Health Net 2015 Annual Report Download - page 58

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matters. Under the settlement agreement, we have agreed to a maximum payment amount to settle all the claims
asserted in the three related litigation matters, and would also pay class counsel attorneys’ fees and costs, related payroll
taxes and the costs of settlement administration. The actual amount that we will be required to pay under the settlement
agreement is dependent on the final number of eligible individuals who timely file claims. The claims period closed on
February 25, 2016, and a final approval hearing is scheduled for March 11, 2016. If the arbitrator gives final approval to
the settlement, we will withdraw the appeal pending before the U.S. Supreme Court, and the parties will ask the
Northern District of California to dismiss all three related litigation matters with prejudice. Our obligations under the
settlement agreement are contingent upon the dismissal of all three related litigation matters, and the amounts that we
would be required to pay pursuant to the settlement agreement are not material.
Miscellaneous Proceedings
In connection with the Merger, two purported Company stockholders filed two putative class action lawsuits in
the Court of Chancery of the State of Delaware seeking to enjoin the Merger, and other relief. The lawsuits were
consolidated, and the amended complaint alleged, among other things, that the merger consideration was inadequate,
that the process culminating in the Merger was flawed, that the directors of the Company breached their fiduciary duties
in connection with the Merger, and that Centene, Merger Sub I and Merger Sub II aided and abetted the breaches of
fiduciary duty. The amended complaint also alleged that the Form S-4 Registration Statement filed by Centene on
August 19, 2015 contained material misstatements and omitted material information. Plaintiffs subsequently requested a
voluntary dismissal of the consolidated action, and the dismissal was granted without prejudice on January 25, 2016.
In addition, in the ordinary course of our business operations, we are subject to periodic reviews, investigations
and audits by various federal and state regulatory agencies, including, without limitation, CMS, DMHC, DHCS, the
AHCCCS, the Office of Civil Rights of HHS and state departments of insurance, with respect to our compliance with a
wide variety of rules and regulations applicable to our business, including, without limitation, the Health Insurance
Portability and Accountability Act of 1996, rules relating to pre-authorization penalties, payment of out-of-network
claims, timely review of grievances and appeals, and timely and accurate payment of claims, any one of which may
result in remediation of certain claims, contract termination, the loss of licensure or the right to participate in certain
programs or other sanctions, and the assessment of regulatory fines or penalties, which could be substantial. From time
to time, we receive subpoenas and other requests for information from, and are subject to investigations by, such
regulatory agencies, as well as from state attorneys general. There also continues to be heightened review by regulatory
authorities of, and increased litigation regarding, the health care industry’s business practices, including, without
limitation, information privacy, premium rate increases, utilization management, appeal and grievance processing,
rescission of insurance coverage and claims payment practices.
In addition, in the ordinary course of our business operations, we are party to various other legal proceedings,
including, without limitation, litigation arising out of our general business activities, such as contract disputes,
employment litigation, wage and hour claims, including, without limitation, cases involving allegations of
misclassification of employees and/or failure to pay for off-the-clock work, real estate-related claims, intellectual
property claims, claims brought by members or providers seeking coverage or additional reimbursement for services
allegedly rendered to our members, but which allegedly were denied, underpaid, not timely paid or not paid, claims for
failure to maintain adequate provider directories and claims arising out of the acquisition or divestiture of various
business units or other assets. We also are subject to claims relating to the performance of contractual obligations to
providers, members, employer groups and others, including the alleged failure to properly pay claims and challenges to
the manner in which we process claims, claims alleging that we have engaged in unfair business practices and claims
related to the payment of taxes, including but not limited to claims that may have retroactive application. In addition,
from time to time we are subject to claims relating to information security incidents and breaches, reinsurance
agreements, rescission of coverage and other types of insurance coverage obligations and claims relating to the
insurance industry in general. In our role as a federal and state government contractor, we are, and may be in the future,
subject to qui tam litigation brought by individuals who seek to sue on behalf of the government for violations of,
among other things, state and federal false claims laws. We are, and may be in the future, subject to class action lawsuits
brought against various managed care organizations and other class action lawsuits.
We intend to vigorously defend ourselves against the miscellaneous legal and regulatory proceedings to which we
are currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending
against us, substantial non-economic or punitive damages are being sought.