Health Net 2011 Annual Report Download - page 153

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We lease an office space in Woodland Hills, California for our California health plan under an operating
lease agreement. This agreement extends the term of an existing lease by ten years and it contains provisions for
full or partial termination under certain circumstances with substantial consideration payable to the landlord. The
total future minimum lease commitments under this lease are approximately $93.6 million.
Long-Term Purchase Obligations
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, 2011.
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. As of December 31, 2011, the remaining terms are approximately one year for each of
these contracts, and termination of these agreements is subject to certain termination provisions. As of
December 31, 2011, the total estimated future commitments under these agreements are $20.1 million.
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 two years, and the total estimated future
commitments under the agreement are approximately $141.7 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, among other things, provides us with services including the following: 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 two years, and the
total estimated future commitments under the agreement are approximately $20.6 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, among other things, provides us
with claims adjudication, adjustment, audit and process improvement services. The remaining term of this
contract is approximately three years, and the total estimated future commitments under the agreement are
approximately $18.6 million.
We have also entered into contracts with our health care providers and facilities, the federal government,
other IT service companies and other parties within the normal course of our business for the purpose of
providing health care services. Certain of these contracts are cancelable with substantial penalties.
As of December 31, 2011, future minimum commitments for operating leases and long-term purchase
obligations for the years ending December 31 are as follows:
Operating
Leases
Long-Term
Purchase
Obligations
(Dollars in millions)
2012 ................................................................. $ 48.8 $161.8
2013 ................................................................. 51.7 123.3
2014 ................................................................. 49.1 53.3
2015 ................................................................. 41.0 9.2
2016 ................................................................. 30.4 —
Thereafter ............................................................ 61.6 —
Total minimum commitments ............................................. $282.6 $347.6
F-49