Health Net 2001 Annual Report Download - page 6

We sold our Florida health plan operations effective August 1, 2001. At the time of the sale, our
commercial membership in Florida was 98,969, our Medicare membership in Florida was 42,831 and
our Medicaid membership in Florida was 24,180. See ‘‘Divestitures and Other Investments’’ below for
additional information on the sale of our Florida health plan.
MEDICARE. Our Medicare+ Choice plans had a combined membership of approximately
215,813 as of December 31, 2001, compared to 271,807 as of December 31, 2000. We offer our
Medicare+ Choice products directly to individuals and to employer groups. To enroll in one of our
Medicare+ Choice plans, covered persons must be eligible for Medicare. We provide or arrange health
care services normally covered by Medicare, in conjunction with a broad range of preventive health
care services. The federal Centers for Medicare and Medicaid Services (‘‘CMS) (formerly the Health
Care Financing Administration (‘‘HCFA’’)) pays us a monthly amount for each enrolled member based,
in part, upon the ‘‘Adjusted Average Per Capita Cost,’’ as determined by CMS’ analysis of
fee-for-service costs related to beneficiary demographics. Depending on plan design and other factors,
we may charge a monthly premium.
Our California Medicare+ Choice product, Seniority Plus, operated by our California health plan,
was licensed and certified to operate in 15 California counties as of December 31, 2001. Our other
health plan subsidiaries are licensed and certified to offer Medicare+ Choice plans in one county in
Pennsylvania, three counties in Connecticut, four counties in Arizona and five counties in New York.
We withdrew from providing Medicare products in certain counties in 2001 due, in part, to the fact that
government Medicare reimbursement payments in those counties had been increasing at a much lower
level than costs of care.
MEDICAID PRODUCTS. As of December 31, 2001, we had an aggregate of approximately
787,584 Medicaid members compared to 666,337 as of December 31, 2000, principally in California. We
also had Medicaid members and operations in Connecticut and New Jersey. To enroll in our Medicaid
products, an individual must be eligible for Medicaid benefits under the appropriate state regulatory
requirements. Our HMO products include, in addition to standard Medicaid coverage, certain
additional services including dental and vision benefits. The applicable state agency pays our HMOs a
monthly fee based on a percentage of fee-for-service costs for each Medicaid member enrolled.
ADMINISTRATIVE SERVICES ONLY (‘‘ASO’’) BUSINESS. We also provide third-party
administrative services to large employer groups in Arizona, Connecticut, New Jersey and New York.
Under these arrangements, we provide claims processing, customer service, medical management and
other administrative services without assuming the risk for medical costs. We are generally compensated
for these services on a fixed per member per month basis. As of December 31, 2001, we serviced
78,311 members through our ASO business.
INDEMNITY INSURANCE PRODUCTS. We offer insured PPO, POS and indemnity products as
‘‘stand-alone’’ products and as part of multiple option products in various markets. These products are
offered by our health and life insurance subsidiaries which are licensed to sell insurance in 35 states
and the District of Columbia. Through these subsidiaries, we also offer HMO members auxiliary
non-health products such as group life and accidental death and disability insurance.
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