Health Net 2013 Annual Report Download - page 52

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Negative publicity regarding the managed health care industry and health care reform could adversely affect our
ability to market and sell our products and services.
Managed health care companies have received and continue to receive negative publicity reflecting the public
perception of the industry. For example, the Company and the managed health care industry have been subject to
negative publicity surrounding premium rate increases and government investigations into the industry and our own
business practices. Such risks may be exacerbated in the event we and other companies in our industry raise premium
rates by more than has been done in recent years to price for the expanded benefits required by, and the fees, taxes and
assessments imposed by, the ACA or to respond to any increase in medical cost trends. In addition, health care, health
care reform and its implementation and related health care reform proposals have been and are expected to continue to
be the subject of intense media attention and political debate. Such political discourse can often generate publicity that
portrays managed care in a negative light. Our marketing efforts may be affected by the amount of negative publicity to
which the industry has been subject, as well as by speculation and uncertainty relating to merger and acquisition activity
among companies in our industry. Speculation, uncertainty or negative publicity about us, our industry or our lines of
business could adversely affect our ability to market and sell our products or services, require changes to our products
or services, or stimulate additional legislation, regulation, review of our practices or those of the industry or litigation
that could adversely affect us.
Managing executive succession and retention is critical to our success. If we are unable to manage the succession of
our key executives, it could adversely affect our business.
We are dependent on retaining existing key executives and attracting additional qualified executives to meet
current and future needs. We face intense competition for qualified executives, and there can be no assurance that we
will be able to attract and retain such executives. Although we have succession plans in place and have employment
arrangements with our key executives, these do not guarantee that the services of these key executives will continue to
be available to us or that we will be able to attract and retain suitable successors. We would be adversely affected if we
fail to adequately plan for future turnover of our senior management team.
Acquisitions, divestitures and other significant transactions may adversely affect our business.
We continue to evaluate the profitability realized or that we expect to be realized by our existing businesses and
operations. From time to time we review, from a strategic standpoint, potential acquisitions and divestitures in light of
our core businesses and growth strategies. The success of any such acquisition or divestiture depends, in part, upon our
ability to identify suitable buyers or sellers, negotiate favorable contractual terms and, in many cases, obtain
governmental approval. For acquisitions, success is also dependent upon efficiently integrating the acquired business
into our existing operations. For divestitures, success may also be dependent upon efficiently reducing general and
administrative or other functions for our remaining operations. In the event the structure of the transaction results in
continuing obligations by the buyer to us or our customers, a buyer's inability to fulfill these obligations could lead to
future financial loss on our part. As a seller, we may have significant continuing indemnification, administrative
services or other obligations to the buyer. Potential acquisitions or divestitures present financial, managerial and
operational challenges, including diversion of management attention from existing businesses, difficulty with
integrating or separating personnel and financial and other systems, significant post-closing obligations, increased
expenses, assumption of unknown liabilities, indemnities and potential disputes with the buyers or sellers.
Our revolving credit facility contains restrictive covenants that could limit our ability to pursue our business
strategies.
Our $600 million revolving credit facility due in October 2016 requires us to comply with various covenants that
impose restrictions on our operations, including our ability to incur additional indebtedness, create liens, pay dividends,
make investments or other restricted payments, sell or otherwise dispose of substantially all of our assets and engage in
other activities. Our revolving credit facility also requires us to comply with a maximum leverage ratio and a minimum
fixed charge coverage ratio. See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Capital Structure-Revolving Credit Facility” for further details
regarding our revolving credit facility.
The restrictive covenants under our revolving credit facility could limit our ability to pursue our business
strategies. In addition, any failure by us to comply with these restrictive covenants could result in an event of default
under the revolving credit facility and, in some circumstances, under the indenture governing our Senior Notes, which,
in any case, could have a material adverse effect on our financial condition.