Health Net 2009 Annual Report Download - page 101

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Description of Business
Health Net, Inc. (referred to herein as the Company, we, us, our or HNT) is an integrated managed care
organization that delivers managed health care services. We are among the nation’s largest publicly traded
managed health care companies. Our health plans and government contracts subsidiaries provide health benefits
through our health maintenance organizations (HMOs), insured preferred provider organizations (PPOs) and
point of service (POS) plans to approximately 6.1 million individuals across the country through group,
individual, Medicare (including the Medicare prescription drug benefit commonly referred to as “Part D”),
Medicaid and TRICARE programs. Our subsidiaries also offer managed health care products related to
behavioral health and prescription drugs. We also own health and life insurance companies licensed to sell
exclusive provider organization (EPO), PPO, POS and indemnity products as well as auxiliary non-health
products such as life and accidental death and dismemberment, dental, vision, behavioral health and disability
insurance. These products are offered by our health and life insurance subsidiaries, which are licensed to sell
insurance in 49 states and the District of Columbia.
We currently operate within three reportable segments: West Operations, Northeast Operations and
Government Contracts, each of which is described below (see Note 14). Prior to the third quarter ended
September 30, 2009, we operated within two reportable segments, Health Plan Services and Government
Contracts.
Our West Operations reportable segment includes the operations of our commercial, Medicare (including
Part D) and Medicaid health plans, the operations of our health and life insurance companies and our behavioral
health and pharmaceutical services subsidiaries in Arizona, California and Oregon.
On December 11, 2009, we completed the sale (the Northeast Sale) of all of the outstanding shares of capital
stock of our New York, New Jersey, Connecticut and Bermuda subsidiaries that conducted business in our
Northeast Operations (the Acquired Companies or Northeast business). The sale was made pursuant to a Stock
Purchase Agreement (the Stock Purchase Agreement), dated as of July 20, 2009, by and among the Company,
Health Net of the Northeast, Inc. (HNNE), Oxford Health Plans, LLC (Buyer) and, solely for the purposes of
guaranteeing Buyer’s obligations thereunder, UnitedHealth Group Incorporated (United). At the closing of the
Northeast Sale, affiliates of United also acquired membership renewal rights for certain health care business
conducted by our subsidiary, Health Net Life Insurance Company, in the states of Connecticut and New Jersey.
We will continue to serve the members of the Acquired Companies under Administrative Services Agreements
we entered into with United and certain of its affiliates (the United Administrative Services Agreements), until
all members are either transitioned to a legacy United entity or non-renewed. We expect the United
Administrative Services Agreements to be in effect for approximately two years following the closing of the
transaction (see Note 3 for more information on the Northeast Sale). Prior to the Northeast Sale, our Northeast
Operations reportable segment included our commercial, Medicare and Medicaid health plans, the operations of
our HMOs in Connecticut, New York and New Jersey and our New York insurance company. See Note 14 for
our reportable segment information. Following the Northeast Sale, our Northeast Operations reportable segment
includes the operations of our businesses that are providing administrative services to United and its affiliates
pursuant to the United Administrative Services Agreements.
Our Government Contracts reportable segment includes government-sponsored managed care plans through
the TRICARE program and other health care-related government contracts, including our behavioral health
contracts with the Department of Defense. The Government Contracts reportable segment administers a large
managed care contract with the U.S. Department of Defense under the TRICARE program in the North Region.
The North Region covers Connecticut, Delaware, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts,
Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island,
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