Health Net 2009 Annual Report Download - page 9

$24 per child, up to a maximum of $72 for all children in a family enrolled in the Healthy Families Program.
California receives two-thirds of the funding for the program from the federal government.
Administrative Services Only Business
We provide ASO products to large employer groups in California. Under these arrangements, we provide
claims processing, customer service, medical management, provider network access and other administrative
services without assuming the risk for medical costs. We are generally compensated for these services on a fixed
per member per month basis.
Indemnity Insurance Products
We offer insured PPO, POS and indemnity products as “stand-alone” products and as part of multiple option
products in various markets. 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. Through these subsidiaries, we also offer
auxiliary non-health products such as life, accidental death and dismemberment, dental, vision and behavioral
health insurance. Our health and life insurance products are provided throughout most of our service areas.
Other Specialty Services and Products
We offer pharmacy benefits, behavioral health, dental and vision products and services (occasionally
through strategic relationships with third parties), as well as managed care products related to cost containment
for hospitals, health plans and other entities as part of our West Operations segment.
Pharmacy Benefit Management. We provide pharmacy benefit management (“PBM”) services to Health Net
members through our subsidiary, Health Net Pharmaceutical Services (“HNPS”). HNPS provides integrated
PBM services to approximately 2.7 million Health Net members who have pharmacy benefits, including
approximately 680,000 Medicare members. In addition, pursuant to the United Administrative Services
Agreements entered into as part of the Northeast Sale, we provide PBM services to approximately 450,000
individuals, including approximately 50,000 individuals under Medicare. For additional information regarding
the Northeast Sale, see “—Northeast Operations Segment.” HNPS manages these benefits in an effort to achieve
the highest quality outcomes at the lowest cost for its members. HNPS contracts with national health care
providers, vendors, drug manufacturers and pharmacy distribution networks (directly and indirectly through a
third party vendor), oversees pharmacy claims and administration, reviews and evaluates new FDA-approved
drugs for safety and efficacy and manages data collection efforts to facilitate our health plans’ disease
management programs.
HNPS focuses its effort on encouraging appropriate use of medications to enhance the overall member
outcome while controlling overall cost to the health plan, member and employer. A committee of internal and
external physicians and pharmacists selects medications by therapeutic class that offer demonstrable clinical
value. A cost effective option is then selected from equivalently effective options.
HNPS provides affiliated and unaffiliated health plans various services including development of benefit
designs, cost and trend management, sales and marketing support, and management delivery systems. HNPS
outsources certain capital and labor-intensive functions of pharmacy benefit management, such as claims
processing, mail order services and pharmacy network services.
Behavioral Health. We administer and arrange for behavioral health benefits and services through our
subsidiary, Managed Health Network, Inc., and its subsidiaries (collectively “MHN”). MHN offers behavioral
health, substance abuse and employee assistance programs (“EAPs”) on an insured and self-funded basis to
groups in various states and is included as a standard part of most of our commercial health plans. MHN’s
benefits and services are also sold in conjunction with other commercial and Medicare products and on a stand-
alone basis to unaffiliated health plans (including the northeast health plans covered under the United
Admistrative Services Agreements) and employer groups. During 2009, MHN continued to expand its product
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