Health Net 2004 Annual Report Download - page 8

Administrative Services Only Business
We provide ASO products to large employer groups in California, Connecticut, New Jersey and New York. Under these
arrangements, we provide claims processing, customer service, medical management, provider network access and other
administrative services without assuming the risk for medical costs. We are generally compensated for these services on a fixed per
member per month basis. Our largest concentration of ASO business is in the Northeast and, in particular, Connecticut. As of
December 31, 2004, we had 80,612 members through our ASO business. Of those members, approximately 76,000 were located in
the Northeast.
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 37
states and the District of Columbia. Through these subsidiaries, we also offer group HMO members auxiliary non-health products
such as group life and accidental death and dismemberment, dental, vision, behavioral health 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. We provide pharmacy benefit management services to Health Net members through our
wholly-owned subsidiary, Health Net Pharmaceutical Services, Inc. (“HNPS”). HNPS provides integrated PBM services to
approximately 3.2 million Health Net members who have pharmacy benefits, including approximately 170,000 seniors. HNPS
manages these benefits in an effort to achieve the lowest cost for its customers. HNPS focuses its effort on encouraging appropriate
use of medications to enhance the overall member outcome while controlling overall cost to the health plan, member and employer. A
committee of internal and external physicians and pharmacists select medications by therapeutic class that offer demonstrable clinical
value. A cost effective option is then selected from equivalently effective options.
HNPS offers affiliated health plans flexible benefit designs, cost and trend management, and delivery systems at a reasonable
cost. HNPS outsources certain capital and labor-intensive functions of pharmacy benefit management, such as claims processing and
mail order services in order to provide cost control. HNPS also provides pharmacy benefit administration services to non-affiliated
customers who wish to self-fund their pharmacy benefit.
Behavioral Health. We provide behavioral health services through our wholly-owned subsidiary, Managed Health Network,
Inc., and its subsidiaries (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. These services are offered as a standard part of most of our commercial health plans. They are also sold in conjunction
with other commercial and Medicare products and on a stand-alone basis to unaffiliated health plans and employer groups.
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 to pursue sales of mental health plans that are not integrated in
comprehensive benefit plans.
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