Health Net 2010 Annual Report Download - page 84

Operating Leases
We lease office space under various operating leases. Certain leases are cancelable with substantial
penalties. See “Item 2. Properties” for additional information regarding our leases.
Long-Term Purchase Obligations and Commitments
We have entered into long-term agreements to purchase various services, which may contain certain
termination provisions and have remaining terms in excess of one year as of December 31, 2010.
We have entered into long-term agreements to receive services related to pharmacy benefit management,
pharmacy claims processing services and health quality/risk scoring enhancement services with external third-
party service providers. The remaining terms are approximately two years for each of these contracts.
Termination of these agreements is subject to certain termination provisions. The total estimated future
commitments under these agreements are $45.9 million and are included in the table above.
We have entered into an agreement with International Business Machines Corporation (“IBM”) to outsource
our IT infrastructure management services including data center services, IT security management and help desk
support. The remaining term of this contract is approximately three years, and total estimated future
commitments under the agreement are approximately $174.5 million.
We have entered into an agreement with Cognizant Technology Solutions U.S. Corporation (“Cognizant”)
to outsource our software applications development and management activities to Cognizant. Under the terms of
the agreement, Cognizant will, among other things, provide us with: application development, testing and
monitoring services, application maintenance and support services, project management services and cross
functional services. The remaining term of this contract is approximately three years, and the total estimated
future commitments under the agreement are approximately $29.7 million.
We have also entered into another agreement with Cognizant to outsource a substantial portion of our claims
processing activities to Cognizant. Under the terms of the agreement, Cognizant will, among other things,
provide us with claims adjudication, adjustment, audit and process improvement services. The remaining term of
this contract is approximately four years, and the total estimated future commitments under the agreement are
approximately $23.4 million.
Under the Stock Purchase Agreement, we retain financial responsibility for the profits or losses, subject to
specified adjustments, of the Acquired Companies for the period beginning on the closing date and ending on the
earlier of (i) the second anniversary of the closing date and (ii) the date that all of the United Administrative
Services Agreements are terminated. We expect the United Administrative Services Agreements to be in effect
through the second quarter of 2011, and anticipate that these profits or losses and the other expenses we incur in
performing the administrative services could be significant. See “Item 1. Business—Segment Information—
Northeast Operations Segment” for additional information.
We have excluded from the table above amounts already recorded in our current liabilities on our
consolidated balance sheet as of December 31, 2010. We have also excluded from the table above various
contracts we have entered into with our health care providers, health care facilities, the federal government and
other contracts that we have entered into for the purpose of providing health care services. We have excluded
those contracts that allow for cancellation without significant penalty, obligations that are contingent upon
achieving certain goals and contracts for goods and services that are fulfilled by vendors within a short time
horizon and within the normal course of business.
The future contractual obligations in the contractual obligations table are estimated based on information
currently available. The timing of and the actual payment amounts may differ based on actual events.
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