Exhibit 99.1
| | | | |
Contacts: | | David Olson | | Angie McCabe |
| | 818.676.6978 | | 818.676.8692 |
| | david.w.olson@healthnet.com | | angeline.c.mccabe@healthnet.com |
HEALTH NET REPORTS A 23.1 PERCENT INCREASE
TO $0.80 PER DILUTED SHARE IN SECOND QUARTER 2007 EARNINGS
HEALTH PLAN ENROLLMENT CLIMBS SEQUENTIALLYBY 55,000
LOS ANGELES, August 1, 2007 – Health Net, Inc. (NYSE:HNT) today announced that 2007 second quarter net income was $92.0 million, or $0.80 per diluted share. Net income for the second quarter of 2006 was $77.0 million, or $0.65 per diluted share.
Following are key highlights for the second quarter of 2007:
| | § | | Pretax margin of 4.3 percent, a 40 basis point improvement compared to the second quarter of 2006; |
| | § | | Medicare Advantage membership grew by 39,000 members, or 19.8 percent, compared to the second quarter of 2006; |
| | § | | Membership in the company’s small group and individual segment increased by 4.1 percent compared to the second quarter of 2006; |
| | § | | The administrative expense ratio of 9.8 percent improved 140 basis points from the second quarter of 2006; |
| | § | | The company completed its $80 million acquisition of The Guardian Life Insurance Company of America’s 50 percent interest in the Healthcare Solutions (HCS) business; |
| | § | | Health Net of California was selected by the California Farm Bureau Federation as the underwriter for its 60,000-member health plan effective July 1, 2007; |
| | § | | The company issued an aggregate of $400 million in 6 3/8% Senior Notes due in June 2017 and entered into a new $900 million, five-year revolving credit agreement which replaced its $700 million revolving credit agreement; and |
| | § | | The company repurchased 360,300 shares of its Common Stock at an average price of $53.07 in the second quarter ended June 30, 2007. |
Membership
Total health plan enrollment during the second quarter of 2007 grew by 13,000 members to 3.7 million members compared to the same period in 2006 and by 55,000 members, or 1.5 percent, sequentially.
Commercial enrollment, including both at-risk and Administrative Services Only (ASO) membership, declined by 65,000 members, or 2.8 percent, to 2.3 million members in the second quarter of 2007 compared to same period in 2006. It increased by 21,000 members, or 0.9 percent, sequentially. The year-over-year decrease was primarily due to expected attrition in commercial large group and ASO membership while the sequential increase was due to growth in the small group and individual segment.
The company’s small group and individual segment experienced strong growth of 28,000 members, or 4.1 percent, in the second quarter of 2007 compared to the second quarter of 2006. Sequentially, the individual and small group segments grew by 20,000 members, or 2.9 percent.
Enrollment in the company’s Medicare Advantage plans was 236,000 members at the end of the second quarter of 2007. This reflects an increase of 39,000 members, or 19.8 percent, since the end of the second quarter of 2006 and an increase of 13,000 members, or 5.8 percent, since the end of the first quarter of 2007. Membership in the company’s Medicare Part D plans at the end of the second quarter of 2007 was 348,000, an increase of 60,000 members, or 20.8 percent, from the end of the second quarter of 2006. Medicare Part D membership increased by 7,000 members, or 2.1 percent, since the end of the first quarter of 2007.
State Health Plan enrollment at the end of the second quarter of 2007 was 839,000 members, a decline of 21,000 members, or 2.4 percent, since the end of the second quarter of 2006. Sequentially, State Health Plan enrollment increased by 14,000 members, or 1.7 percent,
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primarily in the Medi-Cal program in Los Angeles County and the Healthy Families program in California.
“It’s clear we have generated enrollment momentum, especially in commercial risk membership. Our strategy of focusing on the small group and individual segment is working,” said Jay M. Gellert, president and chief executive officer of Health Net.
Revenues and Health Care Costs
Health Net’s total revenues increased 6.1 percent in the second quarter of 2007 to $3.5 billion from $3.3 billion in the second quarter of 2006. Health plan services premium revenues increased 8.2 percent to $2.8 billion in the second quarter of 2007 compared to $2.6 billion in the second quarter of 2006.
