Health Net 2011 Annual Report Download - page 27

unexpectedly severe or widespread illnesses; rate cuts and other risks and uncertainties affecting our Medicare or
Medicaid businesses; litigation costs; regulatory issues with federal and state agencies including, but not limited
to, DHCS, CMS, the Office of Civil Rights of the U.S. Department of Health and Human Services and state
departments of insurance; operational issues; failure to effectively oversee our third party vendors;
noncompliance by us or our business associates with any privacy laws or any security breach involving the
misappropriation, loss or other unauthorized use or disclosure of confidential information; any liabilities of the
Northeast business that were incurred prior to the closing of its sale as well as those liabilities incurred through
the winding-up and running-out period of the Northeast business; our ability to complete proposed dispositions
on a timely basis or at all; investment portfolio impairment charges; volatility in the financial markets; and
general business and market conditions. Additional factors that could cause our actual results to differ materially
from those reflected in forward-looking statements include, but are not limited to, the factors set forth below and
the risks discussed in our other filings from time to time with the SEC.
Any or all forward-looking statements in this Annual Report on Form 10-K and in any other public filings
or statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Many of the factors discussed below will be important in
determining future results. These factors should be considered in conjunction with any discussion of operations
or results by us or our representatives, including any forward-looking discussion, as well as information
contained in press releases, presentations to securities analysts or investors or other communications by us. You
should not place undue reliance on any forward-looking statements, which reflect management’s analysis,
judgment, belief or expectation only as of the date thereof and are subject to changes in circumstances and a
number of risks and uncertainties. Except as may be required by law, we do not undertake to address or update
forward-looking statements.
Federal health care reform legislation could have an adverse impact on our revenues and the costs of
operating our business and could materially adversely affect our business, cash flows, financial condition and
results of operations.
During the first quarter of 2010, the President signed the ACA into law, which is causing and will continue
to cause significant changes to the U.S. health care system and alter the dynamics of the health care insurance
industry. The provisions of the new legislation, among other things:
• impose significant new taxes and fees on health insurers that may not be deductible for income tax
purposes, including a health insurer fee on fully insured premiums and an excise tax on high premium
insurance policies,
• stipulate a minimum medical loss ratio (as adopted by the Department of Health and Human Services),
• limit Medicare Advantage payment rates,
• increase mandated benefits,
• eliminate medical underwriting for medical insurance coverage decisions, which is referred to as
“guaranteed issue,”
• increase restrictions on rescinding coverage, or “rescissions,”
• prohibit some annual and all lifetime limits on amounts paid on behalf of or to members,
• limit the ability of health plans to vary premiums based on assessments of underlying risk,
• limit the amount of compensation paid to health insurance executives that is tax deductible,
• expand regulations that govern premium rate increase requests,
• require that individuals obtain coverage and
25