Health Net 2004 Annual Report Download - page 46

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referred to as the Mid-Atlantic and Heartland sub-regions) and September 1, 2004 for the area that was previously TRICARE Region
1 (now referred to as the National Capital and Northeast sub-regions). We ended the delivery of health care under our existing Region
11 contract on May 31, 2004, our existing Region 9, 10 and 12 contract on June 30, 2004, and our existing Region 6 contract on
October 31, 2004.
Under our TRICARE contract for the North Region, we provide health care services to approximately 2.9 million Military
Health System (“MHS”)-eligible beneficiaries, including 1.8 million TRICARE eligibles for whom we provide health care and
administrative services and 1.1 million other MHS-eligible beneficiaries for whom we provide administrative services only. As of
December 31, 2004, there were 1,350,153 TRICARE eligibles enrolled in TRICARE Prime under our North Region contract. The
total estimated number of eligible beneficiaries for the North Region contract as of December 31, 2004 was 2,928,627 based on data
provided by the Department of Defense. Our old TRICARE contracts covered approximately 1.5 million TRICARE eligibles as of
December 31, 2003.
From January 1, 2004 through May 31, 2004 (the expiration date for the old Region 11 TRICARE contract), enrollment of
TRICARE beneficiaries in TRICARE Prime for the Region 11 contract increased by 2.0% to 153,062, while the total estimated
number of eligible beneficiaries, based on data from the Department of Defense, decreased by 4.5% to 236,834. From January 1, 2004
through October 31, 2004, (the expiration date for the old Region 6 TRICARE contract), enrollment of TRICARE beneficiaries in
TRICARE Prime for the Region 6 contract increased by 1.3% to 393,674, while the total estimated number of eligible beneficiaries,
based on data from the Department of Defense, decreased by 5.3% to 612,611. From January 1, 2004 through June 30, 2004 (the
expiration date for the old Regions 9, 10 and 12 TRICARE contract), enrollment of TRICARE beneficiaries in TRICARE Prime for
the Regions 9, 10 and 12 contract increased by 1.1% to 387,906 while the total estimated number of eligible beneficiaries, based on
data from the Department of Defense and excluding Alaska, decreased by 0.1% to 595,626. Department of Defense estimated
numbers of eligible beneficiaries are subject to revision when actual numbers become available. TRICARE beneficiaries do not
“enroll” in either TRICARE Extra or TRICARE Standard, rather, they select, on a case-by-case basis, to utilize either, both or neither
of these options during any given year. As such, there is no enrollment data available for the TRICARE Extra and TRICARE
Standard options.
In addition to the 2.9 million eligible beneficiaries that we service under the TRICARE contract for the North Region, we
administer 17 contracts with the U.S. Department of Veterans Affairs to manage community based outpatient clinics in 12 states
covering approximately 33,000 enrollees. We also manage two behavioral health services subcontracts which support prime contracts
issued by the Department of Defense’s Quality of Life Office. For additional information regarding our TRICARE contract for the
North Region and the other government contracts we manage and administer, see “Item 1. Business—Segment Information—
Government Contracts Segment.”
Health Plan Services Premiums
2004 Compared to 2003
Health Plan Services premiums increased by $467.0 million or 5.1% to $9,560.2 million for the year ended December 31, 2004
from $9,093.2 million for the same period in 2003 due to the following:
•
Commercial premiums increased by $430.9 million or 6.6% for the year ended December 31, 2004 compared to the same
period in 2003. This increase is attributable to our implementation of higher rates (including renewal rates) in our large and
small group markets in all of our health plans to account for higher health care costs, partially offset by membership losses
in all states except Arizona and Oregon.
43
•
Medicare Risk premium increased by $102.6 million or 7.4% for the year ended December 31, 2004 compared to the same
period in 2003. Rate increases were seen in all states due to increases in the per-member rates paid to us by CMS as a result
of the adoption of the MMA in December 2003. This was partially offset by membership losses in all states except Oregon.