Health Net’s Government contracts revenues decreased 2.1 percent in the second quarter of 2007 to $613.9 million from $627.0 million in the second quarter of 2006. The decrease in revenues was driven by the government assuming payment responsibility for health care expenditures for active duty personnel in the civilian sector as of the third quarter of 2006 and by the continued impact of improved Option Period 3 health care costs.
The health plan medical care ratio (MCR) was 84.7 percent in the second quarter of 2007 compared to 84.0 percent in the second quarter of 2006. This expected increase was driven partly by higher MCRs in the company’s government programs.
The commercial MCR in the second quarter of 2007 was 84.5 percent, up 20 basis points compared to the second quarter of 2006.
The commercial premium yield increased 8.4 percent in the second quarter of 2007 compared to the second quarter of 2006. Commercial health care costs rose by 8.6 percent on a per member per month (PMPM) basis in the second quarter of 2007 compared to the second quarter of 2006.
“Due to the impact of the Guardian transaction and the new California Farm Bureau membership which we added effective July 1, 2007, we are revising our full year 2007 premium yield expectations to approximately 9.0 percent,” said Gellert. “We expect to see commercial health care cost trends approximately 50 to 60 basis points below this amount.”
The Government contracts cost ratio was 92.9 percent in the second quarter of 2007, representing a 120 basis point improvement compared with the second quarter of 2006. “We
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continue to experience excellent health care cost performance and high beneficiary satisfaction in the TRICARE North Region,” said Jim Woys, Health Net’s interim chief financial officer.
Administrative Expenses
In the second quarter of 2007, total general, administrative and depreciation expenses decreased by $16.6 million to $277.0 million compared to $293.6 million in the second quarter of 2006. “The administrative expense ratio improved 140 basis points compared to the second quarter of 2006 due to our continued focus on expense management and some modest one-time benefits,” said Woys. “In addition, the second quarter is seasonally the lowest period of G&A spend during the year. As we move into the third and fourth quarters of 2007, we expect G&A to increase due to higher marketing expenses for open enrollment in both the commercial and Medicare lines of business and from additional expenses related to the HCS transaction.”
Health Net’s selling expenses of $76.8 million in the second quarter of 2007 increased by $17.2 million compared to the second quarter of 2006. “Our selling ratio of 2.7 percent increased 40 basis points compared to the second quarter of 2006 as we continued to focus on growing the individual, small and mid-size employer segments and strengthening our partnerships with the agents and brokers who sell our products. As a result of this focus, commercial new sales increased by 87,000 members, or 27.0 percent, compared to the second quarter of 2006,” said Gellert.
Balance Sheet
Cash and investments as of June 30, 2007 were $2.4 billion compared with $2.1 billion as of December 31, 2006.
Reserves for claims and other settlements increased by $35.7 million to $1.1 billion at June 30, 2007.
Days claims payable (DCP), including provider settlements, capitation payments and Medicare Part D expenses, increased by 0.8 days to 41.7 days in the second quarter of 2007 compared to 40.9 days in the second quarter of 2006. DCP increased by 0.4 days compared to the first quarter of 2007. Excluding provider settlements, capitation payments and Medicare Part D, DCP increased by 0.9 days to 55.3 days at June 30, 2007, from 54.4 days at March 31,
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2007, and by 2.4 days compared with 52.9 days at June 30, 2006 (see footnote (a) in the Notes to Condensed Consolidated Financial Statements in the accompanying tables).
The company’s debt-to-total capital ratio was 17.0 percent as of June 30, 2007 compared to 21.9 percent as of December 31, 2006 and 33.0 percent on June 30, 2006.
During the second quarter of 2007, the company repurchased 360,300 shares of its Common Stock at an average price of $53.07. From the end of the second quarter of 2007 through July 31, 2007, the company repurchased 831,700 shares.
Since Health Net restarted its share repurchase program in November 2006, through July 31, 2007, the company has repurchased more than 7.6 million shares at an average price of $47.90.
