Health Net 2010 Annual Report Download - page 73

MCR was 78.4 percent for the year ended December 31, 2009 compared with 88.2 percent for the same period in
2008. These decreases in MCR were due to increases in premium yield outpacing increases in the health care cost
trend.
Medicaid MCR was 86.6 percent for the year ended December 31, 2009 compared with 84.0 percent for the
year ended December 31, 2008. This increase was primarily driven by physician and hospital costs.
G&A, Selling and Interest Expenses
G&A expense in the Western Region Operations was $833.5 million for the year ended December 31, 2009
compared with $800.5 million for the year ended December 31, 2008. The G&A expense ratio increased 10 basis
points to 8.4 percent for the year ended December 31, 2009.
Selling expense in our Western Region Operations was $233.3 million for the year ended December 31,
2009 compared with $262.0 million for the year ended December 31, 2008. The selling costs ratio was 2.4
percent for the year ended December 31, 2009 compared to 2.7 percent in the same period in 2008. The decrease
was primarily driven by declines in our commercial membership as well as growth of our Medicaid business,
which generally has lower broker and sales commissions.
Interest expense was $41.0 million for the year ended December 31, 2009 compared with $41.4 million for
the year ended December 31, 2008. The decrease was primarily due to lower interest rates.
Government Contracts Reportable Segment
Government Contracts Segment Membership
2010 2009 2008
(Membership in thousands)
Membership under North Region TRICARE contract .................. 3,090 3,067 3,004
Under our current TRICARE contract for the North Region, we provided health care services to
approximately 3.1 million eligible beneficiaries in the MHS as of December 31, 2010 and December 31, 2009.
Included in the 3.1 million eligibles as of December 31, 2010 were 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. As of December 31, 2010 and 2009, there were approximately 1.5 million
TRICARE eligibles enrolled in TRICARE Prime under our North Region contract.
Our current TRICARE North Region contract was scheduled to end on March 31, 2009 and was extended
by the Department of Defense TRICARE Management Authority, or TMA, through March 31, 2010. In March
2010, we were notified that the TMA exercised its options to extend the TRICARE North Region contract for
option period 7 and option period 8. The exercise of these option periods extends our TRICARE North Region
contract through March 31, 2011. On May 13, 2010, we were awarded the new T-3 Managed Care Support
Contract for the TRICARE North Region, and health care delivery under the new contract is scheduled to
commence on April 1, 2011.
In addition to the 3.1 million eligible beneficiaries that we service under the TRICARE contract for the
North Region, we administer contracts with the U.S. Department of Veterans Affairs to manage community
based outpatient clinics in 8 states covering approximately 18,000 enrollees.
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