Health Net 1999 Annual Report Download - page 8

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6 FOUNDATION HEALTH SYSTEMS, INC.
Health Net had an excellent year as its financial performance
showed marked improvement from 1998.
Health Net had an excellent year as its financial
performance showed marked improvement from
1998. Membership, as planned, declined as the
management team remained very focused on
pricing discipline, despite an extremely price
competitive market. It has become a central
theme of Health Net, and of all our health plans,
that we must charge a price that adequately
reflects trends in health care costs, ensuring that
the doctors, hospitals and other health care
providers who work with us are fairly compensat-
ed for their services.
While both commercial and Medicare enrollment
declined, enrollment in Medicaid plans, called
Medi-Cal in California, rose by 13.9 percent. Health
Net continues to do a superb job of serving the
health care needs of Medicaid beneficiaries.
A key development in 1999 was the reorganization
of Health Net into the Government, Northern
and Southern divisions.This increased accounta-
bility, enhanced customer interaction and helped
streamline administrative functions.
Improved financial performance was also a result
of an intense focus on reducing SG&A expenses.
They fell by a full percentage point in 1999, a
remarkable achievement.
Our determination to maintain fair prices led to
an increase in commercial per member per month
(PMPM) yields of approximately 8 percent.We will
continue to focus on improved pricing in 2000.
Overall, the medical care ratio (MCR ) in California
dropped in 1999, as pricing compensated for
higher medical costs.We continue to believe
that medical costs will rise as a consequence of
demographic changes and continued pressure
from pharmaceutical costs.
For many years, very large accounts have been a
hallmark of Health Net’s reputation.These
accounts continue to account for a high percent-
age of commercial enrollment. In 1999, and
continuing into 2000, we are focusing more of
our efforts on the small group and individual
markets as key growth opportunities.There is