In the second quarter of 2007, the company issued $400 million in aggregate principal amount of 6 3/8% Senior Notes due 2017. The net proceeds of the offering were used to repay amounts outstanding under a term loan agreement and the company’s revolving credit facility. Also, the company entered into a new $900 million, five-year revolving credit agreement that replaced its $700 million revolving credit agreement.
Interest expense decreased by $5.6 million in the second quarter of 2007 compared to the second quarter of 2006, due to the redemption of the company’s 8 3/8% Senior Notes due 2011 in the third quarter of 2006, which had a higher interest rate than its term and bridge loans and new Senior Notes issued in the second quarter of 2007.
Cash Flow
Operating cash flow was $135.7 million in the second quarter of 2007, or 1.5 times net income. For the first half of 2007, Health Net’s operating cash flow was $479.7 million, which includes seven monthly payments from the Centers for Medicare & Medicaid Services (CMS), including one extra payment of approximately $265 million.
Adjusted to include only six monthly payments in the first half of 2007, operating cash flow would have been approximately $215 million, or 1.2 times net income.
Outlook
Health Net expects earnings per diluted share of $0.99 in the third quarter of 2007, and $3.66 for the full year of 2007 based on expected average shares outstanding of 114 million.
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Conference Call
As previously announced, Health Net will discuss the company’s second quarter results during a conference call scheduled on Wednesday, August 1, 2007, at approximately 11:00 a.m. Eastern Time. To listen to the call, please dial 800.811.8824, code 7178740. A live webcast and replay of the conference call also will be available atwww.healthnet.com. The conference call webcast is open to all interested parties. A replay of the conference call will be available from August 1, 2007 through August 5, 2007, by dialing 888.203.1112, code 7178740. Anyone listening to the company’s conference call will be presumed to have read Health Net’s Annual Report on Form 10-K for the year ended December 31, 2006, Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and other reports filed by the company from time to time with the Securities and Exchange Commission.
About Health Net
Health Net, Inc. is among the nation’s largest publicly traded managed health care companies. Its mission is to help people be healthy, secure and comfortable. The company’s health plans and government contracts subsidiaries provide health benefits to approximately 6.6 million individuals across the country through group, individual, Medicare, Medicaid and TRICARE and Veterans Affairs programs. Health Net’s behavioral health subsidiary, MHN, provides mental health benefits to approximately 7.0 million individuals in all 50 states. The company’s subsidiaries also offer managed health care products related to prescription drugs, and offer managed health care product coordination for multi-region employers and administrative services for medical groups and self-funded benefits programs.
For more information on Health Net, Inc., please visit the company’s Web site atwww.healthnet.com.
Cautionary Statements
This release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that involve a number of risks and uncertainties. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements. These statements are based on management’s analysis, judgment, belief and
6
expectation only as of the date hereof, and are subject to uncertainty and changes in circumstances. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend” and other similar expressions are intended to identify forward-looking statements. Actual results could differ materially due to, among other things, rising health care costs, negative prior period claims reserve developments, trends in medical care ratios, issues relating to provider contracts, litigation costs, operational issues, health care reform and general business conditions. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included within the company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this release.
