Health Net 2004 Annual Report Download - page 126

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HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2008, however, we may terminate the agreement prior to December 31, 2008, from and after the first anniversary of the agreement,
for any reason or no reason, upon one hundred eighty days’ prior written notice. The monthly fee is calculated on a PMPM basis and
measured on the first day of the month based on the number of designated beneficiaries.
Pharmacy Benefit Services
On April 1, 2004 we entered into a new three-year agreement with an external third-party service provider for it to provide
pharmacy claims processing services for all of our health plans beginning April 1, 2004. Concurrently, on September 2, 2003, we
terminated our existing ten-year Pharmacy Benefit Services Agreement effective April 1, 2004. The original agreement was entered
into in 1999.
We may terminate the new pharmacy claims processing services agreement prior to April 1, 2007, subject to certain termination
provisions which include liquidated damages of $3.6 million; provided, that the liquidated damages are reduced by $100,000 per
month through the termination date.
As of December 31, 2004, future minimum commitments for operating leases and other purchase obligations for the years
ending December 31 are as follows (amounts in thousands):
Rent expense totaled $50.4 million, $52.1 million and $55.7 million for the years ended December 31, 2004, 2003 and 2002,
respectively. Other purchase obligation expenses totaled $31.0 million, $26.9 million and $32.9 million for the years ended December
31, 2004, 2003 and 2002, respectively.
Note 13—Related Parties
Operating
Leases
Other
Purchase
Obligations
2005
$43,604
$21,980
2006
42,165
11,384
2007
39,407
2,118
2008
31,966
246
2009
27,288
—
Thereafter
75,936
—
Total minimum commitments
$260,366
$35,728
One current executive officer of the Company is a director of an industry-related association, of which the Company is a
member and we paid dues of $1.0 million, $1.1 million and $0.9 million in 2004, 2003 and 2002, respectively. The same executive
officer was a director of an internet health services company to which we paid $250,000 in 2003 and in which the Company also has
an investment of $2.3 million as of December 31, 2004 and 2003. No such amounts were paid in 2004 and 2002.
During 1999, three executive officers of the Company, in connection with their hire or relocation, received one-time loans from
the Company aggregating $550,000 which ranged from $100,000 to $300,000 each. All the loans made during 1999 were repaid or
forgiven as of December 31, 2004. During 2001, two executive officers of the Company, in connection with their hire or relocation,
received one-time loans from the Company aggregating $200,000. All of the loans made during 2001 were repaid or forgiven as of
December 31, 2003.
F-40