Health Net 2014 Annual Report Download - page 83

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Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Revenues
Total revenues in our Western Region Operations segment for the year ended December 31, 2014 increased 27.9
percent to $13.4 billion compared to the same period in 2013 primarily due to an increase in our premium revenues in
our health plans. Health plan services premiums revenues in our Western Region Operations segment increased to $13.4
billion for the year ended December 31, 2014 compared to $10.4 billion in the same period in 2013, primarily due to
increase in our Medicaid premium revenues.
Our commercial premium revenue increased by $267.7 million, or 5.2 percent, in the year ended December 31,
2014 compared to the same period in 2013, primarily due to a 9.9 percent increase in commercial enrollment since
December 31, 2013. The net impact of amounts recorded under the ACA's premium stabilization provisions on our
commercial premium revenue in 2014 was not material. See "—Liquidity and Capital Resources—Liquidity" and Note
2 to our consolidated financial statements under the heading "Accounting for Certain Provisions of the ACA" for more
information.
Our Medicare premium revenue increased by $272.8 million, or 9.8 percent, in the year ended December 31,
2014 compared to the same period in 2013, primarily due to a 12.7 percent increase in Medicare Advantage enrollment
since December 31, 2013.
Our Medicaid premium revenue increased by $2.3 billion, or 95.7 percent, in the year ended December 31, 2014
compared to the same period in 2013, primarily due to significant membership growth related to Medicaid expansion
under the ACA during the year ended December 31, 2014. As of December 31, 2014, we accrued $200.6 million for an
MLR rebate payable to DHCS in connection with Medicaid adult expansion members and accrued $24.7 million, net of
$2.3 million receivable, for excess profit sharing payable to the state of Arizona under our Arizona Medicaid contract.
Accordingly, Medicaid premium revenue was reduced by $225.3 million for the year ended December 31, 2014 related
to MLR rebates. (see Note 2 to our consolidated financial statements, under the heading "Health Plan Services Revenue
Recognition" for more information).
Active enrollment in Los Angeles and San Diego counties for the dual eligibles demonstrations began on April 1,
2014, and passive enrollment began on July 1, 2014 and May 1, 2014 for Los Angeles County and San Diego County,
respectively. As of December 31, 2014, we had approximately 16,000 dual eligible members and for the year ended
December 31, 2014, our dual eligibles premium revenues were $117.9 million. See "—California Coordinated Care
Initiative," above for more information on the CCI and the dual eligibles.
Investment income in our Western Region Operations segment decreased to $45.2 million for the year ended
December 31, 2014 from $69.6 million for the same period in 2013 due to lower investment gains realized during the
year ended December 31, 2014.
Administrative services fees and other income decreased by $36.5 million for the year ended December 31, 2014
as compared to the year ended December 31, 2013, primarily due to a settlement related to a pharmacy contract in 2013
and the change in the reimbursement methodology of Section 1202 of the ACA in 2014.
Health Plan Services Expenses
Health plan services expenses in our Western Region Operations segment increased 27.2 percent to
approximately $11.3 billion for the year ended December 31, 2014 from approximately $8.9 billion for the year ended
December 31, 2013, primarily due to new membership resulting from Medicaid expansion under the ACA, partially
offset by $234.0 million of reinsurance recoverable included in commercial health plan services costs for the year ended
December 31, 2014, as discussed in Note 2 to our consolidated financial statements under the heading "Accounting for
Certain Provisions of the ACA."
Commercial Premium Yield and Health Care Cost Trends
In our Western Region Operations segment, commercial premium PMPM increased by 0.1 percent to
approximately $385 for the year ended December 31, 2014 compared to an increase of 2.7 percent to approximately
$385 in the same period of 2013.
Commercial health care costs PMPM in our Western Region Operations segment decreased by 3.0 percent to
approximately $320 in the year ended December 31, 2014 compared to a decrease of 1.0 percent to approximately $330
in the year ended December 31, 2013. We believe that the decrease in our commercial health care cost trend for the year
ended December 31, 2014 was primarily due to the mix shift in the makeup of our commercial membership with