Health Net 2009 Annual Report Download - page 10

portfolio services and client base through enhanced product wellness and behavioral change programs, and
workplace and work life services, as part of its EAP solutions. In 2009, MHN continued to implement, administer
and monitor the non-medical counseling program for the U.S. Department of Defense (“Department of Defense”)
under the Military Family Counseling Services program. See “—Government Contracts Segment—Other
Department of Defense Contracts” for a description of this contract. MHN also holds contracts with the U.S.
Department of State and the U.S. Agency for International Development (“USAID”) to provide EAP counseling
services tailored for State Department and USAID employees and family members while posted overseas.
MHN’s products and services were provided, including pursuant to the United Administrative Services
Agreements, to over 6.5 million individuals as of December 31, 2009, with approximately 140,000 individuals
under risk-based programs, approximately 2.7 million individuals under self-funded programs and approximately
3.6 million individuals under EAPs, including those who are also covered under other MHN programs. For
additional information regarding the Northeast Sale, see “—Northeast Operations Segment.” In 2009, MHN’s
total revenues were $133 million. Of that amount, $67 million represented revenues from business with MHN
affiliates and $66 million represented revenues from non-affiliate business.
Dental and Vision. We do not underwrite or administer stand-alone dental or vision products other than the
stand-alone dental products that we underwrite in Oregon and Washington. During 2009, we made available to
our current and prospective members in Arizona and California private label dental products through a strategic
relationship with Dental Benefit Providers,Inc. (“DBP”) and private label vision products through a strategic
relationship with EyeMed Vision Care LLC (“EyeMed”). Those stand-alone dental products were underwritten
and administered by DBP and the stand-alone vision products were underwritten by Fidelity Security Life
Insurance Company and administered by EyeMed affiliated companies. DBP also administers dental products
and coverage we provide to our members in Oregon and Washington. Liberty Dental Plans of California, Inc.
serves as the underwriter and administrator for the dental services we provide to our Medi-Cal and Healthy
Families program enrollees.
Government Contracts Segment
Our Government Contracts segment includes our TRICARE contract for the North Region and other health
care-related government contracts that we administer for the U.S. Department of Defense (the “Department of
Defense”) and the U.S. Department of Veterans Affairs. Certain components of these contracts are subcontracted
to unrelated third parties.
Under government-funded health programs, the government payor typically determines beneficiary fees and
provider reimbursement levels. Contracts under these programs are generally subject to frequent change,
including changes that may reduce or increase the number of persons enrolled or eligible, the revenue received
by us or our administrative or health care costs under such programs. The amount of government receivables set
forth in our consolidated financial statements represents our best estimate of the government’s liability to us
under TRICARE and other federal government contracts. In general, government receivables are estimates and
are subject to government audit and negotiation. See “Item 1A. Risk Factors—A significant reduction in revenues
from the government programs in which we participate could have an adverse effect on our business, financial
condition or results of operations.”
TRICARE
Our wholly-owned subsidiary, Health Net Federal Services, LLC (“HNFS”), administers a large managed
care federal contract with the Department of Defense under the TRICARE program in the North Region. We
have been serving the Department of Defense since 1988 under the TRICARE program and its predecessor
programs. We believe we have established a solid history of operating performance under our contracts with the
Department of Defense. We believe there will be further opportunities to serve the Department of Defense and
other governmental organizations, such as the Department of Veterans Affairs, in the future.
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