Health Net 2013 Annual Report Download - page 112

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
Note 1—Description of Business
Health Net, Inc. (referred to herein as "Health Net," "the Company," "we," "us," "our" or "HNT") is a publicly
traded managed care organization that delivers managed health care services. Together with our subsidiaries, we
provide health benefits through our health maintenance organizations ("HMOs"), insured preferred provider
organizations ("PPOs") and point of service ("POS") plans to approximately 5.3 million individuals across the country
through group, individual, Medicare, Medicaid ("Medi-Cal" in California), the United States Department of Defense
("Department of Defense" or "DoD"), including TRICARE, and Veterans Affairs programs. Our subsidiaries also offer
managed health care products related to behavioral health and prescription drugs, and are licensed to sell exclusive
provider organization ("EPO"), and indemnity products.
Our reportable segments are comprised of Western Region Operations and Government Contracts, each of which
is described below. Effective January 1, 2013, we closed out our Divested Operations and Services segment, which is
described below. As a result of entering into a definitive agreement in January 2012 to sell our Medicare stand-alone
Prescription Drug Plan ("Medicare PDP") business, we reviewed our reportable segments in the first quarter of 2012.
Following this review, all services provided in connection with divested businesses, including those relating to the sale
of our Medicare PDP business and the Northeast Sale (as defined below), were reported as part of our Divested
Operations and Services reportable segment beginning in the first quarter of 2012. See Note 14 for a discussion of our
reportable segments.
Our health plan services are provided under our Western Region Operations reportable segment, which includes
the operations primarily conducted in California, Arizona, Oregon and Washington for our commercial, Medicare and
Medicaid health plans, our health and life insurance companies, our pharmaceutical services subsidiary and certain
operations of our behavioral health subsidiaries.
Our Government Contracts reportable segment includes our government-sponsored managed care federal
contract with the DoD under the TRICARE program in the North Region and other health care, mental health and
behavioral health government contracts. On April 1, 2011, we began delivering administrative services under the new
T-3 contract for the TRICARE North Region ("T-3 contract"). We were the managed care contractor for the DoD’s
previous TRICARE contract in the North Region, which ended on March 31, 2011. The T-3 contract for the North
Region covers Connecticut, Delaware, Illinois, Indiana, Kentucky (except Fort Campbell), Maine, Maryland,
Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island,
Vermont, Virginia, West Virginia, Wisconsin and the District of Columbia and a small portion of Iowa and Missouri.
The Company provides administrative services to approximately 2.9 million Military Health System ("MHS") eligible
individuals under the T-3 contract. In addition to the beneficiaries that we service under the T-3 contract, we administer
contracts with the U.S. Department of Veterans Affairs to manage community based outpatient clinics in four states
covering approximately 7,200 enrollees and provide behavioral health services to military families under the
Department of Defense sponsored Military and Family Life Counseling, formerly Military and Family Life Consultant,
("MFLC") program. See Note 2 under the heading "Government Contracts" for additional information on our T-3
contract for the North Region and the MFLC contract.
On April 1, 2012, we completed the sale of the business operations of our Medicare PDP business to
Pennsylvania Life Insurance Company, a subsidiary of CVS Caremark Corporation ("CVS Caremark"). Prior to the sale
of our Medicare PDP business, our Divested Operations and Services reportable segment, formerly called the
"Northeast Operations" reportable segment, included the operations of our businesses that provided administrative and
run-out support services to an affiliate of UnitedHealth Group Incorporated ("United") and its affiliates under
administrative services and claims servicing agreements in connection with the sale of all of the outstanding shares of
capital stock of our health plan subsidiaries that were domiciled and had conducted businesses in Connecticut, New
Jersey, New York and Bermuda to United (the "Northeast Sale"). Beginning in the first quarter of 2012, this segment
also included the transition-related expenses of our divested Medicare PDP business. As of December 31, 2012, we had
substantially completed the administration and run-out of our divested businesses. See Note 2 for additional
information on our Divested Operations and Services and Note 3 for more information on the sale of our Medicare PDP
business and the Northeast Sale.