Health Net 2010 Annual Report Download - page 71

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Year Ended December 31, 2010 compared to Year Ended December 31, 2009
Revenues
Total revenues in the Western Region Operations in the year ended December 31, 2010 were flat at $10.0
billion compared to the same period in 2009. Health plan services premiums revenues in the Western Region
Operations increased less than 1 percent to $9.9 billion for the year ended December 31, 2010 compared to the
same period in 2009.
Investment income in the Western Region Operations increased to $70.3 million for the year ended
December 31, 2010 from $67.6 million for the same period in 2009 due to the strong performance of our
investment portfolio and gains taken during the year.
Health Plan Services Expenses
Health plan services expenses in the Western Region Operations were $8.6 billion for the year ended
December 31, 2010 compared to $8.5 billion for the year ended December 31, 2009.
Commercial Premium Yield and Health Care Cost Trends
In the Western Region Operations, commercial premium yields PMPM increased by 7.9 percent to
approximately $341 for the year ended December 31, 2010 compared with approximately $316 in the same
period of 2009. This increase is due to continued pricing discipline.
Commercial health care costs PMPM in the Western Region Operations increased by 7.1 percent to
approximately $294 in the year ended December 31, 2010 compared to an increase of 9.6 percent to
approximately $274 in the year ended December 31, 2009. The commercial health care cost trend continued to
increase for 2010, but at a slower rate than 2009, as 2009 was impacted by higher utilization related to the H1N1
flu and COBRA.
Medical Care Ratios
The health plan services MCR in the Western Region Operations was 86.6 percent for the year ended
December 31, 2010 compared with 86.7 percent for the year ended December 31, 2009.
The Western Region Operations commercial MCR was 86.1 percent for the year ended December 31, 2010,
compared with 86.8 percent for the year ended December 31, 2009. The 70 basis point reduction for the year
ended December 31, 2010 is primarily due to our continuing pricing and underwriting discipline and more
moderate health care cost increases.
The Medicare Advantage MCR in the Western Region Operations was 88.8 percent for the year ended
December 31, 2010 compared with 88.1 percent for the year ended December 31, 2009. This increase in the
Medicare Advantage MCR is due to a higher than expected health care cost trend.
The Medicare Part D MCR was 77.2 percent for the year ended December 31, 2010 compared with 78.4
percent for the same period in 2009. The 120 basis point improvement is consistent with our 2010 bid strategy.
Medicaid MCR was 87.7 percent for the year ended December 31, 2010 compared with 86.6 percent for the
year ended December 31, 2009. This increase is due to higher inpatient hospital and physician costs.
G&A, Selling and Interest Expenses
G&A expense in the Western Region Operations was $881.8 million for the year ended December 31, 2010
compared with $833.5 million for the year ended December 31, 2009. The G&A expense ratio increased 50 basis
points from 8.4 percent for the year ended December 31, 2009 to 8.9 percent for the year ended December 31,
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