Health Net 2009 Annual Report Download - page 8

We also currently offer multiple types of Medicare Advantage Special Needs Plans, including dual eligible
Special Needs Plans (designed for low income Medicare beneficiaries) in Arizona and California and chronic
condition Special Needs Plans (designed for beneficiaries with chronic obstructive pulmonary disease and
congestive heart failure) in California. These plans provide access to additional health care and prescription drug
coverage. In early 2010, we implemented the new CMS Model of Care guidelines for our Special Needs Plan
members under which every member will receive intense care management based on his or her individual needs.
For 2010, we discontinued our hypercholesterolemia chronic condition Special Needs Plans in Arizona,
California and Oregon.
Medicare Part D Stand-Alone Prescription Drug Plans
We are also a major participant in the Medicare prescription drug benefit program with 460,216 members
across all 50 states (except New York) and the District of Columbia, as of December 31, 2009. We offer PDPs
covering basic benefits mandated by Congress, as well as plans providing enhanced coverage with varying
degrees of out-of-pocket costs for premiums, deductibles and coinsurance. Our revenues from CMS and the
beneficiary are determined from our annual bids submitted to CMS. These revenues also reflect the health status
of the beneficiary and risk sharing provisions. As a result of the Northeast Sale, we no longer offer Part D
coverage in New York, which resulted in the loss of 12,524 Part D members. For additional information
regarding the Northeast Sale, see “—Northeast Operations Segment.” We also provide Part D drug coverage
through our Medicare Advantage program and Special Needs Plans.
Medicaid and Related Products
We are one of the top ten largest Medicaid HMOs in the United States based on membership. As of
December 31, 2009, we had an aggregate of 857,388 members enrolled in Medi-Cal, California’s Medicaid
program, and other California state health programs.As a result of the Northeast Sale, we lost 54,423 Medicaid
members in New Jersey. For additional information regarding the Northeast Sale, see “—Northeast Operations
Segment.” To enroll in our California Medicaid products, an individual must be eligible for Medicaid benefits in
accordance with California’s regulatory requirements. The State of California’s Department of Health Care
Services (“DHCS”) pays us a monthly fee for the coverage of our Medicaid members. See “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of
Operations—Health Plan Services Membership” for detailed information regarding our Medicaid enrollment.
Medi-Cal is a public health insurance program which provides health care services for low-income
individuals, and is financed by California and the federal government. As of December 31, 2009, we had
Medi-Cal operations in ten of California’s largest counties: Los Angeles, Fresno, Kern, Orange, Stanislaus,
Riverside, Sacramento, San Bernardino, San Diego and Tulare. We are the sole commercial plan contractor with
DHCS to provide Medi-Cal services in Los Angeles County, California. As of December 31, 2009, 435,467 of
our Medi-Cal members resided in Los Angeles County, California, representing approximately 62% of our
Medi-Cal membership and approximately 51% of our membership in all California state health programs. In May
2005, we renewed our contract with DHCS to provide Medi-Cal service in Los Angeles County. The renewed
contract was effective April 1, 2006 and had an initial term of two years with three 24-month extension periods.
On February 14, 2008, DHCS extended our contract for an initial 24-month extension period ending March 31,
2010. On January 8, 2010, we accepted DHCS’ offer to extend our contract for a second 24-month extension
period ending March 31, 2012, and we and DHCS are in the process of executing a formal amendment of the
contract to this effect.
Our California HMO, HN California, participates in the Children’s Health Insurance Program (“CHIP”),
which, in California, is known as the Healthy Families program. As of December 31, 2009, there were 153,423
members, including 5,415 Healthy Kids members, in our Healthy Families program. CHIP was designed as a
federal/state partnership, similar to Medicaid, with the goal of extending health insurance to children whose
families earn too much money to be eligible for Medicaid, but not enough money to purchase private insurance.
Monthly premiums are subsidized by the State of California and, as of November 1, 2009, range between $4 and
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