Health Net 2013 Annual Report Download - page 7

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statements of operations for the years ended December 31, 2012 and 2011. As of December 31, 2013, we had no
Medicare PDP members, and no associated revenues or pretax income related to the Medicare PDP business for the
year ending December 31, 2013.
Medicare Advantage Products
As of December 31, 2013, we were one of the nation's largest Medicare Advantage contractors based on
membership of 244,424 members. We contract with CMS under the Medicare Advantage program to provide Medicare
Advantage products directly to Medicare beneficiaries and through employer and union groups. We provide or arrange
health care benefits for services normally covered by Medicare, plus a broad range of health care benefits for services
not covered by traditional Medicare, usually in exchange for a fixed monthly premium per member from CMS that
varies by the county in which the member resides, demographic factors of the member such as age, gender and
institutionalized status, and the health status of the member. Any benefits that are not covered by Medicare may result in
an additional monthly premium charged to the enrollee or through portions of payments received from CMS that may
be allocated to these benefits, according to CMS regulations and guidance. Many of our Medicare Advantage members
pay no monthly premium to us for these additional benefits.
Our portfolio of Medicare Advantage plans focuses on simplicity so that members can use benefits with minimal
paperwork and receive coverage that starts immediately upon enrollment. We also provide Medicare supplemental
coverage to 26,879 members as of December 31, 2013 through either individual Medicare supplement policies or
employer group sponsored coverage.
We provide Medicare Advantage plans in select counties in Arizona, California, Oregon and Washington. We
also provide multiple types of Medicare Advantage Special Needs Plans, including dual eligible Special Needs Plans
(designed for low income Medicare beneficiaries) in Arizona and California, chronic condition Special Needs Plans
(designed for beneficiaries with congestive heart failure and diabetes) in California, Oregon and Arizona. These plans
provide access to additional health care and prescription drug coverage.
CMS developed the Medicare Advantage Star Ratings system to help consumers choose among competing plans,
awarding between one and five stars to Medicare Advantage plans based on certain measures of quality. The Star
Ratings are used by CMS to award quality-based payments to Medicare Advantage plans. Beginning with the 2014 Star
Rating (calculated in the fall of 2013), Medicare Advantage plans that achieve a minimum of four Stars will receive a
quality-based payment in 2015. Quality-based payments related to the 2013, 2012, and 2011 benefit years have been
based on a Quality-Based Payment Demonstration. The methodology and measures used in the Star Ratings system are
changed annually and Star Ratings thresholds are based on the performance of Medicare Advantage plans nationwide.
For the 2015 payment year (i.e., the 2014 Star Rating calculated in the Fall of 2013), our California HMO and
Oregon PPO contracts were measured at 4 Stars, our Arizona HMO contract was measured at 3.5 Stars, and our
California PPO contract was measured at 3.0 Stars under the Star Ratings system. The Oregon HMO contract had
insufficient membership to be measured. We are continuing to make efforts to improve our Star Ratings and other
quality measures.
Medicaid and Related Products
We are one of the ten largest Medicaid HMOs in the United States based on membership. As of December 31,
2013, we had 1,112,677 members enrolled in Medi-Cal (California's Medicaid program) and other California state
health programs, and we had 3,936 Medicaid members enrolled in Arizona.
California
To enroll in our Medi-Cal products, an individual must be eligible for Medicaid benefits in accordance with
California's regulatory requirements. The State of California's Department of Health Care Services (“DHCS”) pays us a
monthly fee for the coverage of our Medicaid members. The monthly fee is based on prepaid payment rates that are
required by federal law to be actuarially sound, and ultimately determined by the State. The State considers a
combination of various factors in setting these rates, including, without limitation, geographic area, a members' health
status, age, gender, county or region, benefit mix and member eligibility category. See “Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Western Region
Operations Reportable Segment—Western Region Operations Segment Membership” for detailed information
regarding our Medicaid enrollment.
Medi-Cal is a public health insurance program that provides health care services for low-income individuals
resident in California, and is financed by California and the federal government. As of December 31, 2013, through