Health Net 2006 Annual Report Download - page 19

security of transmitted protected health information (“PHI”). The regulations, consisting of privacy regulations,
transactions and codeset requirements and security regulations require health plans, clearinghouses and providers
to:
• comply with various requirements and restrictions related to the use, storage and disclosure of PHI,
• adopt rigorous internal procedures to protect PHI,
• create policies related to the privacy of PHI and
• enter into specific written agreements with business associates to whom PHI is disclosed.
The regulations also establish significant criminal penalties and civil sanctions for non-compliance. We are
in compliance with the HIPAA privacy regulations, the requirements relating to transactions and codesets and the
security regulations.
The Gramm-Leach-Bliley Act generally requires insurers to provide customers with notice regarding how
their personal health and financial information is used and the opportunity to “opt out” of certain disclosures
before the insurer shares non-public personal information with a non-affiliated third party. Like HIPAA, this law
sets a “floor” standard, allowing states to adopt more stringent requirements governing privacy protection.
ERISA. Most employee benefit plans are regulated by the federal government under the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). Employment-based health coverage is such an
employee benefit plan. ERISA is administered, in large part, by the U.S. Department of Labor (“DOL”). ERISA
contains disclosure requirements for documents that define the benefits and coverage. It also contains a provision
that causes federal law to preempt state law in the regulation and governance of certain benefit plans and
employer groups, including the availability of legal remedies under state law.
Other Federal Regulations. We must comply with, and are affected by, laws and regulations relating to the
award, administration and performance of U.S. Government contracts. Government contract laws and regulations
affect how we do business with our customers and, in some instances, impose added costs on our business. A
violation of specific laws and regulations could result in the imposition of fines and penalties or the termination
of our contracts or debarment from bidding on contracts.
State Laws and Regulations
Our HMOs, insurance companies and behavioral health plan are subject to extensive state regulation. Set
forth below are the principal HMO regulatory agencies that govern our health plans and insurance companies.
Company Regulatory Agency
Arizona HMO Arizona Department of Insurance
California HMO California Department of Managed Health Care
Connecticut HMO Connecticut Department of Insurance
New Jersey HMO New Jersey Department of Banking and Insurance
New York HMO New York Department of Insurance and New York Department of Health
Oregon HMO Oregon Department of Business and Consumer Services
Health Net Life
Insurance Company
California Department of Insurance generally, and the Department of
Insurance of each state in which it does business
Health Net Insurance
Company of New York
New York Department of Insurance
MHN California Department of Managed Health Care
17