Health Net 2005 Annual Report Download - page 48

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Please find page 48 of the 2005 Health Net annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

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We measure our Government Contracts segment profitability based on government contracts cost ratio and
pretax income. The government contracts cost ratio is calculated as government contracts cost divided by
government contracts revenue. The pretax income is calculated as government contracts revenue less government
contracts cost. See “—Results of Operations—Table of Summary Financial Information” for a calculation of our
government contracts cost ratio and “—Results of Operations—Government Contracts Segment Results” for a
calculation of our pretax income.
Government contracts revenue is made up of two major components: health care and administrative
services. The health care component includes revenue recorded for health care costs for the provision of services
to our members, including paid claims and estimated IBNR expenses for which we are at risk, and underwriting
fees earned for providing the health care and assuming underwriting risk in the delivery of care. The
administrative services component encompasses fees received for all other services provided to both the
government customer and to beneficiaries, including services such as medical management, claims processing,
enrollment, customer services and other services unique to the managed care support contract with the
government.
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