Health Net 2010 Annual Report Download - page 7

not covered by traditional Medicare, usually in exchange for a fixed monthly premium per member from CMS
that varies based on the geographic area in which the member resides, demographic factors of the member such
as age, gender and institutionalized status, and the health status of the member. Any additional benefits in our
plans are covered by a monthly premium charged to the enrollee or through portions of payments received from
CMS that may be allocated to these benefits, according to CMS regulations and guidance.
Our portfolio of Medicare Advantage plans focuses on simplicity so that members can use benefits with
minimal paperwork and receive coverage that starts immediately upon enrollment. We also provide Medicare
supplemental coverage to 27,382 members through either individual Medicare supplement policies or employer
group sponsored coverage, as of December 31, 2010.
We provide Medicare Advantage plans in select counties in Arizona, California, Oregon, and Washington.
We also provide multiple types of Medicare Advantage Special Needs Plans, including dual eligible Special
Needs Plans (designed for low income Medicare beneficiaries) in Arizona and California, chronic condition
Special Needs Plans (designed for beneficiaries with chronic obstructive pulmonary disease and congestive heart
failure) in California, and chronic condition Special Needs Plans (designed for beneficiaries with congestive
heart failure and diabetes) in Arizona. These plans provide access to additional health care and prescription drug
coverage.
Medicare Part D Stand-Alone Prescription Drug Plans
We are also a major participant in the Medicare prescription drug benefit program with 426,587 members in
49 states (exclusive of New York) and the District of Columbia, as of December 31, 2010. We provide 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. 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, 2010, we had an aggregate of 900,782 members enrolled in Medi-Cal, California’s Medicaid
program, and other California state health programs. 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—Western Region Operations Reportable Segment—Western Region
Operations Segment 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, 2010, through HNCS,
we had Medi-Cal operations in ten of California’s largest counties: Los Angeles, Fresno, Kern, Orange,
Riverside, Sacramento, San Bernardino, San Diego, Stanislaus 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,
2010, 439,758 of our Medi-Cal members resided in Los Angeles County, representing approximately 58% of our
Medi-Cal membership and approximately 49% 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 March 29, 2010, the DHCS executed an amendment to extend our contract for a second 24-month
extension period ending March 31, 2012.
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