Health Net 2010 Annual Report Download - page 70

Enrollment in our Medicare Advantage plans in our Western Region Operations at December 31, 2009 was
227,000 members, an increase of 2.3 percent compared with December 31, 2008. Membership in our Medicare
PDP plans was 460,000 at the end of 2009, a 15.6 percent decrease compared with the end of 2008. This decline
in Medicare PDP membership was primarily driven by our pricing discipline strategy at that time.
Medicaid enrollment in California on December 31, 2009, increased by 92,000 members or 12.0 percent,
from December 31, 2008 to 857,000 members as a result of higher enrollment in the Fresno, Los Angeles and
Sacramento counties and in the Healthy Families program.
Western Region Operations Segment Results
Year Ended December 31,
2010 2009 2008
(Dollars in thousands, except per
share and PMPM data)
Health plan services premiums ................................ $ 9,925,738 $9,850,783 $9,590,319
Net investment income ...................................... 70,279 67,568 75,895
Administrative services fees and other income .................... 26,547 38,737 35,920
Total revenues ............................................. 10,022,564 9,957,088 9,702,134
Health plan services ........................................ 8,591,161 8,542,361 8,384,497
General and administrative ................................... 881,759 833,476 800,533
Selling ................................................... 235,608 233,278 262,033
Depreciation and amortization ................................ 34,634 36,745 34,553
Interest ................................................... 34,880 41,015 41,401
Total expenses ............................................. 9,778,042 9,686,875 9,523,017
Income from operations before income taxes ..................... 244,522 270,213 179,117
Income tax provision ........................................ 91,709 100,842 71,146
Net income ............................................... $ 152,813 $ 169,371 $ 107,971
Pretax margin ............................................. 2.4% 2.7% 1.8%
Commercial premium yield ................................... 7.9% 9.4% 6.2%
Commercial premium PMPM (d) .............................. $ 340.81 $ 315.73 $ 288.47
Commercial health care cost trend ............................. 7.1% 9.6% 9.9%
Commercial health care cost PMPM (d) ......................... $ 293.51 $ 274.05 $ 250.00
Commercial MCR (e) ....................................... 86.1% 86.8% 86.7%
Medicare Advantage MCR (e) ................................ 88.8% 88.1% 90.6%
Medicare Part D MCR (e) .................................... 77.2% 78.4% 88.2%
Medicaid MCR (e) ......................................... 87.7% 86.6% 84.0%
Health plan services MCR (a) ................................. 86.6% 86.7% 87.4%
G&A expense ratio (b) ...................................... 8.9% 8.4% 8.3%
Selling costs ratio (c) ........................................ 2.4% 2.4% 2.7%
(a) MCR is calculated as health plan services cost divided by health plan services premiums revenue.
(b) The G&A expense ratio is computed as G&A expenses divided by the sum of health plan services premiums
and administrative services fees and other income.
(c) The selling costs ratio is computed as selling expenses divided by health plan services premiums revenue.
(d) PMPM is calculated based on commercial at-risk member months and excludes ASO member months.
(e) MCR is calculated as commercial, Medicare Advantage, Medicare Part D, or Medicaid health care cost
divided by commercial, Medicare Advantage, Medicare Part D, or Medicaid premium, as applicable.
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