Health Net 2009 Annual Report Download - page 53

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
General
We are an integrated managed care organization that delivers managed health care services through health
plans and government sponsored managed care plans. We are among the nation’s largest publicly traded
managed health care companies. Our mission is to help people be healthy, secure and comfortable. We provide
health benefits 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, TRICARE and
Veterans Affairs programs. Our behavioral health services subsidiary, Managed Health Network (MHN),
provides behavioral health, substance abuse and employee assistance programs to approximately 6.5 million
individuals, including our own health plan members. Our subsidiaries also offer managed health care products
related to prescription drugs, and offer managed health care product coordination for multi-region employers and
administrative services for medical groups and self-funded benefits programs.
How We Report Our Results
Due to the Northeast Sale (see “—Recent Developments” below), we expanded our reportable segments in
the third quarter ended September 30, 2009. We currently operate within three reportable segments, West
Operations, Northeast Operations and Government Contracts, each of which is described below. Prior to the third
quarter ended September 30, 2009, we operated within two reportable segments, Health Plan Services and
Government Contracts.
Our health plan services are provided under two reportable segments: West Operations and Northeast
Operations. 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. We have
approximately 3.0 million medical members (including Medicare Part D members) in our West Operations
reportable segment. 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. 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. See “Item 1. Business—Segment
Information—Northeast Operations Segment” and Note 3 to our consolidated financial statements for more
information on the Northeast Sale.
Our Government Contracts segment includes our government-sponsored managed care federal contract with
the U.S. Department of Defense (the Department of Defense) or DoD under the TRICARE program in the North
Region and other health care related government contracts. Under the TRICARE contract for the North Region,
we provide health care services to approximately 3.1 million Military Health System (MHS) eligible
beneficiaries (active duty personnel and TRICARE/Medicare dual eligible beneficiaries), including 1.8 million
TRICARE eligibles for whom we provide health care and administrative services and 1.3 million other
MHS-eligible beneficiaries for whom we provide ASO. We also provide behavioral health services to military
families under the Department of Defense Military Family Life Counseling contract.
How We Measure Our Profitability
Our profitability depends in large part on our ability to, among other things, effectively price our health care
products; manage health care costs, including reserve estimates and pharmacy costs; contract with health care
providers; attract and retain members; and manage our general and administrative (G&A) and selling expenses.
In addition, factors such as regulation, competition and general economic conditions affect our operations and
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