Health Net 2015 Annual Report Download - page 21

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allowing states to adopt more stringent requirements governing privacy protection. In addition, we process and maintain
personal card data, particularly in connection with our individual exchange business. As a result, we are subject to the
requirements under the Payment Card Industry (“PCI”) Data Security Standard, which is a multifaceted security
standard that is designed to protect credit card account data as mandated by payment card industry entities.
Other state and federal laws and regulations, including some of the laws noted above, impose similar privacy and
security requirements as the HIPAA Rules and the Gramm-Leach-Bliley Act.
ERISA. Many employee benefit plans are governed by the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). Employment-sponsored health coverage generally is such an employee benefit plan. ERISA is
administered and regulated, in large part, by the U.S. Department of Labor. ERISA contains disclosure requirements for
documents that define benefits and coverage, among other requirements. ERISA also provides that, in certain instances,
federal law will preempt state law in the regulation and governance of certain benefit plans and employer groups,
including the availability of legal remedies under state law. Regulations established by the U.S. Department of Labor
provide additional rules for claims payment and member appeals under health care plans governed by ERISA.
Other Federal Regulations. We must comply with, and are affected by, laws and regulations relating to the
award, administration and performance of U.S. Government contracts. Government contract laws and regulations affect
how we do business with our customers and, in some instances, impose added costs on our business. In addition,
because of our activities to support our MFLC contract and certain outsourcing arrangements we have with third party
vendors, for example, we are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar worldwide
anti-corruption laws, including the U.K. Bribery Act of 2010, which generally prohibit companies and their
intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
A violation of specific laws and regulations by us or our agents could result in, among other things, the imposition of
fines and penalties on us, changes to our business practices, the termination of our contracts or debarment from bidding
on contracts. See “—Segment Information—Government Contracts Segment—Other Department of Defense
Contracts” for additional information on our MFLC contract and “Item 1A. Risk Factors—We are subject to risks
associated with outsourcing services and functions to third parties” for additional information on our outsourcing
activities.
State Laws and Regulations
Our Western Region Operations operating subsidiaries are subject to extensive state regulation. Set forth below
are the principal regulatory agencies that govern these health plans and insurance companies.
Company Regulatory Agency
Health Net of Arizona, Inc. Arizona Department of Insurance
Health Net Access, Inc. Arizona Health Care Cost Containment System
Health Net of California,
Inc. California Department of Managed Health Care
Health Net Community
Solutions, Inc. California Department of Health Care Services and California Department of Managed Health Care
Health Net Health Plan of
Oregon, Inc. Oregon Department of Consumer and Business Services and Washington State Office of the Insurance Commissioner
Health Net Life Insurance
Company California Department of Insurance generally, and the Department of Insurance of each state in which it does business
Managed Health Network California Department of Managed Health Care
Insurance and HMO laws impose a number of financial requirements and restrictions on our regulated
subsidiaries, which vary from state to state. They generally include certain minimum capital and deposit and/or reserve
requirements, restrictions on dividends and other distributions to the parent corporations and affiliated corporations. See
“Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and
Capital Resources—Statutory Capital Requirements.” These financial requirements are subject to change, which may
require us to commit additional capital to certain regulated subsidiaries or may limit our ability to move capital through
dividends and other distributions. In addition, some state insurance laws require regulated companies to provide to the