# # #
[Seven pages of tables follow]
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Health Net, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share, PMPM and ratio data)
| | | | | | | | | | | | |
| | | Quarter Ended | |
| | | June 30,
2006 | | | March 31,
2007 | | | June 30,
2007 | |
REVENUES: | | | | | | | | | | | | |
Health plan services premiums | | $ | 2,599,079 | | | $ | 2,777,259 | | | $ | 2,811,186 | |
Government contracts | | | 626,957 | | | | 607,995 | | | | 613,865 | |
Net investment income | | | 26,256 | | | | 31,364 | | | | 27,884 | |
Administrative services fees and other income | | | 13,830 | | | | 12,294 | | | | 11,243 | |
| | | | | | | | | | | | |
Total revenues | | | 3,266,122 | | | | 3,428,912 | | | | 3,464,178 | |
| | | | | | | | | | | | |
EXPENSES: | | | | | | | | | | | | |
Health plan services | | | 2,181,975 | | | | 2,341,074 | | | | 2,381,279 | |
Government contracts | | | 590,117 | | | | 567,099 | | | | 570,518 | |
General and administrative | | | 288,670 | | | | 291,285 | | | | 270,003 | |
Selling | | | 59,630 | | | | 69,129 | | | | 76,842 | |
Depreciation | | | 4,950 | | | | 6,541 | | | | 6,969 | |
Amortization | | | 1,275 | | | | 1,092 | | | | 2,044 | |
Interest | | | 13,449 | | | | 9,560 | | | | 7,824 | |
| | | | | | | | | | | | |
| | | 3,140,066 | | | | 3,285,780 | | | | 3,315,479 | |
| | | | | | | | | | | | |
Income from operations before income taxes | | | 126,056 | | | | 143,132 | | | | 148,699 | |
Income tax provision | | | 49,023 | | | | 54,547 | | | | 56,669 | |
| | | | | | | | | | | | |
Net income | | $ | 77,033 | | | $ | 88,585 | | | $ | 92,030 | |
| | | | | | | | | | | | |
Basic earnings per share | | $ | 0.67 | | | $ | 0.79 | | | $ | 0.82 | |
Diluted earnings per share | | $ | 0.65 | | | $ | 0.77 | | | $ | 0.80 | |
Weighted average shares outstanding: | | | | | | | | | | | | |
Basic | | | 115,213 | | | | 111,970 | | | | 112,122 | |
Diluted | | | 118,305 | | | | 114,759 | | | | 114,808 | |
Pretax margin
(Income from operations before income taxes / Total revenues) | | | 3.9 | % | | | 4.2 | % | | | 4.3 | % |
Health plan services MCR | | | 84.0 | % | | | 84.3 | % | | | 84.7 | % |
Government contracts cost ratio | | | 94.1 | % | | | 93.3 | % | | | 92.9 | % |
Administrative ratio
((G&A+Dep) / (HP serv prem + admin serv fees and other income)) | | | 11.2 | % | | | 10.7 | % | | | 9.8 | % |
Selling costs ratio (Selling costs / HP serv prem) | | | 2.3 | % | | | 2.5 | % | | | 2.7 | % |
Days claims payable(a) | | | 40.9 | | | | 41.3 | | | | 41.7 | |
Days claims payable—adjusted(a) | | | 52.9 | | | | 54.4 | | | | 55.3 | |
Effective tax rate | | | 38.9 | % | | | 38.1 | % | | | 38.1 | % |
Health plan services premiums PMPM | | $ | 241.75 | | | $ | 259.35 | | | $ | 260.18 | |
Health plan services costs PMPM | | $ | 202.95 | | | $ | 218.62 | | | $ | 220.39 | |
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Health Net, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except ratio data)
| | | | | | | | |
| | | December 31,
2006 | | | June 30,
2007 | |
ASSETS | | | | | | | | |
Current Assets | | | | | | | | |
Cash and cash equivalents | | $ | 704,806 | | | $ | 976,150 | |
Investments—available for sale | | | 1,416,038 | | | | 1,421,537 | |
Premiums receivable, net | | | 302,355 | | | | 206,513 | |
Amounts receivable under government contracts | | | 199,569 | | | | 229,134 | |
Incurred but not reported (IBNR) health care costs receivable under TRICARE North contract | | | 272,961 | | | | 271,327 | |
Other receivables | | | 106,135 | | | | 105,093 | |
Deferred taxes | | | 54,702 | | | | 69,369 | |
Other assets | | | 161,280 | | | | 179,722 | |
| | | | | | | | |
Total current assets | | | 3,217,846 | | | | 3,458,845 | |
Property and equipment, net | | | 151,184 | | | | 163,877 | |
Goodwill, net | | | 751,949 | | | | 751,949 | |
Other intangible assets, net | | | 42,835 | | | | 119,463 | |
Deferred taxes | | | 33,137 | | | | 92,127 | |
Other noncurrent assets | | | 100,071 | | | | 145,703 | |
| | | | | | | | |
Total Assets | | $ | 4,297,022 | | | $ | 4,731,964 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current Liabilities | | | | | | | | |
Reserves for claims and other settlements | | $ | 1,048,796 | | | $ | 1,084,461 | |
Health care and other costs payable under government contracts | | | 52,384 | | | | 53,528 | |
IBNR health care costs payable under TRICARE North contract | | | 272,961 | | | | 271,327 | |
