Health Net 2010 Annual Report Download - page 140

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We have entered into long-term agreements to receive services related to pharmacy benefit management,
pharmacy claims processing services and health quality/risk scoring enhancement services with external third-
party service providers. The remaining terms are approximately two years for each of these contracts.
Termination of these agreements is subject to certain termination provisions. The total estimated future
commitments under these agreements are $45.9 million and are included in the table below.
We have entered into an agreement with International Business Machines Corporation (IBM) to outsource
our IT infrastructure management services including data center services, IT security management and help desk
support. The remaining term of this contract is approximately three years, and the total estimated future
commitments under the agreement are approximately $174.5 million.
We have entered into an agreement with Cognizant Technology Solutions U.S. Corporation (Cognizant) to
outsource our software applications development and management activities to Cognizant. Under the terms of the
agreement, Cognizant will, among other things, provide us with services including the following: application
development, testing and monitoring services, application maintenance and support services, project management
services and cross functional services. The remaining term of this contract is approximately three years, and the
total estimated future commitments under the agreement are approximately $29.7 million.
We have also entered into another agreement with Cognizant to outsource a substantial portion of our claims
processing activities to Cognizant. Under the terms of the agreement, Cognizant will, among other things,
provide us with claims adjudication, adjustment, audit and process improvement services. The remaining term of
this contract is approximately four years, and the total estimated future commitments under the agreement are
approximately $23.4 million.
We have also entered into contracts with our health care providers and facilities, the federal government,
other IT service companies and other parties within the normal course of our business for the purpose of
providing health care services. Certain of these contracts are cancelable with substantial penalties.
As of December 31, 2010, future minimum commitments for operating leases and long-term purchase
obligations for the years ending December 31 are as follows:
Operating
Leases
Long-Term
Purchase
Obligations
(Dollars in millions)
2011 ......................................................... $ 61.5 $155.5
2012 ......................................................... 44.5 107.0
2013 ......................................................... 37.2 84.4
2014 ......................................................... 35.4 17.0
2015 ......................................................... 28.3 3.3
Thereafter ..................................................... 25.2 0
Total minimum commitments ..................................... $232.1 $367.2
Lease expense totaled $61.4 million, $63.1 million and $71.1 million for the years ended December 31,
2010, 2009 and 2008, respectively. Long-term purchase obligation expenses totaled $184.1 million, $127.6
million and $33.9 million for the years ended December 31, 2010, 2009 and 2008, respectively.
Surety Bonds
During December 2005, the Company elected to post $114.7 million of surety bonds to suspend the effect,
and secure appeal, of the final judgment entered against the Company in connection with the AmCareco
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