Health Net 2011 Annual Report Download - page 52

There have been a number of investigations and enforcement actions against insurance brokers and insurers
over the last several years regarding allegedly inappropriate or undisclosed payments made by insurers to brokers
for the placement of insurance business. For example, CMS has increased its scrutiny of insurance brokers and
insurers regarding allegedly improper sales and marketing practices in connection with the sale of Medicare
products. While we are not aware of any unlawful practices by the Company or any of our agents or brokers in
connection with the marketing and sales of our products and services, we could be sanctioned as a result of
unlawful acts by our agents or brokers. In addition, investigations by state attorneys general, CMS and other
regulators, as well as regulatory changes initiated in several states in response to allegedly inappropriate broker
conduct and broker payment practices, could result in changes in industry practices or negative publicity that
could have an adverse effect on our ability to market our products.
We are dependent on our ability to recruit, manage, enable and retain a large workforce.
Our products and services and our operations require a large number of employees. As of December 31,
2011, we employed 7,351 individuals on a full-time basis and 120 individuals on a part-time or temporary basis.
It is critical that we recruit, manage, enable and retain talent to successfully execute our strategic objectives,
which requires aligned policies, a positive work environment and a robust succession and talent development
process. Further, particularly in light of the changing healthcare environment, we must focus on building
employee capabilities to help ensure that we can meet upcoming challenges and opportunities. Our business
could be adversely affected if we are unable to recruit, manage, enable and retain talent and meet upcoming
challenges and opportunities. In addition, the impact of the external or internal environment or other factors on
employee morale, enablement and engagement could also significantly impact the success of the Company.
Our forecasts and other forward-looking statements are based on a variety of assumptions that are subject to
significant uncertainties. Our performance may not be consistent with these forecasts and forward-looking
statements.
From time to time in press releases and otherwise, we publish forecasts or other forward-looking statements
regarding our future results, including estimated revenues, net earnings and other operating and financial metrics.
Any forecast of our future performance reflects various assumptions. These assumptions are subject to significant
uncertainties, and, as a matter of course, any number of them may prove to be incorrect.
The achievement of any forecast depends on numerous risks and other factors, including those described in
this report, many of which are beyond our control. In addition, the challenging economic conditions and
uncertainties associated with health care reform, among other things, may make it particularly difficult to
forecast our future performance. As a result, we cannot assure that our performance will meet any management
forecasts or that the variation from such forecasts will not be material and adverse. You are cautioned not to base
your entire analysis of our business and prospects upon isolated predictions, but instead are encouraged to utilize
the entire mix of publicly available historical and forward-looking information, as well as other available
information affecting us, our services, and our industry when evaluating our forecasts and other forward-looking
statements relating to our operations and financial performance.
The market price of our common stock is volatile.
The market price of our common stock is subject to volatility. In 2011, the Morgan Stanley Healthcare
Payor Index (the “HMO Index”), an index comprised of 11 managed care organizations, including Health Net,
recorded an approximate 34.8% increase in its value, while the per share value of our common stock increased by
11.5%. There can be no assurance that the trading price of our common stock will vary in a manner consistent
with the variation in the HMO Index or the Standard & Poor’s 400 Mid-Cap Index of which our common stock is
also a component. The market prices of our common stock and the securities of certain other publicly-traded
companies in our industry have shown significant volatility and sensitivity in response to many factors, including
health care reform, public communications regarding managed care, legislative or regulatory actions, litigation or
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