Health Net 2003 Annual Report Download - page 90

December 31, 2003, 2002 and 2001, respectively. As of the date of sale, our employer services group subsidiary had net
equity of $42.3 million.
Dental and Vision Subsidiaries
On October 31, 2003, we consummated the sales of our dental and vision subsidiaries, Health Net Dental, Inc.
(Health Net Dental) and Health Net Vision, Inc. (Health Net Vision) to SafeGuard Health Enterprises, Inc. (SafeGuard).
In addition, we entered into an assumption reinsurance agreement to transfer the 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. However, we
continue to make available 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) to our current and prospective
members. The stand alone dental products are underwritten and administered by SafeGuard companies. 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 and recognized a pretax gain
of $7.8 million. Our dental and vision subsidiaries had been reported as part of our Health Plan Services reportable
segment.
Our dental and vision subsidiaries had $48.0 million, $55.5 million and $58.3 million of total combined revenues and
income (loss) from operations before income taxes of $1.9 million, $(0.7) million and $1.0 million for the years ended
December 31, 2003, 2002 and 2001, respectively. As of the date of sales, our dental and vision subsidiaries had net equity
of $4.3 million.
Hospital Subsidiaries
In 1999, we sold our two hospital subsidiaries to Health Plus, Inc. As part of the sale, we received cash and a note for
$12 million due on August 31, 2003 including any unpaid interest. On August 31, 2003, Health Plus defaulted on the note
and we increased the allowance on the note by $3.4 million. The note was fully reserved as of September 30, 2003. We
are in the process of trying to restructure the note and are making continued efforts to collect all outstanding principal and
interest due on the note. We have recorded the additional $3.4 million allowance in general and administrative expenses in
our accompanying consolidated statements of operations for the year ended December 31, 2003.
Pennsylvania Health Plan
Effective September 30, 2003, we withdrew our commercial health plan from the commercial market in the
Commonwealth of Pennsylvania. Coverage for our members enrolled in the Federal Employee Health Benefit Plan was
discontinued on January 11, 2004, however, we intend to maintain our network of providers in Pennsylvania to service our
New Jersey members and TRICARE eligibles. As of December 31, 2003, we had approximately 3,800 members enrolled
in our commercial health plan in Pennsylvania. Our Pennsylvania health plan is reported as part of our Health Plan
Services reportable segment.
Our Pennsylvania health plan had $56.6 million, $133.6 million and $153.8 million of total revenues and (loss) from
operations before income taxes of $(8.4) million, $(7.6) million and $(19.4) million for the years ended December 31,
2003, 2002 and 2001, respectively. As of December 31, 2003, our Pennsylvania health plan had net equity of $10.6
million.
EOS Claims Services Subsidiary
Effective July 1, 2002, we sold our claims processing subsidiary, EOS Claims Services, Inc. (EOS Claims), to Tristar
Insurance Group, Inc. (Tristar). In connection with the sale, we received $500,000 in cash, and also entered into a Payor
Services Agreement. Under the Payor Services Agreement, Tristar has agreed to exclusively use EOS Managed Care
Services, Inc. (one of our then remaining subsidiaries) for various managed care services to its customers and clients. We
estimated and recorded a $2.6 million pretax loss on the sale of EOS Claims during the second quarter ended June 30,
2002. During the fourth quarter ended December 31, 2003, we recorded an additional $1.2 million pretax loss on the sale
due to the sale price true-up as provided for in the sale agreement. EOS Claims revenue through the date of the sale was
reported as part of other income on the consolidated statements of operations.
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