Health Net 2011 Annual Report Download - page 90

maintain minimum capital and surplus in excess of the RBC requirement, even though RBC has been adopted in
their states of domicile. We generally manage our aggregate regulated subsidiary capital at approximately 400%
of ACL, although RBC standards are not yet applicable to all of our regulated subsidiaries.
Under the California Knox-Keene Health Care Service Plan Act of 1975, as amended (“Knox-Keene”),
certain California subsidiaries must comply with TNE requirements. Under these Knox-Keene TNE
requirements, actual net worth less unsecured receivables and intangible assets must be more than the greater of
i) a fixed minimum amount, ii) a minimum amount based on premiums or iii) a minimum amount based on
health care expenditures, excluding capitated amounts. In addition, certain California subsidiaries have made
certain undertakings to the Department of Managed Health Care to restrict dividends and loans to affiliates, to the
extent that the payment of such would reduce such entities’ TNE below 130% of the minimum requirement, or
reduce the cash-to-claims ratio below 1:1. At December 31, 2011, all of the subsidiaries subject to the TNE
requirements and the undertakings to the Department of Managed Health Care exceeded the minimum
requirements.
As necessary, we make contributions to and issue standby letters of credit on behalf of our subsidiaries to meet
RBC or other statutory capital requirements under state laws and regulations. During the year ended December 31,
2011, we made capital contributions of $24 million to a subsidiary to maintain our target RBC at approximately
400% of ACL. Health Net, Inc. made no capital contributions to any of our subsidiaries to meet RBC or other
statutory capital requirements under state laws and regulations thereafter through February 21, 2012.
Legislation has been or may be enacted in certain states in which our subsidiaries operate imposing
substantially increased minimum capital and/or statutory deposit requirements for HMOs in such states. Such
statutory deposits may only be drawn upon under limited circumstances relating to the protection of
policyholders.
As a result of the above requirements and other regulatory requirements, certain subsidiaries are subject to
restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies.
Such restrictions, unless amended or waived or unless regulatory approval is granted, limit the use of any cash
generated by these subsidiaries to pay our obligations. The maximum amount of dividends that can be paid by
our insurance company subsidiaries without prior approval of the applicable state insurance departments is
subject to restrictions relating to statutory surplus, statutory income and unassigned surplus.
Contractual Obligations
Our significant contractual obligations as of December 31, 2011 are summarized below for the years ending
December 31:
Total 2012 2013 2014 2015 2016 Thereafter
(Dollars in Millions)
Fixed-rate borrowing principal (c) ........... $400.0 $ — $ — $ — $ — $ — $400.0
Fixed-rate borrowing interest ............... 137.1 25.5 25.5 25.5 25.5 25.5 9.6
Variable-rate borrowing principal ........... 112.5 — — — — 112.5 —
Variable-rate borrowing interest ............. 16.5 3.3 2.5 3.1 3.9 3.7 —
Operating leases ......................... 282.6 48.8 51.7 49.1 41.0 30.4 61.6
Long-term purchase obligations ............. 347.6 161.8 123.3 53.3 9.2 — —
Uncertain tax positions liability, including
interest and penalties (b) ................. 1.1 1.1——— — —
Deferred compensation .................... 47.0 4.8 3.3 2.7 2.3 2.2 31.7(a)
Estimated future payments for pension and
other benefits ......................... 38.6 2.2 2.6 4.1 4.1 4.1 21.5(a)
(a) Represents estimated future payments from 2017 through 2021.
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