Health Net 2014 Annual Report Download - page 89

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December 31, 2014 were also impacted by a loss on the stock of one of our subsidiaries that created a tax benefit of
$73.7 million, net of adjustments to our reserve for uncertain tax benefits. See Note 11 to our consolidated financial
statements for additional information regarding this tax benefit.
The operating results in our Corporate/Other segment for the year ended December 31, 2013 were impacted by
$12.0 million in pretax costs, primarily severance expenses related to our continuing efforts to address scale issues.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
The operating results in our Corporate/Other segment for the year ended December 31, 2013 were impacted by
$12.0 million in pretax costs, primarily severance expenses related to our continuing efforts to address scale issues. Our
operating results for the year ended December 31, 2012 were impacted primarily by $35.6 million in pretax costs
related to our G&A cost reduction efforts, $1.3 million in pretax litigation-related expenses net of insurance recoveries
and $5.0 million in pretax costs related to early termination of a medical management contract.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our primary sources of cash include receipts of premiums, services revenue, and investment and other income, as
well as proceeds from the sale or maturity of our investment securities and borrowings. We believe that expected cash
flow from operating activities, existing cash reserves and other working capital and lines of credit are adequate to allow
us to fund existing obligations, repurchase shares of our common stock, introduce new products and services, enter into
new lines of business and continue to operate and develop health care-related businesses as we may determine to be
appropriate at least for the next 12 months. We regularly evaluate cash requirements for, among other things, current
operations and commitments, for acquisitions and other strategic transactions, to address legislative or regulatory
changes such as the ACA, and for business expansion opportunities, such as the CCI, Medicaid expansion under the
ACA and our participation in Arizona's Medicaid program in Maricopa County. We may elect to raise additional funds
for these and other purposes, either through issuance of debt or equity, the sale of investment securities or otherwise, as
appropriate. Based on the composition and quality of our investment portfolio, our expected ability to liquidate our
investment portfolio as needed, and our expected operating and financing cash flows, we do not anticipate any liquidity
constraints in the near term. However, turbulence in U.S. and international markets and certain costs associated with
health care reform legislation and its implementation, our participation in the CCI, Medicaid expansion under the ACA
and our preparation for the Cognizant Transaction, among other things, could adversely affect our liquidity. In addition,
as a holding company, our subsidiaries conduct substantially all of our consolidated operations and own substantially all
of our consolidated assets. Consequently, our cash flow and our ability to pay our debt depends, in part, on the amount
of cash that we receive from our subsidiaries. We are dependent upon dividends and management fees from our
regulated subsidiaries, most of which are subject to regulatory restrictions. For a discussion of these and other risks that
impact our liquidity, see "Item 1A. Risk Factors."
Our cash flow from operating activities is impacted by, among other things, the timing of collections on our
amounts receivable from state and federal governments and agencies. For example, our receivable from DHCS and
AHCCCS related to our California and Arizona Medicaid businesses totaled $801.7 million as of December 31, 2014
and $270.9 million as of December 31, 2013. The receivable from CMS related to our Medicare business was $119.1
million as of December 31, 2014 and $105.2 million as of December 31, 2013. Our Government Contracts receivable,
including receivables from the DoD relating to our current and prior contracts for the TRICARE North Region, was
$150.5 million and $194.0 million as of December 31, 2014 and December 31, 2013, respectively. The timing of
collection of such receivables from the federal and state governments and agencies is impacted by government audits as
well as government appropriations, allocation and funding processes, among other things, and can extend for periods
beyond a year.
In addition, we believe that our cash flow in 2014 was impacted, among other things, by the timing of payments
related to the ACA. The largest of the ACA taxes and fees is the health insurer fee. Our allocable share of the 2014
health insurer fee, based upon 2013 premiums, was $141.4 million. We paid that amount in September 2014, which
impacted our cash flow from operations for the year ended December 31, 2014. Our cash flow was also impacted by the
determination and settlement of amounts related to the premium stabilization provisions in the ACA. Our receivable
balance for the reinsurance program related to the premium stabilization provisions of the ACA was $234.0 million as
of December 31, 2014. If the per capita premiums/contributions paid by all insurers, including self-funded plans, are
insufficient to fund all recoverable amounts, then this will result in pro-rata reduction of recoverable amounts for
insurers for the following year. Our net receivable balance for the risk corridor program related to the premium