Health Net 2009 Annual Report Download - page 172

Schedule 1
Section 1.4(b)
(b) Medicare-Based Payments.
(i) Certain Definitions. For purposes of this Section 1.4(b):
(A) “2010 Actual Medicare GAAP Revenues” means the GAAP revenues for 2010 Medicare Revenue Period
attributable to the Medicare Revenue Contract, as reflected on the 2010 Medicare Actual Income Statement.
(B) “2010 Actual Medicare Profit/Loss Amount” means an amount equal to 50% of the pre-tax income or loss for the
2010 Medicare Revenue Period attributable to the Medicare Revenue Contract (up to a maximum pre-tax income or
loss of *** such that the amount under this subparagraph (B) shall not be greater than *** of pre-tax income or loss)
as reflected on the 2010 Medicare Actual Income Statement; provided that, such amounts shall be pro-rated based
on the actual number of days commencing on the later of January 1, 2010 and the day after the Closing Date and
ending on December 31, 2010 (up to 365). Notwithstanding the foregoing, 2010 Actual Medicare Profit/Loss
Amount shall not include any favorable or unfavorable prior period development, risk adjustment factor
developments or similar adjustments with respect to the Medicare Revenue Contract relating to any pre-Closing
period or any period prior to January 1, 2010.
(C) “2010 Actual Medicare Revenue-Based Payment Amount” means an amount equal to 6.75% of the 2010 Actual
Medicare GAAP Revenues.
(D) “2010 Estimated Medicare GAAP Revenues” means the GAAP revenues for 2010 Medicare Revenue Period
attributable to the Medicare Revenue Contract, as reflected on the 2010 Medicare Estimated Income Statement.
(E) “2010 Estimated Medicare Profit/Loss Amount” means an amount equal to 50% of the pre-tax income or loss for the
2010 Medicare Revenue Period attributable to the Medicare Revenue Contract (up to a maximum pre-tax income or
loss of *** such that the amount under this subparagraph (E) shall not be greater than *** of pre-tax income or loss)
as reflected on the 2010 Medicare Estimated Income Statement; provided that, such amounts shall be pro-rated
based on the actual number of days commencing on the later of January 1, 2010 and the day after the Closing Date
and ending on December 31, 2010 (up to 365). Notwithstanding the foregoing, 2010 Estimated Medicare Profit/Loss
Amount shall not include any favorable or unfavorable prior period development, risk adjustment factor
developments or similar adjustments with respect to the Medicare Revenue Contract relating to any pre-Closing
period or any period prior to January 1, 2010.