Health Net 2015 Annual Report Download - page 51

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utilization and other cost factors, processing provider claims, billing our customers on a timely basis and identifying
accounts for collection. Our customers and providers also depend upon our information systems for membership
verification, claims status and other information. We have different information systems for our various businesses and
these systems require the commitment of significant resources for continual maintenance, upgrading and enhancement
to meet our operational needs and evolving industry and regulatory standards. We have partnered with third parties to
support our information technology systems and to help design, build, test, implement and maintain our information
management systems. Our merger, acquisition and divestiture activity also requires transitions to or from, and the
integration of, various information management systems within our overall enterprise architecture.
We are in the process of reducing the number of systems that we operate. Any difficulty or unexpected delay
associated with the transition to or from information systems, including in connection with the decommissioning of a
system or the implementation of a new system; any inability or failure to properly maintain information management
systems; any failure to efficiently and effectively consolidate our information systems, including to renew technology,
maintain technology currency, keep pace with evolving industry standards or eliminate redundant or obsolete
applications; or any inability or failure to successfully update or expand processing capability or develop new
capabilities to meet our business needs, could result in operational disruptions, loss of existing customers, difficulty in
attracting new customers, disputes with customers and providers, regulatory or other legal or compliance problems,
significant increases in administrative expenses and/or other adverse consequences. If for any reason there is a business
continuity interruption resulting in loss of access to or availability of data, we may, among other things, not be able to
meet the full demands of our customers and, in turn, our business, results of operations, financial condition and cash
flow could be adversely impacted. In addition, we currently obtain, and subject to regulatory approval, expect to obtain
in the future, significant portions of our systems-related and other services and facilities, including our data center, from
independent third parties. This makes our operations vulnerable to adverse effects if such third parties fail to perform
adequately. See “—We are subject to risks associated with outsourcing services and functions to third parties.”
We also face challenges with respect to our support of the requirements of the ACA. Because federal and state
regulators continue to release new and revised final rules and regulations relating to the implementation of the ACA,
there remains substantial uncertainty with respect to these requirements, including, but not limited to rules and
regulations related to the ACA’s premium stabilization provisions, state-based and federally facilitated exchanges and
the assessment and collection of the health insurer fee. Among other things, we have been required to define and
implement new billing and payment capabilities and support new requests from third parties and government agencies
for data collection and reporting. These additional demands have required significant systems changes, and are
continuing to require us to make modifications, including developing, investing in, configuring, installing and
monitoring the performance of new products and technology. The implementation of these changes has required and
will continue to require the expenditure of material resources as requirements evolve over time. See the ACA Risk
Factors for further information regarding the ACA and the challenges we continue to face in implementing its
provisions. If we do not adequately implement and monitor the requirements of the ACA, our results of operations,
financial condition and cash flows would be adversely affected.
As the requirements of supporting our businesses evolve over time, including as a result of the ACA's dynamic
marketplace, there can be no assurances that we will be able to make the necessary systems changes or other
modifications necessary to successfully meet such demands. If we do not successfully respond to such demands in a
timely manner, our results of operations, financial condition and cash flows could be materially adversely affected.
We have a material amount of indebtedness and may incur additional indebtedness, or need to refinance existing
indebtedness, in the future, which may adversely affect our operations.
Our indebtedness includes $400 million in aggregate principal amount of 6.375% Senior Notes due 2017. Our
Senior Notes payable balance was $399.7 million as of December 31, 2015. In addition, we have a $600 million five-
year revolving credit facility that expires in October 2016. As of December 31, 2015, we had $285 million outstanding
under our revolving credit facility. For a description of our Senior Notes and our revolving credit facility, see “Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources-Capital Structure.” We may incur additional debt in the future. Our existing indebtedness, and any additional
debt we incur in the future through drawings on our revolving credit facility or otherwise could have an adverse effect
on our business and future operations. For example, it could:
• require us to dedicate a substantial portion of cash flow from operations to pay principal and interest on our
debt, which would reduce funds available to fund stock repurchases, working capital, capital expenditures
and other general operating requirements;