Health Net 2007 Annual Report Download - page 16

conditions are generally permitted. Where individual underwriting is permitted, the carrier may rescind the policy
coverage if the individual misrepresents his or her medical history in the application process. See “Item 1A. Risk
Factors—Proposed federal and state legislation affecting the managed health care industry could adversely affect
us” and “—Regulatory activities and litigation relating to the rescission of coverage, if resolved unfavorably,
could adversely affect us” for additional information on health plans’ right to rescind coverage.
We believe that the importance of the ultimate health care consumer (or member) in the health care product
purchasing process is likely to increase in the future, particularly in light of advances in technology and online
resources. Accordingly, we are focusing our marketing strategies on the development of distinct brand identities
and innovative product service offerings that will appeal to potential health plan members. For example, we
introduced Decision PowerSM, which is a series of programs designed to more directly involve patients in their
health care decisions. These programs allow our members to access information and consult with health coaches
as they are making decisions regarding health care issues. In addition, in 2006 we added a number of
enhancements on the It’s Your LifeSM—WellSite on the Company’s website. The WellSite gives commercial and
Medicare members easy access to information they need to make smarter choices about their health and about
their health care and health care costs. As more employers begin to offer consumer directed health plans such as
Health Savings Accounts (“HSAs”) and Health Reimbursement Accounts (“HRAs”), we believe consumers need
to be able to learn, plan and make complex decisions regarding their health care. Our new Wellsite combines
access to current Health Net and vendor content and tools.
Consumer-Directed Health Care Plans; Health Savings Accounts and Health Reimbursement Accounts
Health Savings Accounts were created in 2003 as part of the MMA. HSAs are individually owned accounts,
similar to an IRA or a 401(k) retirement plan, that generally allow employees or individuals to make
contributions to the account on a pretax basis. Funds in HSAs can be used to pay for certain qualified medical
expenses such as plan deductibles, copayments and coinsurance on a tax-free basis. HSA funds can be invested
and earnings on the investments are generally tax-free. HSAs must be used in conjunction with high-deductible
health plans. High-deductible health plans provide in-and out-of-network benefits and cover a wide range of
health care services.
Our Northeast and Arizona health plans launched HSA programs in 2005 and our California and Oregon
health plans launched HSA programs in 2006. Our HSA programs and other consumer-driven health care
products provide our members with tools to determine what health care services they may need and to estimate
how much those services would cost. We support our consumer-directed programs with web-based services that
assist members in educating themselves about health care. The web-based program includes WebMD’s Subimo
estimator tools, Decision PowerSM, prescription drug and hospital comparison tools.
In 2007, we expanded our consumer-driven health care initiative by offering a Health Net Health
Reimbursement Account at our health plan in California. An HRA is a health reimbursement arrangement funded
solely by an employer where the employer reimburses an employee for health expenses not covered by the group
health insurance plan (such as deductibles and coinsurance amounts). Employees are reimbursed tax-free for
qualified medical expenses that the employer agrees to reimburse, up to a maximum dollar amount for a coverage
period. Subject to the employer’s discretion, up to 100% of any unused amounts in the HRA at the end of a plan
year can be carried forward for reimbursement in subsequent years. See “Item 1A. Risk Factors—The markets in
which we do business are highly competitive. If we do not design and price our products competitively, our
membership and profitability could decline.”
Health Net Systems Consolidation Project
As discussed in previous years, we continue to work on a number of systems and operational initiatives
designed to improve our customer service, realize operational cost efficiencies and improve our decision making
capability. In 2007, we completed our migration to a single medical management platform. This platform
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