Health Net 2011 Annual Report Download - page 9

subsidized by the State of California and, as of November 1, 2011, range between $4 and $24 per child, up to a
maximum of $72 for all children in a family enrolled in the Healthy Families program. California receives
two-thirds of the funding for the Healthy Families program from the federal government.
Commencing with the 2011-12 Healthy Families benefit year that started October 1, 2011, HN California no
longer offered the Healthy Families exclusive provider organization (EPO) product. As a result, 1,563 Healthy
Families EPO members transitioned to other carriers in 2011. In addition, HN California no longer offers the
Healthy Families HMO in Marin County, California, resulting in approximately 590 members being transitioned
to other carriers in 2011.
On April 14, 2011, the U.S. Department of Health and Human Services announced several initiatives to
offer states more flexibility to adopt new practices in order to provide better and more coordinated care for
individuals dually eligible for Medicare and Medicaid programs, or “dual eligibles.” California was one of 15
states selected by CMS under one of these initiatives to design a pilot program (the “Dual Eligibles
Demonstration Project”) to develop new ways to improve the quality and cost of care of the dual eligible
population. DHCS is targeting a launch of its Dual Eligibles Demonstration Project in 2013, and CMS approval
will also be required.
Under California’s Dual Eligibles Demonstration Project, DHCS, in partnership with CMS, issued a
Request for Solutions (“RFS”) inviting qualified entities to submit a proposal to provide comprehensive health
care services to dual eligible individuals. The purpose of the RFS is to identify the applicants with the requisite
qualifications and resources who are best suited to meet the needs of the dual eligible population. We submitted a
response to the RFS on February 24, 2012.
Indemnity Insurance Products
We offer insured PPO, POS and indemnity products as “stand-alone” products and as part of multiple option
products in various markets. These products are offered by our health and life insurance subsidiaries, which are
licensed to sell insurance in 49 states and the District of Columbia. Through these subsidiaries, we also offer
auxiliary non-health products such as life, accidental death and dismemberment, dental, vision and behavioral
health insurance. Our health and life insurance products are provided throughout most of our service areas.
Other Specialty Services and Products
We offer pharmacy benefits, behavioral health, dental and vision products and services (occasionally
through strategic relationships with third parties), as well as managed care products related to cost containment
for hospitals, health plans and other entities as part of our Western Region Operations segment.
Pharmacy Benefit Management
We provide pharmacy benefit management (“PBM”) services to Health Net members through our
subsidiary, Health Net Pharmaceutical Services (“HNPS”). As of December 31, 2011, HNPS provided integrated
PBM services to approximately 2.7 million Health Net members who have pharmacy benefits, including
approximately 587,000 of our Medicare members. In addition, pursuant to the United Administrative Services
Agreements (as defined below in “—Northeast Operations Segment”) entered into as part of the Northeast Sale
(as defined below in “—Northeast Operations Segment”), HNPS provided PBM services to as many as 66,000
individuals during the first six months of 2011 as the membership was transitioned to United (as defined below in
“—Northeast Operations Segment”). For additional information regarding the Northeast Sale, see “—Northeast
Operations Segment.”
HNPS manages these benefits in an effort to achieve the highest quality outcomes at the lowest cost for
Health Net members. HNPS contracts with national health care providers, vendors, drug manufacturers and
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