Health Net 2014 Annual Report Download - page 79

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Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Total Western Region Operations enrollment at December 31, 2014 was approximately 3.2 million members, an
increase of 29.1 percent compared with enrollment at December 31, 2013. Total enrollment in our California health plan
increased by 26.0 percent to approximately 2.7 million members from December 31, 2013 to December 31, 2014.
Western Region Operations commercial enrollment increased by 9.9 percent from December 31, 2013 to
approximately 1.2 million members at December 31, 2014, primarily due to an increase in our individual business as a
result of new individual members from the ACA exchanges in California and Arizona, partially offset by declines in
large and small group membership.
Enrollment in our large group accounts decreased by 16.0 percent or 104,000 members to 547,000 members,
from December 31, 2013 to December 31, 2014, primarily due to increasingly competitive markets in California.
Enrollment in our small group business in our Western Region Operations segment decreased by 1.9 percent, from
approximately 319,000 members at December 31, 2013 to approximately 313,000 members at December 31, 2014.
Enrollment in our individual business in our Western Region Operations segment increased by 188.7 percent, from
approximately 115,000 members at December 31, 2013 to approximately 332,000 members at December 31, 2014. This
increase was primarily due to an increase in our individual business as a result of new individual members from the
ACA exchanges in California and Arizona. As of December 31, 2014, tailored network products accounted for 49.8
percent of our Western Region Operations commercial enrollment compared with 37.5 percent at December 31, 2013.
For additional information on our tailored network products, see "Item 1. Business—Segment Information—Western
Region Operations Segment—Managed Health Care Operations."
Enrollment in our Medicare Advantage plans in our Western Region Operations at December 31, 2014 was
275,000 members, an increase of 12.7 percent compared with December 31, 2013. The increase in Medicare Advantage
membership was due to gains of approximately 20,000 members in California, 8,000 members in the Northwest, and
3,000 members in Arizona. We have exited certain under-performing counties in our Medicare business, and
consequently expect lower enrollment in our Medicare Advantage plans in 2015.
Medicaid enrollment in California increased by 482,000 members or 43.3 percent to 1,595,000 members at
December 31, 2014 compared with 1,113,000 members at December 31, 2013, primarily as a result of new members
added from the expansion of Medicaid eligibility under the ACA to all individuals with incomes up to 133 percent of
the Federal Poverty Level. In addition, in October 2013, we began administering Medicaid benefits in Maricopa
County, Arizona pursuant to our contract with the Arizona Health Care Cost Containment System ("AHCCCS"). As of
December 31, 2014, we had approximately 81,000 Medicaid members in Arizona compared with approximately 4,000
members at December 31, 2013. On February 4, 2015, we received a notice from the AHCCCS Division of Health Care
Management that stated that we were in violation of our Medicaid contract in Maricopa County. As a result, we are
currently subject to sanctions that include a cap on member auto assignment under the contract effective as of February
13, 2015 until further notice. See "Item 1A. Risk Factors" for additional information on these sanctions.
We are the sole commercial plan contractor with DHCS to provide Medi-Cal services in Los Angeles County,
California. As of December 31, 2014, approximately 849,000 of our Medi-Cal members resided in Los Angeles County,
representing approximately 53 percent of our Medi-Cal membership. As part of our 2012 state settlement agreement
with DHCS, DHCS agreed, among other things, to the extension of all of our existing Medi-Cal managed care
contracts, including our contract with DHCS to provide Medi-Cal services in Los Angeles County, for an additional five
years from their then existing expiration dates. Accordingly, our Medi-Cal contract for Los Angeles County is scheduled
to expire in April 2019. For additional information on our settlement agreement with DHCS, see Note 2 to our
consolidated financial statements under the heading "Health Plan Services Revenue Recognition."
As more fully described below, in 2012, the California legislature enacted the Coordinated Care Initiative, or
“CCI.” The DHCS selected eight counties to participate in the CCI, including Los Angeles and San Diego counties. In
participating counties, the CCI established a voluntary “dual eligibles demonstration,” and in April 2012, DHCS
selected us to participate in the dual eligibles demonstration for both Los Angeles and San Diego counties. Active
enrollment in Los Angeles and San Diego counties for the dual eligible demonstrations commenced on April 1, 2014.
Passive enrollment in San Diego County began on May 1, 2014, and passive enrollment in Los Angeles County began
on July 1, 2014. As of December 31, 2014, we had approximately 16,000 dual eligibles members. See "—California
Coordinated Care Initiative," below for more information on the CCI and the dual eligibles.