Health Net 2006 Annual Report Download - page 8

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. Beginning in 2007, we have added a
Special Needs plan for beneficiaries with hyperlipidemia in two counties in Arizona. See “—Government
Regulation—Federal Legislation and Regulation—Medicare Legislation” and “Item 1A. Risk Factors—Our
efforts to capitalize on Medicare business opportunities could prove to be unsuccessful” for additional
information regarding the MMA and our Medicare program.
Medicaid Products
We believe we are the fourth largest Medicaid HMO in the United States based on membership. As of
December 31, 2006, we had an aggregate of 839,550 Medicaid members compared to 829,927 members as of
December 31, 2005, principally in California. We also had an aggregate of 130,084 Medicaid members in
Connecticut and New Jersey. See “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—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 us a monthly fee for the coverage of our Medicaid members.
As of December 31, 2006, we had Medicaid operations in ten of California’s largest counties: Los Angeles,
Fresno, Kern, Orange, 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, 2006, 502,149 of our Medicaid
members resided in Los Angeles County, California. This represents approximately 70.8% of our California
Medicaid membership, and 59.8% of our total Medicaid membership. In May 2005, we renewed our contract
with DHS to provide Medicaid service in Los Angeles County. The renewed contract was 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, 2006, there
were 118,462 members (excluding 3,894 Healthy Kids 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. Monthly premiums are subsidized by the State of California and range between $4 and $15 per
child, up to a maximum of $45 for all children in a family enrolled in the Healthy Families Program. California
receives two-thirds of the funding for the program from the federal government.
In the Northeast, we offer Medicaid programs in Connecticut and New Jersey. Our Connecticut plan
operates statewide in the state’s HUSKY A Medicaid program, which provides comprehensive health care
coverage (other than behavioral health) to children and families within specified income levels. We believe we
are Connecticut’s second largest managed care company in this program. We have a contract with the
Connecticut Department of Social Services (“DSS”) under which our Connecticut Medicaid program operates.
The current contract is scheduled to terminate on June 30, 2007. We currently anticipate negotiating a renewal
contract with DSS to be effective July 1, 2007.
In New Jersey, we participate in the New Jersey Medicaid program, as well as the New Jersey SCHIP
program, which is known as New Jersey FamilyCare. These programs provide comprehensive health care
coverage for children and families as well as members who are aged, blind and disabled. We operate in 13 of 21
counties in New Jersey under a contract with the Department of Medical Assistance and Health Services. The
current contract is scheduled to expire on June 30, 2007. We currently anticipate negotiating an extension of the
contract to be effective July 1, 2007.
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