Health Net 2014 Annual Report Download - page 84

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significantly higher individual membership in 2014 compared to 2013, combined with moderate health care cost trends
for the commercial market as a whole in 2014.
Medical Care Ratios
The health plan services MCR in our Western Region Operations segment was 84.6 percent for the year ended
December 31, 2014 compared with 85.6 percent for the year ended December 31, 2013.
The commercial MCR in our Western Region Operations segment was 83.0 percent for the year ended
December 31, 2014 compared with 85.6 percent for the year ended December 31, 2013. The improvement of 260 basis
points in the commercial MCR for the year ended December 31, 2014 compared to the same period in 2013 was
primarily due to better performance in our group accounts that allowed us to absorb the impact of the health insurer fee,
a higher percentage of individual enrollment in our membership mix, and moderate health care cost trends.
The Medicare Advantage MCR in our Western Region Operations segment was 91.5 percent for the year ended
December 31, 2014 compared with 90.6 percent for the year ended December 31, 2013. The Medicare Advantage MCR
increased by 90 basis points for the year ended December 31, 2014 compared to the same period in 2013, primarily due
to higher utilization from Medicare Advantage members who changed health plans at year-end and from the impact of
an earlier than expected flu season in this population.
The Medicaid MCR in our Western Region Operations segment was 82.1 percent for the year ended
December 31, 2014 compared with 80.4 percent for the year ended December 31, 2013. The Medicaid MCR increased
by approximately 170 basis points for the year ended December 31, 2014 compared to the same period in 2013. The
increase in the Medicaid MCR was primarily due to the impact of MLR rebate accruals in 2014 combined with the
following factors, which benefited the Medicaid MCR in the year ended December 31, 2013: a favorable impact from
both Medicaid rate adjustments and reinstated Medicaid premium taxes, including portions that are retroactive, and
retrospective adjustments to premium revenues as a result of our settlement agreement with DHCS.
The dual eligibles MCR in our Western Region Operations segment was 86.1 percent for the year ended
December 31, 2014. Active enrollment under the Dual Eligibles program began for the first time in the second quarter
of 2014.
General and Administrative, Selling and Interest Expenses
Total general and administrative expense in our Western Region Operations segment was $1.5 billion for the year
ended December 31, 2014 compared with $1.1 billion for the year ended December 31, 2013. The total G&A expense
ratio was 10.9 percent for the year ended December 31, 2014 compared with 10.3 percent for the year ended
December 31, 2013. The increase in our total general and administrative expenses for the year ended December 31,
2014 was primarily due to increases in premium taxes and ACA-related fees, including the health insurer fee. Such
increases in premium taxes and ACA-related fees increased the total G&A expense ratio by approximately 200 basis
points for the year ended December 31, 2014 as compared to the prior year. See Note 2 to our consolidated financial
statements, under the heading "Accounting for Certain Provisions of the ACA" for more information regarding ACA-
related fees.
Selling expense in our Western Region Operations segment was $262.3 million for the year ended December 31,
2014 compared with $239.4 million for the year ended December 31, 2013. The selling costs ratio was 2.0 percent for
the year ended December 31, 2014 compared with 2.3 percent for the year ended December 31, 2013. This decrease in
our selling costs ratio was primarily due to the change in the mix of our business from the impact of ACA and state
exchanges.
Interest expense in our Western Region Operations segment decreased to $31.4 million for the year ended
December 31, 2013 from $32.6 million for the year ended December 31, 2013 primarily due to lower interest rates.
Year Ended December 31, 2013 compared to Year Ended December 31, 2012
Revenues
Total revenues in our Western Region Operations segment for the year ended December 31, 2013 decreased 0.7
percent to $10.5 billion compared to the same period in 2012 primarily due to a decrease in our premium revenues in
our health plans. Health plan services premiums revenues in our Western Region Operations segment decreased to
$10.4 billion for the year ended December 31, 2013 from $10.5 billion in the same period in 2012, primarily due to a
decrease in commercial premium revenues, partially offset by an increase in Medicaid premium revenues.