Health Net 2003 Annual Report Download - page 3

PART I
Item 1. Business.
General
We are an integrated managed care organization that delivers managed health care services. We operate and conduct
our businesses through subsidiaries of Health Net, Inc., which is among the nation’s largest publicly traded managed
health care companies. In this Annual Report on Form 10-K, unless the context otherwise requires, the terms “Company,”
“we,” “us,” and “our” refer to Health Net, Inc. and its subsidiaries.
Our health plans and government contracts subsidiaries provide health benefits through our health maintenance
organizations (“HMOs”), insured preferred provider organizations (“PPOs”) and point-of-service (“POS”) plans to
approximately 5.3 million individuals in 14 states through group, individual, Medicare, Medicaid and TRICARE
programs. We also offer managed health care products related to behavioral health and prescription drugs. In addition, we
own health and life insurance companies licensed to sell exclusive provider organization (“EPO”), PPO, POS and
indemnity products, as well as auxiliary non-health products such as life and accidental death and disability insurance, in
36 states and the District of Columbia. We currently operate within two reportable segments: Health Plan Services and
Government Contracts.
Our Health Plan Services reportable segment includes the operations of our health plans in Arizona, California,
Connecticut, New Jersey, New York and Oregon, the operations of our health and life insurance companies and our
behavioral health and pharmaceutical services subsidiaries. We have approximately 3.7 million at-risk and 0.1 million
administrative services only (“ASO”) members in our Health Plan Services reportable segment. Effective September 30,
2003, we withdrew our commercial health plan from the commercial market in the Commonwealth of Pennsylvania. See
“Other Company Information and Recent and Other Developments – Withdrawal of Pennsylvania Health Plan” for
additional information regarding our withdrawal from the Pennsylvania commercial market. On October 31, 2003, we
consummated the sale of our dental and vision subsidiaries to SafeGuard Health Enterprises, Inc. (“SafeGuard”). Prior to
the sale, our dental and vision subsidiaries were included in our Health Plan Services Segment. See “Segment Information
– Health Plan Services Segment – Other Specialty Services and Products – Dental and Vision” for additional information
regarding the sale of our dental and vision subsidiaries.
Our Government Contracts reportable segment includes government-sponsored managed care plans through the
TRICARE programs and other government contracts. The Government Contracts reportable segment administers large,
multi-year managed health care government contracts. Certain components of these contracts are subcontracted to
unrelated third parties. We administer health care programs covering approximately 1.5 million eligible individuals under
TRICARE and currently have three TRICARE contracts that cover Alaska, Arkansas, California, Hawaii, Oklahoma,
Oregon, Washington and parts of Arizona, Idaho, Louisiana and Texas. These contracts expire in 2004. In August 2003,
we were awarded a new five year contract for the TRICARE North Region that supports nearly 2.8 million Military
Health System (“MHS”) eligible participants, including the provision of health care and administrative services for 1.7
million TRICARE eligibles and the provision of administrative services only for 1.1 million other MHS-eligible
beneficiaries (active duty personnel and TRICARE/Medicare dual eligible beneficiaries). For additional information
regarding the new TRICARE North Region contract, see “Segment Information – Government Contracts Segment –
TRICARE.”
On October 31, 2003, we consummated the sale of certain of our workers’ compensation services subsidiaries
organized under Health Net Employer Services, Inc. (“HN Employer Services”) to First Health Group Corp. (“First
Health”). Prior to the sale, we recorded revenue from our workers’ compensation services subsidiaries as part of other
income in our consolidated statements of operations. As such, revenue from these subsidiaries had no impact on our
reportable segments’ results of operations. See “Other Company Information and Recent and Other Developments – Sale
of Employer Services Group Subsidiary” for additional information regarding the sale of our workers’ compensation
services subsidiaries.
Our executive offices are located at 21650 Oxnard Street, Woodland Hills, California 91367, and our Internet web
site address is www.health.net. We make available free of charge on or through our Internet web site all of our reports on
Forms 10-K, 10-Q and 8-K and all amendments thereto as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Copies of our Corporate
Governance Guidelines, Code of Conduct and charters for the Audit Committee, Compensation and Stock Option
Committee and Governance Committee of our Board of Directors are also available on our Internet web site. We will
provide electronic or paper copies free of charge upon request.
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