Health Net 2003 Annual Report Download - page 6

We believe our New Jersey operations make us the third largest managed care provider in terms of membership and
the fourth largest in terms of size of provider network in New Jersey. Our HMO membership in New Jersey was 294,360
as of December 31, 2003 (including 153,681 members under The Guardian arrangement), which represented a decrease of
approximately 2% during 2003. Our Medicaid membership in New Jersey was 45,046 as of December 31, 2003, which
represented a decrease of approximately 7% during 2003. We did not have any Medicare members in New Jersey as of
December 31, 2003 or 2002.
We believe our New York HMO and PPO operations make us the tenth largest HMO managed care provider in terms
of membership and the sixth largest in terms of size of provider network in New York. In New York, we had 271,498
commercial members as of December 31, 2003, which represented an increase of approximately 9% during 2003. Such
membership included 115,986 members under The Guardian arrangement. Our Medicare membership in New York was
5,673 as of December 31, 2003, which represented a decrease of 14% during 2003. We did not have any Medicaid
members in New York as of December 31, 2003 or 2002.
Medicare Products.
Our Medicare+Choice plans had a combined membership of approximately 169,239 as of December 31, 2003,
compared to 176,160 as of December 31, 2002. On December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 was signed into law. As a result of this legislation, Medicare private market plans will change
their name from Medicare+Choice to Medicare Advantage. The name change will be transitioned in 2004 and 2005 and
become fully effective in 2006. See “Government Regulation – Federal Legislation and Regulation – Medicare
Legislation” and “Risk Factors – Our businesses are highly regulated” for additional information regarding the Medicare
legislation.
We offer our Medicare+Choice products directly to individuals and through 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 plus a broad range of health care services not covered by traditional Medicare programs.
The federal Centers for Medicare & Medicaid Services (“CMS”) 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 and other factors. Depending on plan design, we may charge a monthly premium. We
also provide Medicare supplemental coverage to approximately 36,821 members through either individual Medicare
supplement policies or employer group sponsored coverage.
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, 2003. Our other health plan subsidiaries are licensed and
certified to offer Medicare+Choice plans in three counties in Connecticut, four counties in Arizona and four boroughs in
the City of New York. We offer a Medicare preferred provider organization product (“Medicare PPO”) under a CMS
demonstration product in seven counties in Arizona, 13 counties in Oregon and one county in Washington. We began
enrolling members in the Medicare PPO effective January 1, 2003.
Medicaid Products
As of December 31, 2003, we had an aggregate of approximately 845,526 Medicaid members (including
approximately 99,633 members in our Healthy Families program described below) compared to 874,154 members as of
December 31, 2002, 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.
Our California HMO, HN California, participates in the State Children’s Health Insurance Program (“SCHIP”),
which, in California, is known as the Healthy Families program. SCHIP was designed as a federal/state partnership,
similar to Medicaid, with the goal of expanding health insurance to children whose families earn too much money to be
eligible for Medicaid, but not enough money to purchase private insurance. Member premiums, which range from $4 to
$9 per child, per month, are subsidized by the State of California. California receives two-thirds of the funding for the
program from the federal government.
Administrative Services Only Business
We provide ASO products to large employer groups in California, Connecticut, New Jersey and New York. Under
these arrangements, we provide claims processing, customer service, medical management and other administrative
4