Health Net 2014 Annual Report Download - page 118

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
Note 1—Description of Business
Health Net, Inc. (referred to herein as "Health Net," "the Company," "we," "us," "our" or "HNT") is a publicly
traded managed care organization that delivers managed health care services. Together with our subsidiaries, we
provide health benefits through our health maintenance organizations ("HMOs"), insured preferred provider
organizations ("PPOs"), exclusive provider organization ("EPO"), point of service ("POS") plans and indemnity
products, among others, to approximately 6.0 million individuals across the country through group, individual,
Medicare, Medicaid ("Medi-Cal" in California), the United States Department of Defense ("Department of Defense" or
"DoD"), including TRICARE, and Veterans Affairs programs. Our subsidiaries also offer managed health care products
related to behavioral health and prescription drugs. Starting in 2014, we participate in the California Coordinated Care
Initiative ("CCI") and provide health care services to individuals that are fully eligible for Medicare and Medi-Cal
benefits ("dual eligibles").
Our reportable segments are comprised of Western Region Operations and Government Contracts, each of which
is described below. On November 2, 2014, we signed a definitive master services agreement with Cognizant Healthcare
Services, LLC, a wholly owned subsidiary of Cognizant Technology Solutions Corporation ("Cognizant") to provide
certain services to us. In connection with this agreement, we have also entered into an asset purchase agreement
pursuant to which we have agreed to sell certain software assets and related intellectual property we own to Cognizant.
The transaction, including the related asset sale (the "Cognizant Transaction"), is subject to receipt of required
regulatory approvals. See Note 2 and Note 3 for more information on the Cognizant Transaction.
In connection with this Cognizant Transaction, we reviewed our reportable segments and determined that there
were no changes to our reportable segments. Effective January 1, 2013, we closed out our Divested Operations and
Services segment, which is described below. As a result of entering into a definitive agreement in January 2012 to sell
our Medicare stand-alone Prescription Drug Plan ("Medicare PDP") business, we reviewed our reportable segments in
the first quarter of 2012. Following this review, all services provided in connection with divested businesses, including
those relating to the sale of our Medicare PDP business and the Northeast Sale (as defined below), were reported as part
of our Divested Operations and Services reportable segment beginning in the first quarter of 2012. See Note 14 for a
discussion of our reportable segments.
Our health plan services are provided under our Western Region Operations reportable segment, which includes
the operations primarily conducted in California, Arizona, Oregon and Washington for our commercial, Medicare and
Medicaid health plans, our health and life insurance companies, our pharmaceutical services subsidiary and certain
operations of our behavioral health subsidiaries.
Our Government Contracts reportable segment includes our government-sponsored managed care federal
contract with the DoD under the TRICARE program in the North Region and other health care, mental health and
behavioral health government contracts. On April 1, 2011, we began delivering administrative services under the new
T-3 contract for the TRICARE North Region ("T-3 contract"). The T-3 contract for the North Region covers
Connecticut, Delaware, Illinois, Indiana, Kentucky (except Fort Campbell), Maine, Maryland, Massachusetts,
Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont,
Virginia, West Virginia, Wisconsin and the District of Columbia and portions of Iowa and Missouri. The Company
provides administrative services to approximately 2.8 million Military Health System ("MHS") eligible individuals
under the T-3 contract. In addition to the beneficiaries that we service under the T-3 contract, we administer contracts
with the U.S. Department of Veterans Affairs ("VA") to manage community based outpatient clinics in one state
covering approximately 3,696 enrollees and provide behavioral health services to military families under the
Department of Defense sponsored Military and Family Life Counseling, formerly Military and Family Life Consultant,
("MFLC") program. Our Government Contracts segment also includes the services we provide under the Patient
Centered Community Care program (“PC3 Program”) contract we have with the Department of Veterans Affairs
(“VA”). See Note 2 under the heading "Government Contracts" for additional information on our T-3 contract for the
North Region, the MFLC contract and PC3 Program contract.
On April 1, 2012, we completed the sale of the business operations of our Medicare PDP business to
Pennsylvania Life Insurance Company, a subsidiary of CVS Caremark Corporation ("CVS Caremark"). Prior to the sale