Unearned premiums | | | 164,099 | | | | 415,256 | |
Bridge loan | | | 200,000 | | | | — | |
Accounts payable and other liabilities | | | 371,263 | | | | 315,688 | |
| | | | | | | | |
Total current liabilities | | | 2,109,503 | | | | 2,140,260 | |
Senior notes payable | | | — | | | | 397,968 | |
Revolver payable and other financing arrangement | | | 300,000 | | | | — | |
Other noncurrent liabilities | | | 108,554 | | | | 243,943 | |
| | | | | | | | |
Total Liabilities | | | 2,518,057 | | | | 2,782,171 | |
| | | | | | | | |
Stockholders’ Equity | | | | | | | | |
Common stock and additional paid-in capital | | | 1,028,018 | | | | 1,100,623 | |
Treasury common stock, at cost | | | (891,294 | ) | | | (966,691 | ) |
Retained earnings | | | 1,653,478 | | | | 1,836,015 | |
Accumulated other comprehensive loss | | | (11,237 | ) | | | (20,154 | ) |
| | | | | | | | |
Total Stockholders’ Equity | | | 1,778,965 | | | | 1,949,793 | |
| | | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 4,297,022 | | | $ | 4,731,964 | |
| | | | | | | | |
Debt-to-Total Capital Ratio | | | 21.9 | % | | | 17.0 | % |
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Health Net, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
| | | | | | | | | | | | |
| | | Quarter Ended | |
| | | June 30,
2006 | | | March 31,
2007 | | | June 30,
2007 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | |
Net income | | $ | 77,033 | | | $ | 88,585 | | | $ | 92,030 | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | | | | | | | | | | |
Amortization and depreciation | | | 6,225 | | | | 7,633 | | | | 9,013 | |
Share-based compensation expense | | | 5,195 | | | | 5,240 | | | | 6,529 | |
Other changes | | | 4,007 | | | | (1,510 | ) | | | (3,067 | ) |
Changes in assets and liabilities, net of the effects of dispositions: | | | | | | | | | | | | |
Premiums receivable and unearned premiums | | | (36,388 | ) | | | 181,344 | | | | 40,925 | |
Other receivables, deferred taxes and other assets | | | (107 | ) | | | (16,980 | ) | | | 89,397 | |
Amounts receivable/payable under government contracts | | | 359 | | | | (1,122 | ) | | | (27,299 | ) |
Reserves for claims and other settlements | | | (10,734 | ) | | | 49,157 | | | | (13,492 | ) |
Accounts payable and other liabilities | | | (63,055 | ) | | | 31,680 | | | | (58,380 | ) |
| | | | | | | | | | | | |
Net cash (used in) provided by operating activities | | | (17,465 | ) | | | 344,027 | | | | 135,656 | |
| | | | | | | | | | | | |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | |
Sales of investments | | | 44,374 | | | | 383,857 | | | | 86,689 | |
Maturities of investments | | | 30,248 | | | | 60,004 | | | | 46,730 | |
Purchases of investments | | | (110,683 | ) | | | (419,172 | ) | | | (190,873 | ) |
Proceeds from sale of property and equipment | | | — | | | | 83,870 | | | | 12,878 | |
Purchases of property and equipment | | | (12,679 | ) | | | (19,629 | ) | | | (13,394 | ) |
Net cash paid for acquisition of Guardian assets | | | — | | | | (69,780 | ) | | | (10,497 | ) |
Sales and purchases of restricted investments and other | | | (497,437 | ) | | | (3,970 | ) | | | (35,592 | ) |
| | | | | | | | | | | | |
Net cash (used in) provided by investing activities | | | (546,177 | ) | | | 15,180 | | | | (104,059 | ) |
| | | | | | | | | | | | |
| | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | |
Proceeds from exercise of stock options and employee stock purchases | | | 20,895 | | | | 30,652 | | | | 11,949 | |
Repurchases of common stock | | | (1,107 | ) | | | (55,893 | ) | | | (13,891 | ) |
Excess tax benefits from share-based compensation | | | 2,221 | | | | 10,399 | | | | 3,789 | |
Borrowings under financing arrangements | | | 497,334 | | | | 100,000 | | | | 393,535 | |
Repayment of borrowings under financing arrangements | | | — | | | | (200,000 | ) | | | (400,000 | ) |
| | | | | | | | | | | | |
Net cash provided by (used in) financing activities | | | 519,343 | | | | (114,842 | ) | | | (4,618 | ) |
| | | | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | | | (44,299 | ) | | | 244,365 | | | | 26,979 | |
Cash and cash equivalents, beginning of period | | | 870,224 | | | | 704,806 | | | | 949,171 | |
| | | | | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 825,925 | | | $ | 949,171 | | | $ | 976,150 | |
| | | | | | | | | | | | |
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Health Net, Inc.
