Health Net 2013 Annual Report Download - page 53

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We depend, in part, on independent brokers and sales agents to market our products and services, and recent
regulatory investigations have focused on certain brokerage practices, including broker compensation arrangements
and bid quoting practices.
We market our products and services both through sales people employed by us and through independent sales
agents. Independent sales agents typically do not work with us on an exclusive basis and may market health care
products and services of our competitors. We face intense competition for the services and allegiance of independent
sales agents and we cannot assure you that these agents will continue to market our products at a reasonable cost.
Although we have a number of sales employees and agents, if key sales employees or agents or a large subset of these
individuals were to leave us, our ability to retain existing customers and members could be impaired.
The ACA includes broker and agent commissions as administrative expenses for purposes of calculating the
minimum medical loss ratio. As a result, these expenses will be under the same cost reduction pressures as other
administrative costs of health insurers, and there is pressure to make changes to existing commission structures for
brokers and agents. For example, some of our competitors have reduced the commissions payable to brokers and agents
for sales in the large group, small group and individual markets, and we have implemented similar reductions in those
markets in California and Arizona. In addition, the implementation of certain provisions of the ACA, including the
exchanges, will open new distribution channels to customers and may reduce or otherwise modify the roles that brokers
play in our marketing and sales practices. Our relationships with brokers and agents could be adversely impacted by
changes in our business practices to address these pressures and changing roles, including potential reductions in
commissions and changes in the treatment of consulting fees.
There have been a number of investigations and enforcement actions against insurance brokers and insurers over
the last several years regarding allegedly inappropriate or undisclosed payments made by insurers to brokers for the
placement of insurance business. We could be sanctioned as a result of unlawful acts by our agents or brokers. In
addition, investigations by state attorneys general, CMS and other regulators, as well as regulatory changes initiated in
several states in response to allegedly inappropriate broker conduct and broker payment practices, could result in
changes in industry practices or negative publicity that could have an adverse effect on our ability to market our
products.
We are dependent on our ability to recruit, manage, enable and retain a skilled and talented workforce.
Our products and services and our operations require a large number of employees. As of December 31, 2013, we
employed 7,565 individuals on a full-time basis and 94 individuals on a part-time or temporary basis. It is critical that
we recruit, manage, enable and retain talent to successfully execute our strategic objectives, which requires aligned
policies, a positive work environment and a robust succession and talent development process. Further, particularly in
light of the changing health care environment, we must focus on building employee capabilities to help ensure that we
can meet upcoming challenges and opportunities. Our business could be adversely affected if we are unable to recruit,
manage, enable and retain talent and meet upcoming challenges and opportunities. In addition, the impact of the
external or internal environment or other factors on employee morale, enablement and engagement could also
significantly impact the success of the Company.
Our forecasts and other forward-looking statements are based on a variety of assumptions that are subject to
significant uncertainties. Our performance may not be consistent with these forecasts and forward-looking
statements.
From time to time in press releases and otherwise, we publish forecasts or other forward-looking statements
regarding our future results, including estimated revenues, net earnings and other operating and financial metrics. Any
forecast of our future performance reflects various assumptions. These assumptions are subject to significant
uncertainties, and, as a matter of course, any number of them may prove to be incorrect.
The achievement of any forecast depends on numerous risks and other factors, including those described in this
report, many of which are beyond our control. In addition, the uncertainties associated with federal and state health care
reform, challenging economic conditions and our potential participation in new government programs or the provision
of new services and/or benefits to new populations, among other things, may make it particularly difficult to forecast
our future performance. As a result, we cannot assure that our performance will meet any management forecasts or that
the variation from such forecasts will not be material and adverse. You are cautioned not to base your entire analysis of
our business and prospects upon isolated predictions, but instead are encouraged to utilize the entire mix of publicly
available historical and forward-looking information, as well as other available information affecting us, our services,