Health Net 2007 Annual Report Download - page 39

independent sales agents and we cannot assure you that these agents will continue to market our products at a
reasonable cost. Although we have a number of sales employees and agents, if key sales employees or agents or a
large subset of these individuals were to leave us, our ability to retain existing customers and members could be
impaired.
There have been a number of investigations and enforcement actions against insurance brokers and insurers
over the last several years regarding allegedly inappropriate or undisclosed payments made by insurers to brokers
for the placement of insurance business. For example, CMS has increased its scrutiny of insurance brokers and
insurers regarding allegedly improper sales and marketing practices in connection with the sale of Medicare
products. While we are not aware of any unlawful practices by the Company or any of our agents or brokers in
connection with the marketing and sales of our products and services, current investigations by the New York
Attorney General, New York Department of Insurance, CMS and other regulators, as well as regulatory changes
initiated in several states in response to allegedly inappropriate broker conduct and broker payment practices,
could result in changes in industry practices that could have an adverse effect on our ability to market our
products.
The market price of our common stock is volatile.
The market price of our common stock is subject to volatility. In 2007, the Morgan Stanley Healthcare
Payor Index (the “HMO Index”), an index comprised of 11 managed care organizations, including Health Net,
recorded an approximate 16% rise in its value, while the per-share value of our common stock decreased by less
than 1%. There can be no assurance that the trading price of our common stock will vary in a manner consistent
with the variation in the HMO Index or the Standard & Poor’s 400 Mid-Cap Index of which our common stock is
also a component. The market prices of our common stock and the securities of certain other publicly-traded
companies in our industry have shown volatility and sensitivity in response to many factors, including public
communications regarding managed care, legislative or regulatory actions, litigation or threatened litigation,
health care cost trends, pricing trends, competition, earnings, receivable collections or membership reports of
particular industry participants, and market speculation about or actual acquisition activity. Additionally, adverse
developments affecting any one of the leading companies in our sector could cause the price of our common
stock to weaken, even if those adverse developments do not otherwise affect us. There can be no assurances
regarding the level or stability of our share price at any time or the impact of these or any other factors on our
stock price.
Large-scale public health epidemics and/or terrorist activity could cause us to incur unexpected health care
and other costs and could materially and adversely affect our business, financial condition and results of
operations.
An outbreak of a pandemic disease and/or future terrorist activities, including bio-terrorism, could
materially and adversely affect the U.S. economy in general and the health care industry specifically. Depending
on the government’s actions and the responsiveness of public health agencies and insurance companies, a large-
scale public health epidemic or future acts of bio-terrorism could lead to, among other things, increased use of
health care services, disruption of information and payment systems, increased health care costs due to increased
in-patient and out-patient hospital costs and the cost of any anti-viral medication used to treat affected people.
Natural disasters, including earthquakes, fires and floods, could severely damage or interrupt our systems
and operations and result in an adverse effect on our business, financial condition or results of operations.
Natural disasters such as fire, flood, earthquake, tornado, power loss, virus, telecommunications failure,
break-in or similar event could severely damage or interrupt our systems and operations, result in loss of data,
and/or delay or impair our ability to service our members and providers. We have in place a disaster recovery
plan which is intended to provide us with the ability to maintain fully redundant systems for our operations in the
event of a natural disaster utilizing various alternate sites provided by a national disaster recovery vendor.
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