Notes to Condensed Consolidated Financial Statements
Notes:
| (a) | Management believes that days claims payable (excluding capitation, provider settlements and Medicare Part D), a non-GAAP financial measure, provides useful information to investors because, in excluding those health care costs for which no or minimal reserves are maintained, it is a more accurate reflection of days claims payable calculated from claims-based reserves than is days claims payable, which does not exclude such costs. This non-GAAP financial information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP. The following table provides a reconciliation of the differences between days claims payable (excluding capitation, provider settlements and Medicare Part D) and days claims payable, the most directly comparable financial measure calculated and presented in accordance with GAAP: |
| | | | | | | | | | | | |
| | | Q2 2006 | | | Q1 2007 | | | Q2 2007 | |
| | | (Dollars in millions) | |
Reserve for Claims and Other Settlements | | $ | 975.4 | | | $ | 1,098.0 | | | $ | 1,084.5 | |
Less: Capitation Payable, Provider Settlements and Medicare Part D | | | (110.3 | ) | | | (101.1 | ) | | | (98.8 | ) |
| | | | | | | | | | | | |
Adjusted Reserve for Claims and Other Settlements | | | 865.1 | | | | 996.9 | | | | 985.7 | |
| | | |
(1) Average Reserve for Claims and Other Settlements | | | 980.8 | | | | 1,073.4 | | | | 1,091.2 | |
| | | |
(2) Average Adjusted Reserve for Claims and Other Settlements | | | 865.4 | | | | 980.2 | | | | 991.2 | |
| | | |
(3) Health Plan Services Cost | | | 2,182.0 | | | | 2,341.1 | | | | 2,381.3 | |
Less: Capitation Payments, Provider Settlements and Medicare Part D | | | (692.6 | ) | | | (720.9 | ) | | | (751.5 | ) |
| | | | | | | | | | | | |
(4) Adjusted Health Plan Services Cost | | | 1,489.4 | | | | 1,620.2 | | | | 1,629.8 | |
| | | |
(5) Number of Days in Period | | | 91 | | | | 90 | | | | 91 | |
| | | |
= (1) / (3) * (5) Days Claims Payable | | | 40.9 | | | | 41.3 | | | | 41.7 | |
= (2) / (4) * (5) Days Claims Payable (Excl. Capitation, Provider Settlements and Medicare Part D) | | | 52.9 | | | | 54.4 | | | | 55.3 | |
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Health Net, Inc.
