Health Net 2014 Annual Report Download - page 85

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Our commercial premium revenue decreased by $530.1 million, or 9 percent, in the year ended December 31,
2013 compared to the same period in 2012, primarily due to a 12 percent decrease in commercial enrollment.
Our Medicare premium revenue decreased by $19.1 million, or 0.7 percent, in the year ended December 31, 2013
compared to the same period in 2012, primarily due to federal rate decreases.
Our Medicaid premium revenue increased by $467.2 million, or 24 percent, in the year ended December 31, 2013
compared to the same period in 2012, primarily due to premium rate increases, reinstated Medicaid premium taxes,
accruals made pursuant to our state settlement agreement, membership growth and the rollout of a new Medicaid
service, Community Based Adult Services, some of which are further discussed below. The increase in our Medicaid
premium revenue for the year ended December 31, 2013 included $74.3 million of retroactive rate adjustments for our
SPD and non-SPD members for periods prior to 2013. For the year ended December 31, 2012, we recognized $21.7
million of premium revenue as a result of retroactive rate adjustments for our SPD and non-SPD members for periods
prior to 2012. The increase in our Medicaid premium revenue for the year ended December 31, 2013 also included
$92.8 million in Medicaid premium revenues related to reinstated premium taxes for the year ended December 31,
2013. See Note 2 to our consolidated financial statements under the headings "Health Plan Services Revenue
Recognition" and "Medicaid Premium Taxes" for additional information. Medicaid premium revenue for the year ended
December 31, 2013 also included $62.9 million of retrospective adjustments to premium revenue related to our state-
sponsored health plans rate settlement agreement as described in Note 2 to our consolidated financial statements under
the heading "Health Plan Services Revenue Recognition."
Investment income in our Western Region Operations segment decreased to $69.6 million for the year ended
December 31, 2013 from $82.4 million for the same period in 2012 due to lower investment gains realized during the
year ended December 31, 2013 as compared to 2012.
Administrative services fees and other income increased by $16.8 million for the year ended December 31, 2013
as compared to the year ended December 31, 2012 primarily due to a settlement related to a pharmacy contract and
Medicaid revenue from the State of California related to the administration of the primary care physician parity
reimbursement mandated by the ACA.
Health Plan Services Expenses
Health plan services expenses in our Western Region Operations segment decreased 4.6 percent to approximately
$8.9 billion for the year ended December 31, 2013 from approximately $9.3 billion for the year ended December 31,
2012, primarily due to a decrease in commercial health plan services costs, partially offset by an increase in Medicaid
health plan services costs as discussed in the following sections.
Commercial Premium Yield and Health Care Cost Trends
In our Western Region Operations segment, commercial premium PMPM increased by 2.7 percent to
approximately $385 for the year ended December 31, 2013 compared to an increase of 4.7 percent to approximately
$375 in the same period of 2012. This percentage change decrease in the 2013 premium yield compared to that in 2012
was due to changes in geographic and product mix, including a higher percentage of members enrolled in our tailored
network products.
Commercial health care costs PMPM in our Western Region Operations segment decreased by 1.0 percent to
approximately $330 in the year ended December 31, 2013 compared to an increase of 9.1 percent to approximately
$333 in the year ended December 31, 2012. We believe that the decrease in our commercial health care cost trend for
the year ended December 31, 2013 was due to the absence of adverse prior period development and our efforts to
reposition our commercial book of business away from unprofitable full network large group accounts towards smaller
accounts and tailored network products.
Medical Care Ratios
The health plan services MCR in our Western Region Operations segment was 85.6 percent for the year ended
December 31, 2013 compared with 89.1 percent for the year ended December 31, 2012.
Commercial MCR in our Western Region Operations segment was 85.6 percent for the year ended December 31,
2013 compared with 88.8 percent for the year ended December 31, 2012. The improvement of 320 basis points in
commercial MCR for the year ended December 31, 2013 compared to the same period in 2012 is primarily due to the
repositioning of our large group commercial business, lower utilization and changes in product and geographic mix as
well as the absence of the adverse prior period development that was recorded in 2012.