Health Net 2010 Annual Report Download - page 60

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
General
We are a publicly traded managed care organization that delivers managed health care services through
health plans and government sponsored managed care plans. Our mission is to help people be healthy, secure and
comfortable. We provide health benefits to approximately 6.0 million individuals across the country through
group, individual, Medicare (including the Medicare prescription drug benefit commonly referred to as
“Part D”), Medicaid, Department of Defense, including TRICARE, and Veterans Affairs programs. Our
behavioral health services subsidiary, Managed Health Network (“MHN”), provides behavioral health, substance
abuse and employee assistance programs to approximately 5.4 million individuals, including our own health plan
members. Our subsidiaries also offer managed health care products related to prescription drugs, and offer
managed health care product coordination for multi-region employers and administrative services for medical
groups and self-funded benefits programs.
How We Report Our Results
We expanded our reportable segments in the quarter ended September 30, 2009 following the execution of
the Stock Purchase Agreement in connection with the Northeast Sale. We operate within three reportable
segments, Western Region Operations, Government Contracts and Northeast Operations, each of which is
described below. Prior to the quarter ended September 30, 2009, we operated within two reportable segments,
Health Plan Services and Government Contracts.
Our health plan services are provided under our Western Region Operations reportable segment, which
includes the operations conducted in California, Arizona, Oregon and Washington for our commercial, Medicare
(including Part D) and Medicaid health plans, our health and life insurance companies and our behavioral health
and pharmaceutical services subsidiaries. We have approximately 2.9 million medical members (including
Medicare Part D members) in our Western Region Operations reportable segment.
Our Government Contracts segment includes our government-sponsored managed care federal contract with
the U.S. Department of Defense (the “Department of Defense” or “DoD”) under the TRICARE program in the
North Region and other health care related government contracts. Under the TRICARE contract for the North
Region, we provide health care services to approximately 3.1 million Military Health System (“MHS”) eligible
beneficiaries (active duty personnel and TRICARE/Medicare dual eligible beneficiaries), including 1.8 million
TRICARE eligibles for whom we provide health care and administrative services and 1.3 million other
MHS-eligible beneficiaries for whom we provide administrative services only, or “ASO”. We also provide
behavioral health services to military families under the Department of Defense Military Family Life Counseling
contract. On May 13, 2010, we were awarded the new T-3 Managed Care Support Contract for the TRICARE
North Region. The transition-in period for the T-3 contract contractually commenced on May 13, 2010, and
health care delivery under the new contract is scheduled to commence on April 1, 2011. We believe that the T-3
contract will be accounted for as an administrative services only contract and are currently evaluating its
expected impact on our consolidated results of operations and financial condition in 2011 as well as the related
accounting and reporting requirements.
For periods prior to the Northeast Sale, our Northeast Operations reportable segment included the operations
conducted in Connecticut, New Jersey and New York for our commercial, Medicare and Medicaid health plans.
For periods following the Northeast Sale, our Northeast Operations reportable segment includes the operations of
our businesses that are providing administrative services to United and its affiliates pursuant to the United
Administrative Services Agreements and the operations of Health Net Life in Connecticut and New Jersey prior
to the renewal dates of the Transitioning HNL Members.
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