Health Net 2005 Annual Report Download - page 59

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In addition to the 3.0 million eligible beneficiaries that we service under the TRICARE contract for the
North Region, we administer 15 contracts with the U.S. Department of Veterans Affairs to manage community
based outpatient clinics in 11 states covering approximately 37,000 enrollees.
Government Contracts Segment Results
The following table summarizes the operating results for Government Contracts for the last three fiscal
years:
Year Ended December 31,
2005 2004 2003
(Dollars in millions, except membership)
Government contracts segment:
Revenues ...................................... $2,307.5 $2,021.9 $1,865.8
Government contracts costs ....................... 2,211.3 1,927.6 1,789.5
Pretax income .................................. 96.2 94.3 76.3
Government Contracts Ratio ....................... 95.8% 95.3% 95.9%
Government Contracts Revenues
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Government Contracts revenues increased by $285.6 million, or 14.1%, for the year ended December 31,
2005 as compared to the same period in 2004. The increase in Government Contracts revenues is primarily due to
an increase in health care services provided under our TRICARE contract for the North Region resulting from a
rise in demand for private sector services as a direct result of continued heightened military activity.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Government Contracts revenues increased by $156.1 million, or 8.4%, for the year ended December 31,
2004 as compared to the same period in 2003. This increase was primarily due to a $684.1 million increase in
revenues in the second half of 2004 when we began providing health care services under the TRICARE contract
for the North Region, partially offset by a decrease in revenues of $526.7 million from the expiration of the old
TRICARE contracts.
Government Contracts Costs
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Government Contracts costs increased by $283.7 million or 14.7% for the year ended December 31, 2005 as
compared to the same period in 2004, primarily due to higher costs under the TRICARE contract for the North
Region resulting from a rise in demand for private sector services as a direct result of continued heightened
military activity.
The Government contracts ratio increased by 50 basis points for the year ended December 31, 2005 as
compared to the same period in 2004 due to change in the business mix of the TRICARE contracts as we fully
transitioned to the North region contract in 2005.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Government Contracts costs increased by $138.1 million, or 7.7%, for the year ended December 31, 2004
compared to the same period in 2003 due to an increase in costs of $672.1 million from the commencement of
health care services under the TRICARE contract for the North Region, partially offset by $528.2 million from
the expiration of the old TRICARE contracts.
57