Health Net 2010 Annual Report Download - page 8

HN California participates in the Children’s Health Insurance Program (“CHIP”), which, in California, is
known as the Healthy Families program. As of December 31, 2010, there were 145,787 members, including
2,093 Healthy Kids members, in our Healthy Families program. CHIP was designed as a federal/state
partnership, similar to Medicaid, with the goal of extending health insurance to children whose families earn too
much money to be eligible for Medicaid, but not enough money to purchase private insurance. Monthly
premiums are subsidized by the State of California and, as of November 1, 2010, range between $4 and $24 per
child, up to a maximum of $72 for all children in a family enrolled in the Healthy Families Program. California
receives two-thirds of the funding for the Healthy Families Program from the federal government.
Administrative Services Only Business
During 2010, we provided ASO products to commercial large employer groups in California. Under these
arrangements, we provided claims processing, customer service, medical management, provider network access
and other administrative services without assuming the risk for medical costs. We were generally compensated
for these services on a fixed per member per month basis. Effective January 2011, we no longer provide ASO
products to commercial groups.
Indemnity Insurance Products
We offer insured PPO, POS and indemnity products as “stand-alone” products and as part of multiple option
products in various markets. These products are offered by our health and life insurance subsidiaries, which are
licensed to sell insurance in 49 states and the District of Columbia. Through these subsidiaries, we also offer
auxiliary non-health products such as life, accidental death and dismemberment, dental, vision and behavioral
health insurance. Our health and life insurance products are provided throughout most of our service areas.
Other Specialty Services and Products
We offer pharmacy benefits, behavioral health, dental and vision products and services (occasionally
through strategic relationships with third parties), as well as managed care products related to cost containment
for hospitals, health plans and other entities as part of our Western Region Operations segment.
Pharmacy Benefit Management. We provide pharmacy benefit management (“PBM”) services to Health Net
members through our subsidiary, Health Net Pharmaceutical Services (“HNPS”). As of December 31, 2010,
HNPS provided integrated PBM services to approximately 2.7 million Health Net members who have pharmacy
benefits, including approximately 648,000 Medicare members. In addition, pursuant to the United Administrative
Services Agreements (as defined below in “—Northeast Operations Segment”) entered into as part of the
Northeast Sale (as defined below in “—Northeast Operations Segment”), HNPS provided PBM services to
approximately 216,000 individuals, including approximately 58,000 individuals under Medicare as of
December 31, 2010. For additional information regarding the Northeast Sale, see “—Northeast Operations
Segment.” HNPS manages these benefits in an effort to achieve the highest quality outcomes at the lowest cost
for Health Net members. HNPS contracts with national health care providers, vendors, drug manufacturers and
pharmacy distribution networks (directly and indirectly through a third party vendor), oversees pharmacy claims
and administration, reviews and evaluates new FDA-approved drugs for safety and efficacy and manages data
collection efforts to facilitate our health plans’ disease management programs.
HNPS provides affiliated and unaffiliated health plans various services including development of benefit
designs, cost and trend management, sales and marketing support, and management delivery systems. HNPS
outsources certain capital and labor-intensive functions of pharmacy benefit management, such as claims
processing, mail order services and pharmacy network services.
Behavioral Health . We administer and arrange for behavioral health benefits and services through our
subsidiary, Managed Health Network, Inc., and its subsidiaries (collectively “MHN”). MHN offers behavioral
6