Health Net 2011 Annual Report Download - page 159

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
majority of the reserve balance held at each quarter-end is associated with the most recent months’ incurred
services because these are the services for which the fewest claims have been paid. The degree of
uncertainty in the estimates of incurred claims is greater for the most recent months’ incurred services.
Revised estimates for prior years are determined in each quarter based on the most recent updates of paid
claims for prior years. As of December 31, 2011, 2010 and 2009, incurred claims related to prior years were
estimated to be $96.5 million, $70.0 million and $80 million lower than originally estimated. The majority
of this amount was due to adjustments to our reserves that related to variables and uncertainties associated
with our assumptions. As our reserve balance for older months of service decreased, and estimates of our
incurred costs for older dates of service became more certain and predictable, our estimates of incurred
claims related to prior periods were adjusted accordingly. Actual claim experience was more favorable than
our estimate.
(d) Includes claims payable, provider dispute reserve, and other claims-related liabilities.
(e) Includes accrued capitation, shared risk settlements, and other reserve items.
The following table shows the Company’s health plan services capitated and non-capitated expenses for the
years ended December 31:
Health Plan Services
2011 2010 2009
(Dollars in millions)
Total incurred claims .............................................. $4,636.5 $4,574.2 $ 6,342.8
Capitated expenses and shared risk ................................... 2,789.8 2,700.2 2,782.0
Pharmacy and other ............................................... 1,522.0 1,334.7 1,607.2
Health plan services .............................................. $8,948.3 $8,609.1 $10,732.0
For the years ended December 31, 2011, 2010 and 2009, the Company’s capitated, shared risk, pharmacy
and other expenses represented 48%, 47% and 41%, respectively, of the Company’s total health plan services.
Note 17—Quarterly Information (Unaudited)
The following interim financial information presents the 2011 and 2010 results of operations on a quarterly
basis:
2011
March 31 June 30 September 30 December 31
(Dollars in millions, except per share data)
Total revenues ..................................... $3,526.5 $2,775.9 $2,786.6 $2,812.0
Health plan services costs ............................ 2,282.3 2,231.3 2,223.5 2,211.3
Government contracts costs ........................... 822.2 130.8 127.9 157.0
(Loss) income from operations before income taxes ........ (98.9) 88.5 99.2 90.2
Net (loss) income ................................... (108.2)(1) 58.3(2) 61.8(3) 60.2(4)
Basic (loss) earnings per share ........................ $ (1.16) $ 0.64 $ 0.71 $ 0.73
Diluted (loss) earnings per share (5) .................... $ (1.16) $ 0.63 $ 0.70 $ 0.71
(1) Includes a $177.2 million expense incurred as a result of the Louisiana Supreme Court’s judgement in the
AmCareco litigation, a $11.0 million expense related to our cost management initiatives and a $34.9 million
favorable adjustment to loss of sale of Northeast health plan subsidiaries.
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