Health Net 2013 Annual Report Download - page 58

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Finally, we will be responsible for the costs of administering the Settlement Agreement. In the event that the
Sacramento County Superior Court does not grant final approval of the Settlement Agreement, and the parties are
unable to negotiate a revised settlement agreement that is finally approved by the Court, the pending litigation described
above will continue. In the event the Settlement Agreement described above receives final approval, we do not believe
that the terms of the Settlement Agreement would have a material impact on our consolidated financial statements.
We have also been informed that a number of regulatory agencies are investigating the incident, including the
California Department of Managed Health Care ("DMHC").
Miscellaneous Proceedings
In the ordinary course of our business operations, we are subject to periodic reviews, investigations and audits by
various federal and state regulatory agencies, including, without limitation, CMS, DMHC, the Office of Civil Rights of
the U.S. Department of Health and Human Services and state departments of insurance, with respect to our compliance
with a wide variety of rules and regulations applicable to our business, including, without limitation, HIPAA, rules
relating to pre-authorization penalties, payment of out-of-network claims, timely review of grievances and appeals, and
timely and accurate payment of claims, any one of which may result in remediation of certain claims, contract
termination, the loss of licensure or the right to participate in certain programs, and the assessment of regulatory fines or
penalties, which could be substantial. From time to time, we receive subpoenas and other requests for information from,
and are subject to investigations by, such regulatory agencies, as well as from state attorneys general. There also
continues to be heightened review by regulatory authorities of, and increased litigation regarding, the health care
industry’s business practices, including, without limitation, information privacy, premium rate increases, utilization
management, appeal and grievance processing, rescission of insurance coverage and claims payment practices.
In addition, in the ordinary course of our business operations, we are party to various other legal proceedings,
including, without limitation, litigation arising out of our general business activities, such as contract disputes,
employment litigation, wage and hour claims, including, without limitation, cases involving allegations of
misclassification of employees and/or failure to pay for off-the-clock work, real estate and intellectual property claims,
claims brought by members or providers seeking coverage or additional reimbursement for services allegedly rendered
to our members, but which allegedly were denied, underpaid, not timely paid or not paid, and claims arising out of the
acquisition or divestiture of various business units or other assets. We are also subject to claims relating to the
performance of contractual obligations to providers, members, employer groups and others, including the alleged failure
to properly pay claims and challenges to the manner in which we process claims, and claims alleging that we have
engaged in unfair business practices. In addition, we are subject to claims relating to information security incidents and
breaches, reinsurance agreements, rescission of coverage and other types of insurance coverage obligations and claims
relating to the insurance industry in general. We are, and may be in the future, subject to class action lawsuits brought
against various managed care organizations and other class action lawsuits.
We intend to vigorously defend ourselves against the miscellaneous legal and regulatory proceedings to which
we are currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending
against us, substantial non-economic or punitive damages are being sought.
Potential Settlements
We regularly evaluate legal proceedings and regulatory matters pending against us, including those described
above in this Item 3, to determine if settlement of such matters would be in the best interests of the Company and its
stockholders. The costs associated with any settlement of the various legal proceedings and regulatory matters to which
we are or may be subject from time to time, including those described above in this Item 3, could be substantial and, in
certain cases, could result in a significant earnings charge or impact on our cash flow in any particular quarter in which
we enter into a settlement agreement and could have a material impact on our financial condition, results of operations,
cash flow and/or liquidity and may affect our reputation.
Item 4. Mine Safety Disclosures.
Not applicable.