Health Net 2011 Annual Report Download - page 24

• Procedures for member grievance resolution and medical necessity determinations;
• Accessibility of providers, handling of provider claims (including out-of-network claims) and
adherence to timely and accurate payment and appeal rules; and
• Linguistic and cultural accessibility standards, governance requirements and reporting requirements.
PPO regulation also varies by state, and while these regulations generally cover all or most of the subject
areas referred to above, the regulation of PPO products and carriers tends to be less intensive than regulation of
HMOs.
Variations in state regulation also arise in connection with the intensity of government oversight. Variations
include: the need to file or have affirmatively approved certain proposals before use or implementation by the
health plan; the degree of review and comment by the regulatory agency; the amount and type of reporting by the
health plan to the regulatory agency; the extent and frequency of audit or other examination; and the authority
and extent of investigative activity, enforcement action, corrective action authority, and penalties and fines. In
addition, either the states or the federal government will create exchanges, which will act as markets for the
purchase of subsidized health insurance. At least some states and possibly the federal government may condition
health carrier participation in an exchange on a number of factors, which could mean that some carriers would be
excluded. Our regulated subsidiaries are also subject to legal restrictions on our ability to price some of our
products. Some products may be subject to regulatory approval of premium levels. Generally, insurance and
HMO laws require premiums to be established at amounts reasonably related to our costs.
State regulations also may be more stringent than federal regulations that are applicable to us. For example,
the California Department of Insurance recently adopted emergency regulations regarding medical loss ratios
requiring individual products subject to its jurisdiction to meet or exceed an 80% medical loss ratio in 2011.
Under the emergency regulations, the medical loss ratio must be included in all individual product filings and
calculated as an estimate on a prospective basis for the following policy period. However, under the federal
regulations, the medical loss ratio is to be calculated on a retrospective basis—that is, 2011 medical loss ratio
results are required to be reported in June 2012. In addition, various health insurance reform proposals are
emerging at the state level. For addition information, see “Item 1A. Risk Factors—Various health insurance
reform proposals are also emerging at the state level which could have an adverse impact on us.”
On October 9, 2011, the Governor of California signed California Senate Bill 946 (“SB 946”) into law. SB
946 mandates coverage by July 1, 2012 for medically necessary autism treatment including Applied Behavioral
Analysis for commercial but not state health plans, subject to any required revisions to conform to essential
benefits required under the ACA, which CMS has directed to be determined by states in 2012.
Intellectual Property
We have registered and maintain various service marks, trademarks and trade names that we use in our
businesses, including marks and names incorporating the “Health Net” phrase, and from time to time we apply
for additional registrations of such marks. We utilize these and other marks and names in connection with the
marketing and identification of products and services. We believe such marks and names are valuable and
material to our marketing efforts.
Employees
As of December 31, 2011, Health Net, Inc. and its subsidiaries employed 7,351 persons on a full-time basis
and 120 persons on a part-time or temporary basis. These employees perform a variety of functions, including,
among other things, provision of administrative services for employers, providers and members; negotiation of
agreements with physician groups, hospitals, pharmacies and other health care providers; handling of claims for
payment of hospital and other services; and provision of data processing services. Our employees are not
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