Enrollment Data—By State
(In thousands)
| | | | | | | | | | | | | | | | | | |
| | | June 30,
2007 | | March 31,
2007 | | June 30,
2006 | | Change from | |
| | | | | | March 31, 2007 | | | June 30, 2006 | |
| | | | | | Increase/
(Decrease) | | | %
Change | | | Increase/
(Decrease) | | | %
Change | |
California | | | | | | | | | | | | | | | | | | |
Large Group | | 1,013 | | 1,009 | | 1,063 | | 4 | | | 0.4 | % | | (50 | ) | | (4.7 | )% |
Small Group and Individual | | 425 | | 413 | | 422 | | 12 | | | 2.9 | % | | 3 | | | 0.7 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 1,438 | | 1,422 | | 1,485 | | 16 | | | 1.1 | % | | (47 | ) | | (3.2 | )% |
ASO | | 5 | | 5 | | 5 | | 0 | | | 0.0 | % | | 0 | | | 0.0 | % |
| | | | | | | | | | | | | | | | | | |
Total Commercial | | 1,443 | | 1,427 | | 1,490 | | 16 | | | 1.1 | % | | (47 | ) | | (3.2 | )% |
Medicare Advantage | | 112 | | 108 | | 104 | | 4 | | | 3.7 | % | | 8 | | | 7.7 | % |
Medi-Cal | | 708 | | 694 | | 726 | | 14 | | | 2.0 | % | | (18 | ) | | (2.5 | )% |
| | | | | | | | | | | | | | | | | | |
Total California | | 2,263 | | 2,229 | | 2,320 | | 34 | | | 1.5 | % | | (57 | ) | | (2.5 | )% |
| | | | | | | | | | | | | | | | | | |
Connecticut | | | | | | | | | | | | | | | | | | |
Large Group | | 142 | | 143 | | 156 | | (1 | ) | | (0.7 | )% | | (14 | ) | | (9.0 | )% |
Small Group and Individual | | 27 | | 29 | | 31 | | (2 | ) | | (6.9 | )% | | (4 | ) | | (12.9 | )% |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 169 | | 172 | | 187 | | (3 | ) | | (1.7 | )% | | (18 | ) | | (9.6 | )% |
ASO | | 58 | | 57 | | 69 | | 1 | | | 1.8 | % | | (11 | ) | | (15.9 | )% |
| | | | | | | | | | | | | | | | | | |
Total Commercial | | 227 | | 229 | | 256 | | (2 | ) | | (0.9 | )% | | (29 | ) | | (11.3 | )% |
Medicare Advantage | | 43 | | 40 | | 32 | | 3 | | | 7.5 | % | | 11 | | | 34.4 | % |
Medicaid | | 85 | | 85 | | 87 | | 0 | | | 0.0 | % | | (2 | ) | | (2.3 | )% |
| | | | | | | | | | | | | | | | | | |
Total Connecticut | | 355 | | 354 | | 375 | | 1 | | | 0.3 | % | | (20 | ) | | (5.3 | )% |
| | | | | | | | | | | | | | | | | | |
New York | | | | | | | | | | | | | | | | | | |
Large Group | | 116 | | 116 | | 120 | | 0 | | | 0.0 | % | | (4 | ) | | (3.3 | )% |
Small Group and Individual | | 117 | | 109 | | 96 | | 8 | | | 7.3 | % | | 21 | | | 21.9 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 233 | | 225 | | 216 | | 8 | | | 3.6 | % | | 17 | | | 7.9 | % |
ASO | | 15 | | 15 | | 17 | | 0 | | | 0.0 | % | | (2 | ) | | (11.8 | )% |
| | | | | | | | | | | | | | | | | | |
Total Commercial | | 248 | | 240 | | 233 | | 8 | | | 3.3 | % | | 15 | | | 6.4 | % |
Medicare Advantage | | 9 | | 8 | | 7 | | 1 | | | 12.5 | % | | 2 | | | 28.6 | % |
| | | | | | | | | | | | | | | | | | |
Total New York | | 257 | | 248 | | 240 | | 9 | | | 3.6 | % | | 17 | | | 7.1 | % |
| | | | | | | | | | | | | | | | | | |
New Jersey | | | | | | | | | | | | | | | | | | |
Large Group | | 32 | | 36 | | 47 | | (4 | ) | | (11.1 | )% | | (15 | ) | | (31.9 | )% |
