Health Net 2009 Annual Report Download - page 20

Additionally, the administrative services that we provide to United and certain of its affiliates as part of our
Northeast Operations are subject to state laws and regulations. The Connecticut Department of Insurance, the
New Jersey Department of Banking and Insurance, the New Jersey Department of Human Services and Division
of Medical Assistance and Health Services (for Medicaid only), the New York Department of Insurance and the
New York Department of Health are the principal state regulatory agencies that govern our provision of
administrative services in the Northeast pursuant to the United Administrative Services Agreements. For
additional information about our Northeast Operations segment, see “—Northeast Operations Segment.”
Insurance and HMO laws impose a number of financial requirements and restrictions on our regulated
subsidiaries, which vary from state to state. They generally include certain minimum capital and deposit and/or
reserve requirements, restrictions on dividends and other distributions to the parent corporations and affiliated
corporations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Statutory Capital Requirements.” These financial requirements
are subject to change, which may require us to commit additional capital to certain regulated subsidiaries or may
limit our ability to move capital through dividends and other distributions.
While there are state-by-state variations, HMO regulation generally is extremely comprehensive. Among the
areas regulated by these HMO regulatory agencies are:
• Adequacy of financial resources, network of health care providers and administrative operations;
• Sales and enrollment requirements, disclosure documents and notice requirements;
• Product offerings, including the scope of mandatory benefits and required offerings of benefits that are
optional coverages;
• Procedures for member grievance resolution and medical necessity determinations;
• Accessibility of providers, handling of provider claims (including out-of-network claims) and
adherence to timely and accurate payment and appeal rules; and
• Linguistic and cultural accessibility standards, governance requirements and reporting requirements.
PPO regulation also varies by state, and while these regulations generally cover all or most of the subject
areas referred to above, the regulation of PPO products and carriers tends to be less intensive than regulation of
HMOs.
Variations in state regulation also arise in connection with the intensity of government oversight. Variations
include: the need to file or have affirmatively approved certain proposals before use or implementation by the
health plan; the degree of review and comment by the regulatory agency; the amount and type of reporting by the
health plan to the regulatory agency; the extent and frequency of audit or other examination; and the authority
and extent of investigative activity, enforcement action, corrective action authority, and penalties and fines.
Our regulated subsidiaries are also subject to legal restrictions on our ability to price some of our products.
Some products may be subject to regulatory approval of premium levels. Generally, insurance and HMO laws
require premiums to be established at amounts reasonably related to our costs.
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. For example, the United States Senate and House of Representatives recently passed separate bills
relating to health care reform. These bills have not yet been reconciled with each other or signed into law. These
measures and other initiatives, if enacted, could have significant adverse effects on our operations. See “Item 1A.
Risk Factors—Potential health care reform legislation being considered by Congress may adversely affect us”
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