Health Net 2013 Annual Report Download - page 158

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-54
Long-Term Purchase Obligations
We have entered into long-term agreements to purchase various services, which may contain certain termination
provisions and have remaining terms in excess of one year as of December 31, 2013.
We have entered into long-term agreements to receive services related to disease management, case management,
wellness, pharmacy benefit management, pharmacy claims processing services and health quality/risk scoring
enhancement services with external third-party service providers. As of December 31, 2013, the remaining terms were
approximately from two to three years for these contracts, and termination of these agreements is subject to certain
termination provisions. As of December 31, 2013, the total estimated future commitments under these agreements were
$123.6 million.
We have entered into an agreement with International Business Machines Corporation ("IBM") to outsource our
IT infrastructure management services including data center services, IT security management and help desk support.
We exercised two of our three six-month options to extend the contract for an additional year and as of December 31,
2013, the remaining term of this contract was approximately one year, and the total estimated future commitments
under the agreement were approximately $99.1 million.
We have entered into an agreement with Cognizant Technology Solutions U.S. Corporation ("Cognizant") to
outsource our software applications development and management activities to Cognizant. Under the terms of the
agreement, Cognizant, among other things, provides us with services including the following: application development,
testing and monitoring services, application maintenance and support services, project management services and cross
functional services. We exercised our option to extend the contract for an additional year and as of December 31, 2013,
the remaining term of this contract was approximately one year, and the total estimated future commitments under the
agreement were approximately $65.0 million.
We have also entered into another agreement with Cognizant to outsource a substantial portion of our claims
processing activities to Cognizant. Under the terms of the agreement, Cognizant, among other things, provides us with
claims adjudication, adjustment, audit and process improvement services. As of December 31, 2013, the remaining term
of this contract was approximately three years, and the total estimated future commitments under the agreement were
approximately $30.5 million.
We have also entered into contracts with our health care providers and facilities, the federal government, other IT
service companies and other parties within the normal course of our business for the purpose of providing health care
services. Certain of these contracts are cancelable with substantial penalties.
As of December 31, 2013, future minimum commitments for operating leases and long-term purchase obligations
for the years ending December 31 are as follows:
Operating
Leases
Long-Term
Purchase
Obligations
(Dollars in millions)
2014......................................................................................... $ 55.3 $ 275.7
2015......................................................................................... 51.0 144.3
2016......................................................................................... 43.8 64.7
2017......................................................................................... 32.4 7.9
2018......................................................................................... 24.4 2.2
Thereafter ................................................................................ 65.5 —
Total minimum commitments.................................................. $ 272.4 $ 494.8
Lease expense totaled $45.1 million, $47.8 million and $52.1 million for the years ended December 31, 2013,
2012 and 2011, respectively. Long-term purchase obligation expenses totaled $217.2 million, $214.9 million and
$188.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.