Health Net 2000 Annual Report Download - page 8

6 HEALTH NET 2000 Annual Report
The MCR in 2000 was as expected, and we believe it will decline by no more than a few tenths of a percent in the
near future.
The fastest growing component of health care costs is pharmaceuticals. Health Net experienced an approximately
9 percent increase in pharmacy costs in 2000. To address this trend, in 2000 we expanded our pharmaceutical programs
with a wider variety of co-payment structures.These provide greater choices to our members, while continuing to keep
this very popular benefit affordable.
We continue to work on significant improvements in SG&A. As I noted, SG&A dropped in 2000. During the year
there were many exciting developments, both in SG&A initiatives and in our New Ventures Group.
The New Ventures Group was established in late 1999 to develop new processes utilizing technological enhancements
such as the Internet. For example, in the Northeast we have signed up more than 3,500 physicians to our connectivity
project that uses the Internet to speed administrative functions and reduce administrative burdens for doctors’offices.
The Group developed and introduced in California, Questium (www.Questium.com), a consumer Web site that
allows members to be more actively involved in the design and management of their health benefits. It’s proving to be
very popular with our members and we’ll be rolling it out to our other health plans and to our TRICARE members
throughout 2001.
Our success in 2000 was also based on exemplary performance by our Government and Specialty Division.
We are very pleased with our position in the TRICARE program. In 2000, we secured two-year contract extensions
for Region 11 in the Pacific Northwest and for Region 6, which covers Texas and three other states.We hope to receive
a two-year extension on the third contract for Regions 9, 10 and 12 that covers California, Hawaii and two other states.
We continue to see a bright future for our behavioral health subsidiary, MHN. It added new members in 2000 and
continued its leadership in Employee Assistance Programs (EAPs).
Overall, our health plans had a very successful 2000. In early 2001, however, we announced a definitive agreement to
sell our Florida plan. Unfortunately, we reached the conclusion that this plan was too small to succeed in the highly
competitive south Florida market.
For our other health plans, it is clear that our focused and innovative marketing efforts, our emphasis on customer
service and our attractive product designs are drawing new members, especially in our key New York and California
markets. As a measurement of our success, our plans in California and the Northeast were rated #1 in member sat-
isfaction surveys conducted by a major national firm.
We have also done an outstanding job in various state Medicaid programs. In California, our Medi-Cal program and
our involvement in newer, state-sponsored programs for children and families generated enrollment growth in 2000.
As we enter a period of economic uncertainty, we believe employers will show more interest in managed care
products as they strive to maintain attractive health benefit packages. In such a climate we believe success will come to
plans with strong market positions and the ability to offer flexible benefit packages. In fact, our turnaround prepared us well
for virtually any economic scenario.We are now concentrated in large dynamic markets, with competitive advantages
and expertise in a range of health insurance products.
Getting to the point where we could focus on growth was the goal of our turnaround.While we are pleased with this
achievement, we still have the challenges of consistent, profitable growth coupled with improved technology-based operating
efficiencies ahead of us – challenges we are all confident we can meet – just as we met the challenges of the turnaround.
None of what has happened in the last two years could have been possible without a dedicated team of associates who
have worked long and hard against some pretty tough odds.They are led by our Executive Management Committee
(EMC), pictured with this letter.The EMC is a cohesive team working with an admirable focus to our shared goals.
They and all of our associates are to be congratulated for the successful completion of the turnaround and the
resumption of growth.