Health Net 2009 Annual Report Download - page 70

The Government contracts ratio increased by 310 basis points for the year ended December 31, 2008 as
compared to the same period in 2007 primarily due to increased costs of health care services provided under
Option Period 5 in the TRICARE contract.
Asset Impairment, Loss on Sale of Northeast Health Plan Subsidiaries and Other Charges
2009 Charges
We recorded $404.4 million pretax, or $280.9 million after tax, charges during the year ended December 31,
2009 as follows:
• $174.9 million recorded in asset impairments on Northeast Operations, including goodwill impairment
of $137.0 million, impairments of other intangible assets of $6.3 million and property and equipment of
$31.6 million. See Note 2 to our consolidated financial statements for more information regarding these
impairments;
• $105.9 million recorded in loss on sale of Northeast health plan subsidiaries. See Note 3 to our
consolidated financial statements for more information regarding the Northeast Sale;
• $124.8 million recorded as part of G&A expenses primarily for severance charges, IT infrastructure
transformation costs and other costs associated with Health Net’s operations strategy which is aimed at
achieving substantial reductions in G&A by 2010; and
• $3.6 million recorded in government contracts costs for TRICARE contract procurement costs;
partially offset by
• $4.8 million recorded as a reduction in health plan services reserves primarily for litigation and
regulatory actions related to the Company’s rescission practices in Arizona and California and claim-
related matters.
2008 Charges
We recorded the following $175.1 million pretax, or $104.1 million after tax, charges during the year ended
December 31, 2008:
• $119.6 million recorded as part of G&A expenses primarily for severance and other costs associated
with Health Net’s operations strategy. This amount also includes attorney’s fees and regulatory fines
associated with our rescission practices and in connection with the settlement agreement for the
McCoy, Wachtel and Scharfman class action lawsuits.
• $37.5 million recorded as part of health plan services expenses for estimated litigation and regulatory
actions related to the Company’s rescission practices in Arizona and California and claim-related
matters in connection with the settlement agreement for the McCoy, Wachtel and Scharfman class
action lawsuits;
• $14.6 million loss recorded as part of net investment income from other-than-temporary impairments in
our available-for-sale investments and money market funds; and
• $3.4 million recorded as part of administrative services fees and other income for an impairment of
assets of a small, non-core subsidiary.
2007 Charges
In 2007, we recorded a $306.8 million pretax, or $222.4 million after-tax, charge incurred as a result of us
reaching an agreement in principle to settle the McCoy, Wachtel and Scharfman class action lawsuits; the
proposed resolution of regulatory issues with the New Jersey Department of Banking and Insurance; arbitration
settlement; and other immaterial litigation matters. The charge amount was comprised of the following:
• $201.5 million recorded as part of health plan services expenses during the year ended December 31,
2007 for claim-related matters, class disbursements and remediations; and
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