Health Net 2013 Annual Report Download - page 8

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HNCS, we had Medi-Cal operations in 13 California counties: Fresno, Kern, Kings, Los Angeles, Madera, Orange,
Riverside, Sacramento, San Bernardino, San Diego, San Joaquin, Stanislaus and Tulare. Beginning March 2014, we
expect to cease Medi-Cal operations in Orange. We are the sole commercial plan contractor with DHCS to provide
Medi-Cal services in Los Angeles County, California. As of December 31, 2013, 571,797 of our Medi-Cal members
resided in Los Angeles County, representing approximately 51% of our Medi-Cal membership. Approximately 51% of
our total California state health programs membership is in Los Angeles county.
In November 2012, we entered into a state-sponsored health plans rate settlement agreement (the "Agreement")
with DHCS to settle certain rate disputes related to prior years. Under the Agreement, DHCS agreed, among other
things, to the extension of all of our Medi-Cal managed care contracts existing on the date of the Agreement, including
our contract with DHCS to provide Medi-Cal services in Los Angeles County, for an additional five years from their
existing expiration dates. As a result, our agreement to provide Medi-Cal services in Los Angeles County is currently
scheduled to expire by its terms in April 2019. The Agreement also established an account to track retrospective
premium adjustments on all of our state-sponsored health care programs, including Medi-Cal, Healthy Families, SPDs,
our proposed participation in the dual eligibles demonstration portion of the California Coordinated Care Initiative, or
“CCI,” that is expected to begin in 2014 and any potential future Medi-Cal expansion populations (our “state-sponsored
health care programs”). These retrospective premium adjustments are designed to help maintain minimum pretax
margins with respect to our Medi-Cal operations. For additional information on the Agreement, 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-State-Sponsored
Health Plans Rate Settlement Agreement.”
On November 2, 2010, CMS approved California's Section 1115 Medicaid waiver proposal, which, among other
things, authorized mandatory enrollment of seniors and persons with disabilities (“SPD”) (also referred to as the aged,
blind and disabled) in managed care programs to help achieve care coordination and better manage chronic conditions.
California's mandatory SPD enrollment began in June 2011 in 16 California counties, including Los Angeles county.
and was phased in over a 12 month period. As of December 31, 2013, we had approximately 119,239 total SPD
members, of which 91,965 members were from the mandated transition of those members to managed care that began
in June 2011.
HN California participated in the Children's Health Insurance Program (“CHIP”), which, in California, was
known as the Healthy Families program. As of December 31, 2012, there were 141,376 members, including 209
Healthy Kids members, in our Healthy Families program. CHIP was designed as a federal/state partnership, similar to
Medicaid, with the goal of extending health insurance to children whose families earn too much money to be eligible
for Medicaid, but not enough money to purchase private insurance. Monthly premiums were subsidized by the State of
California and, in 2012, ranged from $4 to $24 per child, up to a maximum of $72 for all children in a family enrolled
in the Healthy Families program. California received two-thirds of the funding for the Healthy Families program from
the federal government. On January 1, 2013 the State of California commenced the phased transition of CHIP members
to Medi-Cal, and substantially completed the transition in November 2013. Accordingly, as of December 31, 2013, we
had only 18 members in the Healthy Families program.
Arizona
In March 2013, we were awarded a contract by the Arizona Health Care Cost Containment System ("AHCCCS")
to administer Medicaid benefits in Maricopa County, Arizona beginning on October 1, 2013. AHCCCS uses federal,
state and county funds to provide health care coverage to the State’s acute and long-term care Medicaid populations,
low income groups and small businesses. Since 1982, when it became the first statewide Medicaid managed care
system in the nation, AHCCCS has operated under a federal Section 1115 Medicaid waiver authority that allows for the
operation of a total managed care model. AHCCCS contracts for acute care services in seven geographic service areas
that include 15 Arizona counties. We were awarded the contract for Maricopa County and began administering benefits
on October 1, 2013. The contract term is for three years with two additional one-year extensions. In accordance with
AHCCCS contractual requirements, we established a subsidiary, Health Net Access, Inc., whose sole activity is to
perform the obligations under the AHCCCS contract.
AHCCCS makes monthly prospective capitation payments to contracted health plans responsible for the delivery
of care to members. As with our monthly fee under Medi-Cal, 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