Health Net 2013 Annual Report Download - page 22

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of such information, our reputation and business operations could be materially adversely affected” for additional
information about the risks related to privacy and security breaches.
The Gramm-Leach-Bliley Act generally requires insurers to provide customers with notice regarding how their
personal health and financial information is used and, in certain circumstances, the opportunity to “opt out” of certain
disclosures before the insurer shares non-public personal information with a non-affiliated third party. Like HIPAA, this
law sets a “floor” standard, allowing states to adopt more stringent requirements governing privacy protection.
ERISA. Many employee benefit plans are governed by the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). Employment-sponsored health coverage generally is such an employee benefit plan. ERISA is
administered and regulated, in large part, by the U.S. Department of Labor. ERISA contains disclosure requirements for
documents that define benefits and coverage, among other requirements. ERISA also provides that, in certain instances,
federal law will preempt state law in the regulation and governance of certain benefit plans and employer groups,
including the availability of legal remedies under state law. Regulations established by the U.S. Department of Labor
provide additional rules for claims payment and member appeals under health care plans governed by ERISA.
Other Federal Regulations. We must comply with, and are affected by, laws and regulations relating to the
award, administration and performance of U.S. Government contracts. Government contract laws and regulations affect
how we do business with our customers and, in some instances, impose added costs on our business. In addition,
because of our activities to support our MFLC contract and certain outsourcing arrangements we have with third party
vendors, we are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-corruption
laws, including the U.K. Bribery Act of 2010, which generally prohibit companies and their intermediaries from making
improper payments to non-U.S. officials for the purpose of obtaining or retaining business. A violation of specific laws
and regulations by us or our agents could result in, among other things, the imposition of fines and penalties on us,
changes to our business practices, the termination of our contracts or debarment from bidding on contracts. See “—
Segment Information—Government Contracts Segment—Other Department of Defense Contracts” for additional
information on our MFLC contract and “Item 1A. Risk Factors—We are subject to risks associated with outsourcing
services and functions to third parties” for additional information on our outsourcing activities.
State Laws and Regulations
Our Western Region Operations HMOs, insurance companies and behavioral health plan are subject to extensive
state regulation. Set forth below are the principal regulatory agencies that govern these health plans and insurance
companies.
Company Regulatory Agency
Health Net of Arizona Arizona Department of Insurance
Health Net Access Arizona Health Care Cost Containment System (AHCCCS)
Health Net of California California Department of Managed Health Care (DMHC)
Health Net Community
Solutions California Department of Health Care Services and DMHC (Medi-Cal) and the Managed Risk Medical Insurance Board (Healthy Families)
Health Net Health Plan of
Oregon Oregon Department of Consumer and Business Services
Health Net Life Insurance
Company (Arizona,
Washington and California
PPO) California Department of Insurance generally, and the Department of Insurance of each state in which it does business
MHN California Department of Managed Health Care
Insurance and HMO laws impose a number of financial requirements and restrictions on our regulated
subsidiaries, which vary from state to state. They generally include certain minimum capital and deposit and/or reserve
requirements, restrictions on dividends and other distributions to the parent corporations and affiliated corporations. See
“Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and
Capital Resources—Statutory Capital Requirements.” These financial requirements are subject to change, which may
require us to commit additional capital to certain regulated subsidiaries or may limit our ability to move capital through