Health Net 2003 Annual Report Download - page 7

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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, 2003, we had 87,767 members through our ASO business.
Indemnity Insurance Products
We offer insured PPO, POS, EPO 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 36 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. Our health and life
insurance products are provided throughout most of our service areas.
Other Specialty Services and Products
We offer pharmacy benefits, behavioral health, dental and vision products and services (through strategic
relationships with third parties) as well as managed care products related to cost containment for hospitals, health plans
and other entities as part of our Health Plan Services segment.
Pharmacy Benefit Management. Pharmacy benefits are managed through a variety of clinical, technological and
contractual tools. We seek to provide safe, effective medications that are affordable to our members. We outsource certain
capital and labor intensive functions of pharmacy benefit management, such as claims processing. However, we continue
to actively utilize all other pharmacy management tools available. Some of the tools used are as follows:
• Pharmacy benefit design – we have designed and sell multi-tier pharmacy products that allow consumer choice
with variable member financial participation
• Clinical programs that improve safety, efficacy and member compliance with prescribed medical treatment
• Retail and mail order pharmacy network and manufacturer contracting that lower the net cost
• Technological tools that efficiently automate claim adjudication and payment to lower administrative costs
• Technology that plays a key role in preventing members from receiving drugs that may harmfully interact with
other medications they are taking.
Behavioral Health. We provide behavioral health services through our wholly-owned subsidiary, Managed Health
Network, Inc., and subsidiaries of Managed Health Network, Inc. (collectively “MHN”). MHN holds a license in
California under the Knox-Keene Health Care Service Plan Act of 1975 (the “Knox-Keene Act”) as a Specialized Health
Care Service Plan. MHN offers behavioral health, substance abuse and employee assistance programs (“EAPs”) on an
insured and self-funded basis to employers, governmental entities and other payers in various states.
Employers participating in MHN’s programs range in size from Fortune 100 companies to mid-sized companies with
under 100 employees. MHN’s strategy is to extend its market share in the Fortune 500 and health plan markets, through a
combination of direct, consultant/broker and affiliate sales. MHN intends to achieve additional market share by
broadening its employer products, including using the Internet as a distribution channel and by continuing carve-out
product sales, funded on either a risk or self-funded basis.
MHN’s products and services were being provided to over 7.1 million individuals as of December 31, 2003, with
approximately 2.6 million individuals under risk-based programs, approximately 2.1 million individuals under self-funded
programs and approximately 2.4 million individuals under EAP. MHN is serving approximately 803 employer groups on
a stand-alone basis plus approximately 49,487 groups through other affiliates of MHN, primarily in California and the
Northeast.
In 2003, MHN’s total revenues were $223 million. Of that amount, $133 million represented revenues from business
with MHN affiliates and $90 million represented revenues from non-affiliate business.
Headquartered in Point Richmond, California, MHN has nationwide operations with full-service clinical intake
offices in New York, Dallas, Milwaukee, Las Vegas, San Rafael and Huntington Beach, California.
Dental and Vision. On October 31, 2003, we consummated the sale of our dental and vision subsidiaries, Health Net
Dental, Inc. (“Health Net Dental”) and Health Net Vision, Inc. (“Health Net Vision”) to SafeGuard. In addition, we entered
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