Health Net 2014 Annual Report Download - page 67

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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 (including the Medicare prescription drug benefit commonly referred to as "Part D"), Medicaid,
dual eligible, U.S. Department of Defense (“Department of Defense” or “DoD”), including TRICARE, and U.S.
Department of Veterans Affairs ("VA") programs. We also offer behavioral health, substance abuse and employee
assistance programs, managed health care products related to prescription drugs, 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
Our reportable segments are comprised of Western Region Operations and Government Contracts. Effective
January 1, 2013, our Divested Operations and Services segment was closed out after we substantially completed the
transition and run-out of our divested businesses, as further discussed below.
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,
Medicaid and dual eligibles health plans, our health and life insurance companies, our pharmaceutical services
subsidiary and certain operations of our behavioral health subsidiaries. As of December 31, 2014, we had approximately
3.2 million medical members in our Western Region Operations reportable segment. On April 1, 2012, we completed
the sale of our Medicare stand-alone prescription drug plan business ("Medicare PDP business") to Pennsylvania Life
Insurance Company, a subsidiary of CVS Caremark Corporation ("CVS Caremark"). As a result, the operating results
related to our Medicare PDP business have been excluded from continuing operations results and are classified in this
Annual Report on Form 10-K as discontinued operations for the year ended December 31, 2012. Accordingly, the
information included in this Annual Report on Form 10-K regarding our Western Region Operations reportable segment
excludes the operating results of our Medicare PDP business for the year ended December 31, 2012. For additional
information regarding the sale of our Medicare PDP business, see Note 3 to our consolidated financial statements.
Our Government Contracts segment includes our government-sponsored managed care contract with the DoD
under the TRICARE program in the North Region and other health care related government contracts, including the
Patient Centered Community Care program (“PC3 Program”) contract we have with VA. On April 1, 2011, we began
delivery of administrative services under a new Managed Care Support Contract (“T-3 contract”) for the TRICARE
North Region. Under the T-3 contract for the TRICARE North Region, we provide administrative services to
approximately 2.8 million Military Health System (“MHS”) eligible beneficiaries. In addition, we also provide
behavioral health services to military families under the Department of Defense Military and Family Life Counseling,
formerly Military and Family Life Consultant (“MFLC”) contract, which is also included in our Government Contracts
segment. See Note 2 to our consolidated financial statements under the heading “Government Contracts” for additional
information on the T-3, MFLC and PC3 Program contracts.
On November 2, 2014, we signed a definitive master services agreement with Cognizant Healthcare Services,
LLC, a wholly owned subsidiary of Cognizant Technology Solutions Corporation ("Cognizant") to provide certain
services to us. In connection with this agreement, we have also entered into an asset purchase agreement pursuant to
which we have agreed to sell certain software assets and related intellectual property we own to Cognizant. The
transaction, including the related asset sale (the "Cognizant Transaction"), is subject to receipt of required regulatory
approvals. In connection with the Cognizant Transaction, we reviewed our reportable segments and determined that
there were no changes to our reportable segments. See Note 3 to our consolidated financial statements under the
heading “Assets Held for Sale” for additional information on the Cognizant Transaction.
Prior to January 1, 2013, our Divested Operations and Services reportable segment included the operations of our
businesses that provided administrative and run-out support services to an affiliate of UnitedHealth Group Incorporated
("United") and its affiliates under administrative services and claims servicing agreements in connection with the
Northeast Sale (as defined below), as well as the transition-related revenues and expenses of our divested Medicare
PDP business. The "Northeast Sale" referred to the sale of all of the outstanding shares of capital stock of our health
plan subsidiaries that were domiciled and/or had conducted businesses in Connecticut, New Jersey, New York and