Health Net 2011 Annual Report Download - page 4

Western Region Operations Segment
Our Western Region Operations segment includes the operations of our commercial, Medicare (including
Medicare Part D stand-alone Prescription Drug Plans or “PDP”) and Medicaid health plans as well as the
operations of our health and life insurance companies, primarily in Arizona, California, Oregon and Washington,
and the operations of our behavioral health and pharmaceutical services subsidiaries in several states, including
Arizona, California and Oregon. As of December 31, 2011, we had approximately 2.6 million risk members and
approximately 0.4 million PDP members in our Western Region Operations segment.
Managed Health Care Operations
We offer a full spectrum of managed health care products and services. Our strategy is to create affordable
and tailored customer solutions by (i) seeking to provide product offerings that both anticipate and respond to
current and emerging market demands; (ii) pursuing innovative provider relationships that effectively manage the
cost of care; and (iii) building alliances with other stakeholders in the health care system to identify and
implement changes to help improve the quality and accessibility of the health care system. The pricing of our
products is designed to reflect the varying costs of health care based on the benefit alternatives in our products.
Our health plans offer members coverage for a wide range of health care services including ambulatory and
outpatient physician care, hospital care, pharmacy services, behavioral health and ancillary diagnostic and
therapeutic services. Our health plans include a matrix package, which allows employers and members to select
their desired coverage from a variety of alternatives. Our principal commercial health care products are as
follows:
•HMO Plans: Our health maintenance organization or HMO plans offer comprehensive benefits for a
fixed fee or premium that does not vary with the extent or frequency of medical services actually
received by the member. We offer HMO plans with differing benefit designs and varying levels of
co-payments at different premium rates. These plans are offered generally through contracts with
participating network physicians, hospitals and other providers. When an individual enrolls in one of
our HMO plans, he or she selects a primary care physician (“PCP”) from among the physicians
participating in our network. PCPs generally are family practitioners, general practitioners or
pediatricians who provide necessary preventive and primary medical care, and are generally
responsible for coordinating other necessary health care services, including making referrals to
participating network specialists. In California, participating providers are typically contracted through
medical groups and independent physician associations. In those cases, enrollees in HMO plans are
generally required to secure specialty professional services from physicians in the group, as long as
such services are available from group physicians. A significant majority of our California membership
is in HMO plans.
•PPO Plans: Our preferred provider organization or PPO plans offer coverage for services received
from any health care provider, with benefits generally paid at a higher level when care is received from
a participating network provider. Coverage typically is subject to deductibles and co-payments or
coinsurance.
•POS Plans: Our point of service or POS plans blend the characteristics of HMO, PPO and indemnity
plans. Members can have comprehensive HMO-style benefits for services received from participating
network providers with lower co-payments (particularly within the medical group), but also have
coverage, generally at higher co-payment or coinsurance levels, for services received outside the
network.
In the past several years, continuing weak economic conditions in the United States and, in particular,
California, have driven a renewed interest in the managed care model. The weak economy has caused customers
(both individuals and employer groups) to make health insurance purchasing decisions based on “value versus
choice.” Customers are increasingly choosing health plans that offer the best financial value over a health plan
that offers a broader network at a higher premium. Health Net has developed and is selling products using high
2