Health Net 2013 Annual Report Download - page 36

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costs of providing benefits to dual eligibles or the rates under our agreement with CMS and DHCS prove to
be inadequate, our participation in the CCI may prove to be unprofitable.
• We have designed and substantially implemented certain modifications to our internal administrative and
operations structure to meet the demands of the CCI, including, without limitation, hiring new staff to run
programs, implementing systems modifications, establishing new provider networks and making
arrangements to provide LTSS either directly or by subcontracting with other parties, with all such
modifications in compliance with both Medicare and Medi-Cal regulatory regimes. While CMS has
administered a readiness assessment and subsequently allowed us to market for the demonstration, certain
modifications relating to our provision of LTSS remain in process. To the extent we are unable to
adequately modify our operations to address the provision of LTSS, it may negatively impact our
profitability in the CCI.
• Our profitability in the CCI will be dependent in part on our ability to successfully provide and administer
LTSS benefits, both directly and through subcontracting arrangements with third parties. Because we have
limited operating experience in providing and administering these benefits, particularly with respect to cost
management, there is no assurance that the arrangements we have made and are continuing to refine will be
on favorable terms or that the information exchange between us and these third parties will allow us to
efficiently manage member care, which may adversely affect our results of operations, particularly as our
Medi-Cal membership increases through, among other things, Medicaid expansion.
• Dual eligibles will have the option to opt out of the duals demonstration while retaining all of their Medi-
Cal benefits under CCI, including LTSS, which may reduce or eliminate the inherent efficiencies of the
duals demonstration portion of the CCI. In particular, while the provision and administration of LTSS
benefits may increase Medi-Cal costs, successfully managing care for these LTSS recipients may generate
equal or greater Medicare savings in the form of reduced costs for treatment for acute conditions and/or
hospitalizations. However, if large numbers of dual eligibles opt out of the duals demonstration, we may be
unable to capitalize on such potential efficiencies in the dual demonstration portion of the CCI, and as a
result, we may not be able to maximize our investment in the CCI and our profitability with respect to our
participation in the CCI may be adversely affected.
• In each county, we will be offered as one of the health plans selected to participate in the CCI. Dual
eligibles in each county will be able to select to receive benefits from any of the participating health plans.
As a result of such competitive factors, we may not attract a satisfactory number of dual eligibles.
• The duals demonstration is scheduled to begin in 2014, with active enrollment in Los Angeles and San
Diego Counties to start on April 1, 2014, and is scheduled to conclude at the end of 2017. The
commencement of the CCI, including the duals eligibles demonstration, has been subject to prior delay, and
it is possible that the commencement of the CCI could be further delayed as a result of factors beyond our
control. Also, after completion of the demonstration, the duals portion of the CCI may not continue and we
may not be able to participate in the CCI if enacted in additional counties.
• We are required to make required filings with, and obtain approvals from, regulatory authorities in order to
meet the ongoing demands of the CCI. There can be no assurance that we will obtain these approvals on
satisfactory terms, or at all.
• We are subject to various other risks and uncertainties associated with participating in government
programs such as Medicare and Medi-Cal, including, among other things, the ability of DHCS and CMS to
terminate the agreement governing the demonstration without cause upon 180 days prior notice and the
impact of changing legislation. For example, under current legislation, the D-SNP program will be
terminated in January 2015, and all participating members will join the prospective dual eligible
population. Any change to such legislation could have an adverse impact on our expected enrollment. See
“—Medicare programs represent a significant portion of our business and are subject to risk”, “—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” and “—Federal and state audits, reviews and investigations of us and our subsidiaries could
have a material adverse effect on our operations, financial condition and cash flows”.
Accordingly, there can be no assurance that the business opportunity presented by the CCI, including the duals
demonstration, will prove to be successful. Our failure to successfully adapt to the requirements of the CCI could have a
material adverse effect on our business, financial condition and results of operation.