Health Net 2009 Annual Report Download - page 89

under the supervision and with the participation of our principal executive officer and principal financial officer,
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on its evaluation, management concluded that our internal control over
financial reporting was effective as of December 31, 2009.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Deloitte & Touche LLP, the independent registered public accounting firm that audited the financial
statements included in this 2009 Annual Report on Form 10-K, has issued an attestation report on our internal
control over financial reporting as of December 31, 2009, which is included herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter ended December 31,
2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting, except as indicated below.
During the fourth quarter of 2009, the Company transitioned the responsibility for the calculation of its
outstanding claims liability to a third-party actuarial firm. Management has retained responsibility for the
approval and recording of the outstanding claims liability.
During the first quarter of 2009, the Company also outsourced its internal information technology (IT)
environment, including mainframe services, server services, help desk services, end user services, data network
services, voice network services and cross functional services, to a third party. This IT infrastructure outsourcing
was completed in February 2009, except for the data center migration, which was completed in all material
respects as it relates to the Company’s financial reporting practices in the fourth quarter of 2009. While
outsourcing these IT activities, the Company adopted a detailed transition model involving extensive transition
planning activities and relevant training, guided support, evaluation of quality measures and increased oversight
activities.
We are not currently aware of any material adverse impacts on our internal control over financial reporting
as a result of these changes. Management performed an evaluation of the effectiveness of our internal control
over financial reporting as of the year ended December 31, 2009. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. There have been no other significant
changes in the Company’s internal control over financial reporting that occurred during the quarter ended
December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
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