Health Net 2006 Annual Report Download - page 10

During 2006, MHN continued to expand and enhance its product portfolio services and client base. For
example, additional products focusing on wellness and behavioral change programs were introduced and are
available as part of MHN’s commercial EAP solutions. In addition, MHN provided its workplace and work-life
services to members of Health Net affiliated medical plans, including Medicare members. MHN’s EAP services
extend internationally to certain countries to cover eligible employees of domestic companies who are located
abroad.
MHN was recently awarded a five-year contract to develop, administer and monitor the non-medical
counseling program for Department of Defense members and families under the Military Family Counseling
Services program. See “—Government Contracts Segment—Other Department of Defense Contracts.”
MHN’s products and services were being provided to over 7.3 million individuals as of December 31, 2006,
with approximately 1.9 million individuals under risk-based programs, approximately 2.2 million individuals
under self-funded programs and approximately 3.2 million individuals under EAPs, including those who are also
covered under other MHN programs. In 2006, MHN’s total revenues were $282 million. Of that amount, $155
million represented revenues from business with MHN affiliates and $127 million represented revenues from
non-affiliate business.
Dental and Vision. In 2003, we sold our dental and vision subsidiaries and, as a result, we no longer
underwrite or administer stand-alone dental and vision products. However, we continue to make available to our
current and prospective members in Arizona, California and Oregon private label dental products through a
strategic relationship with SafeGuard Health Enterprises, Inc. (“SafeGuard”) and private label vision products
through a strategic relationship with EyeMed Vision Care LLC (“EyeMed”). The stand-alone dental products are
underwritten and administered by SafeGuard companies and the stand-alone vision products are underwritten by
Fidelity Security Life Insurance Company and administered by EyeMed affiliated companies. In addition,
following the Universal Care Acquisition, we continued to provide contracted dental services to Medi-Cal,
Medicare and Healthy Families program enrollees in California. Effective January 1, 2007, we no longer provide
contracted dental services to former Universal Care Medicare members. Safeguard serves as the administrator for
the dental services we provide to our Medi-Cal and Healthy Families program enrollees.
Government Contracts Segment
Our Government Contracts segment includes our TRICARE contract for the North Region and other health
care related government contracts that we administer for the U.S. Department of Defense (the “Department of
Defense”) and the U.S. Department of Veterans Affairs. Certain components of these contracts are subcontracted
to unrelated third parties.
Under government-funded health programs, the government payor typically determines premium and
reimbursement levels. Contracts under these programs are generally subject to frequent change, including
changes which may reduce the number of persons enrolled or eligible, reduce the revenue received by us or
increase our administrative or health care costs under such programs. The amount of government receivables set
forth in our consolidated financial statements represents our best estimate of the government’s liability to us
under TRICARE and other federal government contracts. In general, government receivables are estimates and
are subject to government audit and negotiation. See “Item 1A. Risk Factors—A significant reduction in
revenues from the government programs in which we participate could have an adverse effect on our business,
financial condition or results of operations.”
TRICARE
Our wholly-owned subsidiary, Health Net Federal Services, LLC (“HNFS”), administers a large managed
care federal contract with the Department of Defense under the TRICARE program in the North Region. We
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