Health Net 2007 Annual Report Download - page 61

Health Plan Services Segment Results
The following table summarizes the operating results for the Health Plan Services segment for the last three
fiscal years:
Year Ended December 31,
2007 2006 2005
(Dollars in millions, except PMPM data)
Health plan services segment:
Commercial premium revenue ..................................$ 7,468.0 $ 6,903.5 $ 6,797.3
Medicare premium revenue .................................... 2,778.9 2,304.4 1,574.1
Medicaid premium revenue .................................... 1,188.4 1,156.8 1,135.5
Health plan services premium revenues ...........................$11,435.3 $10,364.7 $ 9,506.9
Health plan services costs ...................................... (9,762.9) (8,600.4) (8,013.0)
Net investment income ........................................ 120.2 111.0 72.8
Administrative services fees and other income ..................... 51.1 56.6 53.4
G&A ...................................................... (1,275.6) (1,165.3) (956.8)
Selling ..................................................... (327.8) (245.3) (221.6)
Amortization and depreciation .................................. (43.0) (25.6) (33.7)
Interest .................................................... (32.5) (51.2) (44.6)
Pretax income ...............................................$ 164.8 $ 444.5 $ 363.4
MCR: ..................................................... 85.4% 83.0% 84.3%
Commercial ............................................. 85.7% 83.2% 83.4%
Medicare ............................................... 85.4% 83.3% 89.4%
Medicaid ............................................... 83.1% 80.9% 82.3%
Health plan services premium PMPM ............................$ 263.54 $ 243.70 $ 235.80
Health plan services costs PMPM ...............................$ 225.00 $ 202.22 $ 198.75
G&A expense ratio ........................................... 11.1% 11.2% 10.0%
Selling costs ratio ............................................ 2.9% 2.4% 2.3%
Health Plan Services Premiums
Total Health Plan Services premiums increased by $1,070.6 million, or 10%, for the year ended
December 31, 2007 as compared to the same period in 2006, and increased by $857.8 million, or 9%, for the year
ended December 31, 2006 as compared to the same period in 2005. On a PMPM basis, premiums increased by
8% for the year ended December 31, 2007 as compared to the same period in 2006, and increased by 3% for the
year ended December 31, 2006 as compared to the same period in 2005.
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Commercial premium revenues increased by $564.5 million, or 8%, for the year ended December 31, 2007
as compared to the same period in 2006. The Guardian Transaction added approximately $266 million of
premium revenue in 2007. The commercial premium PMPM increased by an average of 9% in the year ended
December 31, 2007 compared to the same period in 2006. These increases were primarily attributable to the
impact of the Guardian Transaction and our ongoing pricing discipline.
Medicare premiums increased by $474.5 million, or 21%, for the year ended December 31, 2007 as
compared to the same period in 2006. This increase was primarily due to an increase in members participating
the Medicare Advantage and Medicare Part D prescription drug program and Medicare risk factor adjustments
totaling $95.1 million in the year ended December 31, 2007 (see “—Health Plan Services Costs” for detail
regarding the increase in capitation expense related to the Medicare rate adjustment). Of this amount, $80.3
million, $13.2 million and $1.6 million were for the 2007, 2006 and 2003 payment years, respectively. The
premium yields were essentially flat in 2007 compared to 2006.
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