Health Net 2013 Annual Report Download - page 12

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Dental and Vision
We do not underwrite or administer stand-alone dental or vision products other than the stand-alone dental
products that we underwrite in Oregon and Washington. During 2013 our current and prospective group plan members
in Arizona and California had the option to elect private label dental products through a strategic relationship with
Dental Benefit Providers, Inc. (“DBP”) and private label vision products through a strategic relationship with EyeMed
Vision Care LLC (“EyeMed”). Those stand-alone dental products were underwritten and administered by DBP
affiliated companies and the stand-alone vision products were underwritten by Fidelity Security Life Insurance
Company and administered by EyeMed affiliated companies. DBP also administers dental products and coverage we
provide to our members in Oregon and Washington. Liberty Dental Plans of California, Inc. serves as the underwriter
and administrator for the dental services we provide to our Medi-Cal and Healthy Families program enrollees. Vision
Service Plan serves as the underwriter and administrator for the vision services we provide to our Medi-Cal and Healthy
Families vision program enrollees in California.
Government Contracts Segment
Our Government Contracts segment includes our government-sponsored managed care federal contract with the
Department of Defense 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 delivery of administrative services under the
Managed Care Support Contract (“T-3 contract”) for the TRICARE North Region. Under the T-3 contract for the
TRICARE North Region, we provide various types of administrative services including: provider network management,
referral management, medical management, disease management, enrollment, customer service, clinical support
service, and claims processing.
Our Government Contracts segment also includes other health care, mental health and behavioral health
government contracts, and subcontracts that we administer for the Department of Defense, the U.S. Department of
Veterans Affairs and certain other federal, state and local government entities. Certain components of these contracts are
subcontracted to unrelated third parties.
The government payor typically determines beneficiary fees and provider reimbursement levels. Contracts under
these programs are generally subject to frequent change, including changes that may reduce or increase the number of
persons enrolled or eligible, or the revenue received by us for our administrative services. Amounts receivable under
government contracts are comprised primarily of contractually defined billings, accrued contract incentives under the
terms of the contract and amounts related to change orders for services not originally specified in the contract. In
general, government receivables are estimates and are subject to government audit and negotiation. See “Item 1A. Risk
Factors—A significant reduction in revenues from the government programs in which we participate or other changes
to these programs could have a material adverse effect on our business, financial condition or results of operations.”
TRICARE
Our wholly owned subsidiary, Health Net Federal Services, LLC (“HNFS”), administers the T-3 contract with the
Department of Defense under the TRICARE program in the North Region. We have been serving the Department of
Defense since 1988 under the TRICARE program and its predecessor programs. We believe we have established a solid
history of operating performance under our contracts with the Department of Defense. We believe there will be further
opportunities to serve the Department of Defense and other governmental organizations, such as the Department of
Veterans Affairs, in the future.
We began providing services under the T-3 contract on April 1, 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. In addition, the contract covers a small portion of each
of Iowa and Missouri.
Under the T-3 contract for the TRICARE North Region, we provide administrative services to approximately 2.9
million Military Health System (“MHS”) eligible beneficiaries. Eligible beneficiaries in the TRICARE program are
able to choose from a variety of program options. They can choose to enroll in TRICARE Prime, which is similar to a
conventional HMO plan, or they can select, on a case-by-case basis, to utilize TRICARE Extra, which is similar to a
conventional PPO plan, or TRICARE Standard, which is similar to a conventional indemnity plan.
Under TRICARE Prime, enrollees pay an enrollment fee (which is zero for active duty participants and their
dependents) and select a primary care physician from a designated provider panel. The primary care physicians are
responsible for making referrals to specialists and hospitals. Except for active duty family members, who have no co-