Health Net 2003 Annual Report Download - page 4

Segment Information
We currently operate within two reportable segments, Health Plan Services and Government Contracts, each of
which are described below. For additional financial information regarding our reportable segments, see Note 15 in the
Notes to Consolidated Financial Statements included as part of this Annual Report on Form 10-K.
Health Plan Services Segment
Managed Health Care Operations.
We offer a full spectrum of managed health care products. Our strategy is to offer to employers and individuals a
wide range of managed health care products and services that, among other things, provide comprehensive coverage and
contain health care costs increases. As of December 31, 2003, approximately 50% of our members were covered by
conventional HMO products. We are continuing to expand our other product lines, thereby enabling us to offer flexibility
to employer groups and individual insureds.
Our health plans offer members a wide range of health care services that are designed to contain costs and provide
comprehensive coverage, including ambulatory and outpatient physician care, hospital care, pharmacy services,
behavioral health and ancillary diagnostic and therapeutic services. Our health plans include a matrix package which
allows members to select their desired coverage from alternatives that have features such as interchangeable outpatient
and inpatient co-payment levels; POS programs which offer a multi-tier design that provides both conventional HMO and
indemnity-like (in-network and out-of-network) tiers; a PPO traditional product which allows members to self-refer to the
network physician of their choice; and a managed indemnity plan which is provided for employees who reside outside of
their HMO service areas. For information regarding the marketing and sale of our health plans, see “Additional
Information Concerning our Business – Marketing and Sales.”
The pricing of our products is designed to provide incentives to both employers and employees to select and enroll in
the products with greater managed health care and cost containment elements. In general, our HMOs provide
comprehensive health care coverage for a fixed fee or premium that does not vary with the extent or frequency of medical
services actually received by the member. PPO enrollees choose their medical care from among the various contracting
providers or choose a non-contracting provider and are reimbursed on a traditional indemnity plan basis after reaching an
annual deductible. POS enrollees choose, each time they receive care, from conventional HMO or indemnity-like (in-
network and out-of-network) coverage, with payments and/or reimbursement depending on the coverage chosen. We
assume both underwriting and administrative expense risk in return for the premium revenue we receive from our HMO,
POS and PPO products. We have contractual relationships with health care providers for the delivery of health care to our
enrollees.
The following table contains information relating to our commercial large group members (generally defined as an
employer group with 50 or more employees), commercial small group (generally defined as an employer group with 2 to
50 employees) and individual members, ASO members, Medicare members and Medicaid members as of December 31,
2003 (our Medicare and Medicaid businesses are discussed below under “Medicare Products” and “Medicaid Products”):
Commercial – Large Group ......................................................... 1,779,553(a)
Commercial – Small Group & Individual .............................................. 953,907(b)
Medicare Members (risk only) ...................................................... 169,239
Medicaid Members ............................................................... 845,526
ASOmembers ................................................................... 87,767
(a) Includes 1,153,620 HMO members, 94,328 PPO members, 465,115 POS members, 56,035 EPO members and 10,455
Fee for Service (“FFS”) members.
(b) Includes 203,165 HMO members (42,157 of which are members under our arrangement with The Guardian Life
Insurance Company of America (“The Guardian”)), 233,754 PPO members, 500,505 POS members (272,999 of
which are members under our arrangement with The Guardian), 430 EPO members and 16,053 FFS members. For
additional information regarding our arrangement with The Guardian, see “Segment Information – Health Plan
Services Segment – Managed Health Care Operations – Northeast” below.
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