Health Net 2003 Annual Report Download - page 8

into an assumption reinsurance agreement to transfer full responsibility for the stand alone dental and vision policies of Health
Net Life Insurance Company to SafeHealth Life Insurance Company (“SafeHealth Life”). As a result of the sale, we no longer
underwrite or administer stand alone dental and vision products. We continue to make available to our current and prospective
members private label dental products through a strategic relationship with SafeGuard and private label vision products
through a strategic relationship with EyeMed Vision Care LLC (“EyeMed”). The stand alone dental products are underwritten
and administered by SafeGuard companies and the stand alone vision products are underwritten by Fidelity Security Life
Insurance Company and administered by EyeMed. In connection with these sales, we received approximately $14.8 million in
cash. We also transferred $2.1 million in cash and $2.1 million in liabilities to SafeHealth Life under the assumption
reinsurance agreement.
As of October 31, 2003, Health Net Dental had approximately 418,500 members, of which 61,700 members were
beneficiaries under the Medicaid dental programs. As of October 31, 2003, Health Net Vision provided services to
approximately 159,600 members. Of those covered lives, 99,100 members were enrolled in full-risk products and 60,500
lives were covered under administrative services contracts. As of October 31, 2003, Health Net Life Insurance Company
had approximately 49,400 dental PPO and indemnity members and 53,600 vision PPO and indemnity members.
Our dental and vision subsidiaries had $47.4 million of revenues and $1.9 million of income before income taxes for
the ten months ended October 31, 2003. As of October 31, 2003, our dental and vision subsidiaries had a combined total
of $4.3 million in net equity, which we recovered through the sales proceeds. Health Net Life Insurance Company had
$15.9 million of stand alone dental and vision product revenues and related income before income taxes of $0.7 million
for the ten months ended October 31, 2003. Prior to being sold, our dental and vision subsidiaries and the stand alone
dental and vision product business of Health Net Life Insurance Company were reported as part of our Health Plan
Services reportable segment.
Government Contracts Segment
Our Government Contracts reportable segment includes government-sponsored managed care plans through the
TRICARE programs and other government contracts.
TRICARE.
Our wholly-owned subsidiary, Health Net Federal Services, Inc. (“HNFS”), administers large, multi-year managed
care federal contracts with the U.S. Department of Defense (the “Department of Defense”).
HNFS currently administers health care contracts for the Department of Defense’s TRICARE program covering
approximately 1.5 million eligible individuals under TRICARE. Through TRICARE, HNFS provides eligible
beneficiaries with improved access to care, lower costs and improved quality.
HNFS currently administers three TRICARE contracts for five regions:
• Region 11, covering Washington, Oregon and part of Idaho
• Region 6, covering Arkansas, Oklahoma, most of Texas and most of Louisiana
• Regions 9, 10 and 12, covering California, Hawaii, Alaska and part of Arizona
Eligible beneficiaries in the TRICARE program are able to choose from a variety of program options. They can
choose to enroll in TRICARE Prime, which is similar to a conventional HMO plan, or they can select, on a case-by-case
basis, to utilize TRICARE Extra, which is similar to a conventional PPO plan, or TRICARE Standard, which is similar to
a conventional indemnity plan.
Under TRICARE Prime, enrollees pay an enrollment fee (which is zero for active duty participants and their
dependents) and select a primary care physician from a designated provider panel. The primary care physicians are
responsible for making referrals to specialists and hospitals. Except for active duty family members who have no co-
payment charges, TRICARE Prime enrollees pay co-payments each time they receive medical services from a civilian
provider. TRICARE Prime enrollees may opt, on a case-by-case basis, for a point-of-service option in which they are
allowed to self-refer but incur a deductible and a co-payment.
Under TRICARE Extra, eligible beneficiaries may utilize a TRICARE network provider but incur a deductible and
co-payment which is greater than the TRICARE Prime co-payment. Under TRICARE Standard, eligible beneficiaries may
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