Health Net 2005 Annual Report Download - page 8

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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 46 states and the District of Columbia. Through these subsidiaries, we also
offer auxiliary non-health products such as life, 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 (“PBM”) services to Health Net
members through our wholly-owned subsidiary, Health Net Pharmaceutical Services, Inc. (“HNPS”). HNPS
provides integrated PBM services to approximately 2.9 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 provides affiliated health plans various services including development of benefit designs, cost and
trend management, and management delivery systems. HNPS outsources certain capital and labor-intensive
functions of pharmacy benefit management, such as claims processing and mail order services. HNPS also
provides pharmacy benefit administration services to non-affiliated customers who wish to self-fund their
pharmacy benefit.
The number of seniors for which HNPS manages pharmacy benefits is expected to grow significantly with our
participation in the Part D Prescription drug benefit. We are offering seniors in 10 states broad drug coverage
through low cost benefits that leverage HNPS’s experience in managing drug costs and trends at a reasonable price.
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 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.
Over the past several years, MHN has focused on capitalizing growth opportunities both inside and outside
its traditional areas of business. Areas of focus include EAP, health care services integration and aggressive
market-facing initiatives.
•EAP:MHN is focusing on expanding telephonic EAP services in response to the demand for EAP
services where face-to-face counseling is not practicable. In addition, MHN is expanding its EAP
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