Health Net 2010 Annual Report Download - page 23

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. In
addition, either the states or the federal government will create exchanges, which will act as markets for the
purchase of subsidized health insurance. At least some states and possibly the federal government may condition
health carrier participation in an exchange on a number of factors, which could mean that some carriers would be
excluded. 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.
State regulations also may be more stringent than federal regulations that are applicable to us. For example,
the California Department of Insurance recently adopted emergency regulations requiring individual products
subject to its jurisdiction to meet or exceed an 80% medical loss ratio in 2011 using the methodology set out in
the interim final regulations issued by HHS. The requirements of the federal interim final regulations do not
apply to 2011 medical loss ratios until 2012.
Intellectual Property
We have registered and maintain various service marks, trademarks and trade names that we use in our
businesses, including marks and names incorporating the “Health Net” phrase, and from time to time we apply
for additional registrations of such marks. We utilize these and other marks and names in connection with the
marketing and identification of products and services. We believe such marks and names are valuable and
material to our marketing efforts.
Employees
As of December 31, 2010, Health Net, Inc. and its subsidiaries employed 8,010 persons on a full-time basis
and 159 persons on a part-time or temporary basis. These employees perform a variety of functions, including,
among other things, provision of administrative services for employers, providers and members; negotiation of
agreements with physician groups, hospitals, pharmacies and other health care providers; handling of claims for
payment of hospital and other services; and provision of data processing services. Our employees are not
unionized and we have not experienced any work stoppages since our inception. We consider our relations with
our employees to be very good.
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