Health Net 2011 Annual Report Download - page 64

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
General
We are a publicly traded managed care organization that delivers managed health care services through
health plans and government-sponsored managed care plans. Our mission is to help people be healthy, secure and
comfortable. We provide and administer health benefits to approximately 6.0 million individuals across the
country through group, individual, Medicare, Medicaid, U.S. Department of Defense (“Department of Defense”
or “DoD”), including TRICARE, and Veterans Affairs programs. Our behavioral health services subsidiary,
Managed Health Network, Inc., provides behavioral health, substance abuse and employee assistance programs
to approximately 5.0 million individuals, including our own health plan members. Our subsidiaries also offer
managed health care products related to prescription drugs, and offer managed health care product coordination
for multi-region employers and administrative services for medical groups and self-funded benefits programs.
How We Report Our Results
We operate within three reportable segments, Western Region Operations, Government Contracts and
Northeast Operations, each of which is described below. As a result of entering into a definitive agreement in
January 2012 to sell our Medicare stand-alone PDP business (see “—Recent Developments”), we will undertake
a review of our reportable segments in the first quarter of 2012 to determine if there should be any changes to our
reportable segments.
Our health plan services are provided under our Western Region Operations reportable segment, which
includes the operations primarily conducted in California, Arizona, Oregon and Washington for our commercial,
Medicare and Medicaid health plans, our health and life insurance companies, and our behavioral health and
pharmaceutical services subsidiaries. We have approximately 3.0 million medical members (including Medicare
stand-alone PDP members) in our Western Region Operations reportable segment.
Our Government Contracts segment includes our government-sponsored managed care federal contract with
the DoD under the TRICARE program in the North Region and other health care related government contracts.
On April 1, 2011, we began delivery of administrative services under a new Managed Care Support Contract
(“T-3”) for the TRICARE North Region. Under the T-3 contract for the TRICARE North Region, we provide
administrative services to approximately 3.0 million Military Health System (“MHS”) eligible beneficiaries. See
Note 2 to our consolidated financial statements under the heading “T-3 TRICARE Contract” for additional
information on the T-3 contract. We also provide behavioral health services to military families under the
Department of Defense Military and Family Life Consultant (“MFLC”) contract, which is included in our
Government Contracts segment.
Prior to its conclusion on March 31, 2011, our previous TRICARE contract for the North Region was
included in our Government Contracts segment. Under our previous TRICARE contract for the North Region, we
provided health care services to approximately 3.1 million MHS eligible beneficiaries, including 1.8 million
TRICARE eligible beneficiaries for whom we provided health care and administrative services and 1.3 million
other MHS eligible beneficiaries for whom we provided administrative services only (ASO).
For periods prior to the Northeast Sale in 2009 (see Note 2 to our consolidated financial statements), our
Northeast Operations reportable segment included our commercial, Medicare and Medicaid health plan
operations conducted in Connecticut, New Jersey and New York. For periods following the Northeast Sale
through June 30, 2011, our Northeast Operations reportable segment included the operations of our businesses
that provided administrative services to United and its affiliates pursuant to the United Administrative Services
Agreements prior to their termination on July 1, 2011 and the operations of HNL in Connecticut and
62