Health Net 2005 Annual Report Download - page 54

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membership losses from our planned withdrawal in selected counties in California. Medicare enrollment in our
Oregon health plan increased from 392 to 8,594 members during 2004, primarily as a result of our Oregon health
plan’s participation in a Medicare PPO demonstration project.
We participate in state Medicaid programs in California, Connecticut and New Jersey. California
membership, where the program is known as Medi-Cal, comprised 84% of our Medicaid membership at
December 31, 2004. Overall Medicaid membership decreased 2% at December 31, 2004 compared to
December 31, 2003, primarily as a result of competition in New Jersey, a change in law that eliminated certain
members eligibility in Connecticut and the State of California’s efforts to tighten eligibility requirements for
participation in the Medi-Cal and Healthy Families program. In the third quarter of 2004, we added a new county
in California, accounting for approximately 33,000 new members. Despite ongoing concerns about the states’
ability to adequately fund these Medicaid programs, we believe that the significant savings generated by
Medicaid managed care will provide ongoing future growth opportunities, as states may move more Medicaid
enrollees into managed care plans.
Health Plan Services Segment Results
The following table summarizes the operating results for Health Plan Services for the last three fiscal years:
Year Ended December 31,
2005 2004 2003
(Dollars in millions, except PMPM data)
Health plan services segment:
Health plan services premiums ..................... $9,553.5 $ 9,560.2 $ 9,093.2
Health plan services expenses ...................... (8,013.0) (8,413.6) (7,516.8)
Gross margin ................................... 1,540.5 1,146.6 1,576.4
Net investment income ........................... 72.8 58.2 59.3
Other income ................................... 6.8 6.1 46.3
G&A ......................................... (956.8) (888.5) (912.5)
Selling ........................................ (221.6) (240.1) (233.5)
Amortization and depreciation ..................... (33.7) (44.3) (58.7)
Interest ........................................ (44.6) (33.1) (39.1)
Pretax income .................................. $ 363.4 $ 4.9 $ 438.2
MCR ......................................... 83.9% 88.0% 82.7%
Health plan services premium PMPM ............... $ 236.95 $ 217.31 $ 201.97
Health Care Cost PMPM .......................... $ 198.75 $ 191.24 $ 166.96
Health Plan Services Premiums
Total Health Plan Services premiums decreased by $6.7 million, or 0.1%, for the year ended December 31,
2005 as compared to the same period in 2004, and increased by $467.0 million, or 5.1%, for the year ended
December 31, 2004 as compared to the same period in 2003 as shown in the following table:
Year Ended December 31,
2005 2004 2003
(Dollars in millions)
Commercial premium revenue ............................ $6,844.0 $6,984.7 $6,553.8
Medicare Risk premium revenue .......................... 1,574.1 1,483.2 1,380.6
Medicaid premium revenue ............................... 1,135.4 1,092.3 1,158.8
Total Health Plan Services premiums ................... $9,553.5 $9,560.2 $9,093.2
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