Health Net 2015 Annual Report Download - page 80

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Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Revenues
Total revenues in our Western Region Operations segment for the year ended December 31, 2015 increased 16.5
percent to $15.6 billion compared to the same period in 2014 primarily due to an increase in our premium revenues in
our health plans.
Health plan services premiums revenues in our Western Region Operations segment increased to $15.6 billion for
the year ended December 31, 2015 compared to $13.4 billion in the same period in 2014, primarily due to enrollment
growth from Medicaid expansion. Our health plan services premiums revenues were impacted by MLR rebates, which
are payable to DHCS in connection with Medicaid adult expansion members. The impact was $202.5 million and
$200.6 million for the years ended December 31, 2015 and 2014, respectively. Our premium revenues were also
affected by $63.7 million and $24.7 million for the years ended December 31, 2015 and 2014, respectively, for excess
profit sharing, which is payable to the state of Arizona under our Arizona Medicaid contract. Due to the combined
impact of these MLR rebates and profit sharing provisions in Arizona, Medicaid premium revenue was reduced by
$266.2 million for the year ended December 31, 2015, compared with a reduction to premium revenue of $225.3
million for the year ended December 31, 2014. During 2015, Medi-Cal retroactive premium adjustments for prior years
increased premium revenue by $46.9 million. During the year ended December 31, 2014, our premium revenue was
decreased by $62.9 million due to a change in deficit calculated under our state-sponsored health plans rate settlement
agreement. No such adjustment was recorded during the year ended December 31, 2015. See Note 2 to our consolidated
financial statements, under the heading "Health Plan Services Revenue Recognition" for more information.
Investment income in our Western Region Operations segment increased to $55.5 million for the year ended
December 31, 2015 from $45.2 million for the same period in 2014 due to higher investments-available-for-sale
balances and higher interest rate environment. Investment income for 2015 reflects $2.0 million of other-than-
temporary impairment of certain energy and oil sector investments.
Administrative services fees and other income in our Western Region Operations segment increased by $8.0
million for the year ended December 31, 2015 as compared to the year ended December 31, 2014. The administrative
services fees and other income for the year ended December 31, 2014 was negative due to the reversal of certain ACA
administrative fee income booked in the first quarter of 2014 and the fourth quarter of 2013 as discussed in Note 2 to
the consolidated financial statements under the heading "Accounting for Certain Provisions of the ACA—Section 1202
of the ACA."
Health Plan Services Expenses
Health plan services expenses in our Western Region Operations segment increased 15.3 percent to
approximately $13.0 billion for the year ended December 31, 2015 from approximately $11.3 billion for the year ended
December 31, 2014, primarily due to enrollment growth from Medicaid expansion.
Premium Yield and Health Care Cost Trends
Our Western Region Operations premium PMPM increased by 4.6 percent to $402 for the year ended December
31, 2015 compared to an increase of 9.8 percent to $384 for the same period in 2014.
Western Region Operations health care cost PMPM increased by 3.6 percent to $337 for the year ended
December 31, 2015 compared to an increase of 8.5 percent to $325 for the same period in 2014.
The change in the premium yields and health care cost trends reflect the ongoing product mix change associated
with our membership growth.
Medical Care Ratios
The Western Region Operations health plan services MCR was 83.8 percent for the year ended December 31,
2015 compared with 84.6 percent for the year ended December 31, 2014. The improvement in the year ended December
31, 2015 compared to the same period in 2014 is primarily due to improved performance in our Medicaid expansion
business, which was partially offset by increased health care costs in our off-exchange products.
General and Administrative, Selling and Interest Expenses
Total general and administrative expense in our Western Region Operations segment was $1.7 billion for the year
ended December 31, 2015 compared with $1.5 billion for the year ended December 31, 2014. The increase in our total
general and administrative expenses for the year ended December 31, 2015 was primarily due to increases in the health