Health Net 2006 Annual Report Download - page 145

Download and view the complete annual report

Please find page 145 of the 2006 Health Net annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 165

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 15—Segment Information
We currently operate within two reportable segments: Health Plan Services and Government Contracts. Our
Health Plan Services reportable segment includes the operations of our commercial, Medicare (including Part D)
and Medicaid health plans, the operations of our health and life insurance companies and our behavioral health
and pharmaceutical services subsidiaries. Effective in 2006, we excluded administrative services fees revenues
from our health plan services premiums; however, they remain included in our Health Plan Services segment
pretax income. See Note 1 for information on the reclassification of administrative services fees revenue. Our
Government Contracts reportable segment includes government-sponsored managed care plans through the
TRICARE program and other health care-related government contracts. Our Government Contracts segment
administers one large, multi-year managed health care government contract and other health care related
government contracts.
Our two reportable segments are determined by applying the aggregation criteria in SFAS No. 131,
“Disclosures About Segments of An Enterprise and Related Information.” The financial results of our two
reportable segments are reviewed on a monthly basis by our executive operating team which comprises the chief
operating decision maker (CODM). We continuously monitor our reportable segments to ensure that they reflect
how our CODM manages our company. The operating segments within our Health Plan Services reportable
segment all have similar economic characteristics and they meet the additional following five aggregation
criteria:
• Similar managed health care products and services including HMO, PPO and POS,
• Similar production process as they support similar customer groups and products,
• Same type of customers, individuals within large and small employer groups and senior and
commercial individuals,
• Similar distribution channels primarily consisting of insurance brokers, and
• Similar regulatory environment in that the health care industry is highly regulated at both the federal
and state levels.
We evaluate performance and allocate resources based on segment pretax income. The accounting policies
of the reportable segments are the same as those described in the summary of significant accounting policies (see
Note 2), except that intersegment transactions are not eliminated. We include investment income, administrative
services fees and other income and expenses associated with our corporate shared services and other costs in
determining Health Plan Services segment’s pretax income to reflect the fact that these revenues and expenses
are primarily used to support Health Plan Services reportable segment.
The debt refinancing charge, litigation, severance and related benefit costs, asset impairments and net gain
on sales of businesses and properties are excluded from our measurement of segment performance since they are
not managed within either of our reportable segments.
F-51