Health Net 2015 Annual Report Download - page 78

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or "opt out" of the demonstration. As of December 31, 2015, we were administering benefits to 42% of the Cal
MediConnect enrollment in Los Angeles County and 19% of the enrollment in San Diego County.
The financial performance of the Cal MediConnect Contract is included in the calculation of the settlement
account that was established pursuant to the terms of the settlement agreement entered into by DHCS, HNCS and
Health Net of California, Inc. on November 2, 2012, which is further discussed in Note 2 to our consolidated financial
statements under the heading "Health Plan Services Revenue Recognition.”
Health Net’s participation in CCI, and the dual eligibles demonstration in particular, continues to represent a
business opportunity for us, but is subject to a number of risks inherent in untested health care initiatives, particularly
those that involve new populations with limited cost experience. Moreover, CCI and the dual eligibles demonstration
program in particular, is a model of providing health care that is new to beneficiaries, providers, regulatory authorities
and health plans in the state of California, and involves risks generally associated with government programs. For
example, larger than expected numbers of dual eligibles have opted out of, and continue to dis-enroll from, the
demonstration, which has impacted and continues to impact our expected total enrollment for the demonstration. We
have worked with DHCS and others to implement outreach and other programs designed to increase our Cal
MediConnect enrollment, but if enrollment continues below expectations over the course of the demonstration, our
overall profitability with respect to our participation in CCI may be lower than originally anticipated. Due to these and
other risks associated with CCI, including, without limitation, that the dual eligibles demonstration is a pilot program
subject to changing legislation and state budgetary concerns, there can be no assurance that the business opportunity
presented by the CCI, including the dual eligibles demonstration, will prove to be successful. Our failure to successfully
adapt to the requirements of the CCI could have an adverse effect on our business, financial condition and results of
operation. For additional information regarding our participation in the duals program see “Item 1. Business—Segment
Information—Western Region Operations Segment—Dual Eligibles and the California Coordinated Care Initiative" and
for a discussion of additional risks related to the duals program, see “Item 1A. Risk Factors—Our participation in the
dual eligibles demonstration portion of the California Coordinated Care Initiative in Los Angeles and San Diego
Counties may prove to be unsuccessful for a number of reasons.”