercial membership was primarily due to the implementation of higher premiums during 2005.
Our commercial membership in the small group and individual market in California was 373,292 as of
December 31, 2005, which represented a decrease of approximately 19% during 2005. Our Medicare
membership in California as of December 31, 2005 was 93,469, which represented a decrease of approximately
2% during 2005. Our Medicaid membership in California as of December 31, 2005 was 697,723 members, which
represented an increase of approximately 0.3% during 2005.
Oregon. We believe that our Oregon operations make us the sixth largest managed care provider in Oregon
in terms of membership. Our commercial membership in Oregon was 138,287 as of December 31, 2005, which
represented a decrease of approximately 0.1% during 2005. Of these members, approximately 9,800 reside in
Washington. In December 2005, we announced that our Oregon health plan would expand its service area in all
counties in Washington state effective January 1, 2006. We expect this expansion to continue throughout 2006.
Our Medicare membership in Oregon increased by 7,660 members to 16,254 as of December 31, 2005 from
8,594 as of December 31, 2004. We did not have any Medicaid members in Oregon as of December 31, 2005 or
2004.
Northeast. Our Northeast operations are conducted in Connecticut, New Jersey and New York. For our large
employer group business, we directly market commercial HMO, PPO and POS products in Connecticut and New
York and commercial HMO and POS products in New Jersey. For our small employer group business in
Connecticut, New Jersey and New York, we offer HMO, PPO and POS products through a marketing agreement
with The Guardian pursuant to which we do business under the brand name “Healthcare Solutions.” Under the
agreement, The Guardian generally has the exclusive right to market and sell our HMO, PPO and POS products
to small employer groups. We generally share the profits of Healthcare Solutions equally with The Guardian,
subject to certain terms of the marketing agreement related to expenses. The Guardian is a mutual life insurance
company (owned by its policy-holders) which offers diversified financial products and services, including
individual life and disability income insurance, employee benefits, retirement services and investments.
We believe our Connecticut operations make us the third largest managed care provider in Connecticut in
terms of membership and size of provider network. Our commercial membership in Connecticut was 206,920 as
of December 31, 2005 (including 30,429 members under The Guardian arrangement), which represented a
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