Health Net 2011 Annual Report Download - page 76

December 31, 2009 to 433,000 members at December 31, 2010, consistent with the overall weak employment
levels in our Western markets. Partially offsetting the decrease in membership from the weak economy was a
15.2 percent increase, or 42,000 new members, in our tailored network products from December 31, 2009 to
December 31, 2010. As of December 31, 2010, tailored network products accounted for 22.9 percent of our
Western Region Operations commercial enrollment compared with 19 percent at December 31, 2009.
Enrollment in our Medicare Advantage plans in the Western Region Operations at December 31, 2010 was
222,000 members, a decrease of 2.2 percent compared with December 31, 2009. The decline in Medicare
Advantage membership was due to a loss of 16,000 members in Arizona and 4,000 members in California,
partially offset by a gain of 15,000 members in Oregon. Membership in our Medicare PDP plans was 427,000 at
December 31, 2010, a 7.2 percent decrease compared with December 31, 2009. This decline in Medicare PDP
membership was primarily driven by the suspension of the auto-assignment of LIS-eligible Medicare
beneficiaries under CMS’ LIS auto-assignment process, effective February 1, 2010 and changes in our
termination policy for nonpayment of member premiums.
Medicaid enrollment in California increased by 44,000 members or 5.1 percent, from December 31, 2009 to
901,000 members as of December 31, 2010. The increase in Medicaid enrollment was attributable to an increase
in the Medicaid-eligible population due to high unemployment and a downturn in economic conditions.
Western Region Operations Segment Results
Year Ended December 31,
2011 2010 2009
(Dollars in thousands, except PMPM data)
Health plan services premiums ............................... $10,361,934 $ 9,925,738 $9,850,783
Net investment income ..................................... 74,092 70,279 67,568
Administrative services fees and other income ................... 11,532 26,547 38,737
Total revenues ............................................ 10,447,558 10,022,564 9,957,088
Health plan services ....................................... 8,954,218 8,591,161 8,542,361
General and administrative .................................. 926,739 881,759 833,476
Selling .................................................. 237,997 235,608 233,278
Depreciation and amortization ............................... 32,197 34,634 36,745
Interest .................................................. 31,963 34,880 41,015
Total expenses ............................................ 10,183,114 9,778,042 9,686,875
Income from operations before income taxes .................... 264,444 244,522 270,213
Income tax provision ....................................... 96,169 91,709 100,842
Net income .............................................. $ 168,275 $ 152,813 $ 169,371
Pretax margin ............................................ 2.5% 2.4% 2.7%
Commercial premium yield .................................. 5.1% 7.9% 9.4%
Commercial premium PMPM (d) ............................. $ 358.04 $ 340.81 $ 315.73
Commercial health care cost trend ............................ 4.0% 7.1% 9.6%
Commercial health care cost PMPM (d) ........................ $ 305.27 $ 293.51 $ 274.05
Commercial MCR (e) ...................................... 85.3% 86.1% 86.8%
Medicare Advantage MCR (e) ............................... 90.3% 88.8% 88.1%
Medicare PDP (stand-alone) MCR (e) ......................... 84.1% 77.2% 78.4%
Total Medicare MCR (e) .................................... 89.3% 86.9% 86.6%
Medicaid MCR (e) ........................................ 85.5% 87.7% 86.6%
Health plan services MCR (a) ................................ 86.4% 86.6% 86.7%
G&A expense ratio (b) ..................................... 8.9% 8.9% 8.4%
Selling costs ratio (c) ....................................... 2.3% 2.4% 2.4%
(a) MCR is calculated as health plan services cost divided by health plan services premiums revenue.
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