Health Net 2005 Annual Report Download - page 7

additional premium. We are also offering the new “Part D” stand-alone prescription drug benefit in these states.
In addition, we offer the stand-alone Part D prescription drug benefit to seniors in five states where we do not
have Medicare Advantage membership: Massachusetts, New Jersey, Rhode Island, Vermont and Washington.
We participate as a Special Needs plan provider in Arizona, California, Connecticut and New York. Special
Needs plans are designed to ensure that Medicare beneficiaries with limited financial means and disabled
Medicare beneficiaries have additional health care and prescription drug coverage. Our plan targets beneficiaries
who are eligible for both Medicare and Medicaid in these four states and beneficiaries with chronic obstructive
pulmonary disease and congestive heart failure in two California counties.
Medicaid Products
We believe we are the fourth largest Medicaid HMO in the United States based on membership. As of
December 31, 2005, we had an aggregate of 829,927 Medicaid members compared to 831,421 members as of
December 31, 2004, principally in California. We also had Medicaid members and operations in Connecticut and
New Jersey See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operation—Results of Operations—Health Plan Services Segment Membership” for detailed information
regarding our Medicaid enrollment by state. To enroll in our Medicaid products, an individual must be eligible
for Medicaid benefits under the appropriate state regulatory requirements. The applicable state agency pays our
HMOs a monthly fee for the coverage of our Medicaid members.
As of December 31, 2005, we had Medicaid operations in nine of California’s largest counties: Los Angeles,
Fresno, Kern, Stanislaus, Riverside, Sacramento, San Bernardino, San Diego and Tulare. We are the sole
commercial plan contractor with the State of California’s Department of Health Services (“DHS”) to provide
Medicaid service in Los Angeles County, California. As of December 31, 2005, 466,521 of our Medicaid
members, representing approximately 56% of our total Medicaid membership, resided in Los Angeles County. In
May 2005, we renewed our contract with DHS to provide Medicaid service in Los Angeles County. The renewed
contract is effective April 1, 2006 and has an initial term of two years with three 24-month extension periods.
Our California HMO, HN California, participates in the State Children’s Health Insurance Program
(“SCHIP”), which, in California, is known as the Healthy Families program. As of December 31, 2005, there
were 97,039 members in our Healthy Families program. SCHIP was designed as a federal/state partnership,
similar to Medicaid, with the goal of extending health insurance to children whose families earn too much money
to be eligible for Medicaid, but not enough money to purchase private insurance. Member premiums, which
range from $4 to $9 per child, per month, are subsidized by the State of California. California receives two-thirds
of the funding for the program from the federal government.
In 2005, we were awarded four new contracts covering the Healthy Kids Programs in seven California
counties. We are the exclusive Health Kids contractor in each of these counties and are the only commercial plan
to be awarded such contracts in California. The Health Kids program provides coverage for low-income children
in California that do not meet all of the eligibility criteria of Medicaid or the Healthy Families program.
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, principally Connecticut. As of December 31, 2005, we had 116,318 members
through our ASO business. Of those members, approximately 109,105 were located in the Northeast.
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