Small Group and Individual | | 62 | | 61 | | 58 | | 1 | | | 1.6 | % | | 4 | | | 6.9 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 94 | | 97 | | 105 | | (3 | ) | | (3.1 | )% | | (11 | ) | | (10.5 | )% |
ASO | | 18 | | 19 | | 20 | | (1 | ) | | (5.3 | )% | | (2 | ) | | (10.0 | )% |
| | | | | | | | | | | | | | | | | | |
Total Commercial | | 112 | | 116 | | 125 | | (4 | ) | | (3.4 | )% | | (13 | ) | | (10.4 | )% |
Medicaid | | 46 | | 46 | | 47 | | 0 | | | 0.0 | % | | (1 | ) | | (2.1 | )% |
| | | | | | | | | | | | | | | | | | |
Total New Jersey | | 158 | | 162 | | 172 | | (4 | ) | | (2.5 | )% | | (14 | ) | | (8.1 | )% |
| | | | | | | | | | | | | | | | | | |
Arizona | | | | | | | | | | | | | | | | | | |
Large Group | | 80 | | 78 | | 72 | | 2 | | | 2.6 | % | | 8 | | | 11.1 | % |
Small Group and Individual | | 53 | | 52 | | 47 | | 1 | | | 1.9 | % | | 6 | | | 12.8 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 133 | | 130 | | 119 | | 3 | | | 2.3 | % | | 14 | | | 11.8 | % |
Medicare Advantage | | 48 | | 45 | | 35 | | 3 | | | 6.7 | % | | 13 | | | 37.1 | % |
| | | | | | | | | | | | | | | | | | |
Total Arizona | | 181 | | 175 | | 154 | | 6 | | | 3.4 | % | | 27 | | | 17.5 | % |
| | | | | | | | | | | | | | | | | | |
Oregon | | | | | | | | | | | | | | | | | | |
Large Group | | 96 | | 96 | | 99 | | 0 | | | 0.0 | % | | (3 | ) | | (3.0 | )% |
Small Group and Individual | | 35 | | 35 | | 37 | | 0 | | | 0.0 | % | | (2 | ) | | (5.4 | )% |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 131 | | 131 | | 136 | | 0 | | | 0.0 | % | | (5 | ) | | (3.7 | )% |
Medicare Advantage | | 20 | | 20 | | 19 | | 0 | | | 0.0 | % | | 1 | | | 5.3 | % |
| | | | | | | | | | | | | | | | | | |
Total Oregon | | 151 | | 151 | | 155 | | 0 | | | 0.0 | % | | (4 | ) | | (2.6 | )% |
| | | | | | | | | | | | | | | | | | |
Other States | | | | | | | | | | | | | | | | | | |
Medicare Advantage | | 4 | | 2 | | 0 | | 2 | | | 100.0 | % | | 4 | | | | |
| | | | | | | | | | | | | | | | | | |
Medicare PDP (stand-alone) | | 348 | | 341 | | 288 | | 7 | | | 2.1 | % | | 60 | | | 20.8 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total Health Plan Enrollment | | | | | | | | | | | | | | | | | | |
Large Group | | 1,479 | | 1,478 | | 1,557 | | 1 | | | 0.1 | % | | (78 | ) | | (5.0 | )% |
Small Group and Individual | | 719 | | 699 | | 691 | | 20 | | | 2.9 | % | | 28 | | | 4.1 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 2,198 | | 2,177 | | 2,248 | | 21 | | | 1.0 | % | | (50 | ) | | (2.2 | )% |
ASO | | 96 | | 96 | | 111 | | 0 | | | 0.0 | % | | (15 | ) | | (13.5 | )% |
| | | | | | | | | | | | | | | | | | |
Total Commercial | | 2,294 | | 2,273 | | 2,359 | | 21 | | | 0.9 | % | | (65 | ) | | (2.8 | )% |
Medicare Advantage | | 236 | | 223 | | 197 | | 13 | | | 5.8 | % | | 39 | | | 19.8 | % |
Medicare PDP (stand-alone) | | 348 | | 341 | | 288 | | 7 | | | 2.1 | % | | 60 | | | 20.8 | % |
Medi-Cal/Medicaid | | 839 | | 825 | | 860 | | 14 | | | 1.7 | % | | (21 | ) | | (2.4 | )% |
| | | | | | | | | | | | | | | | | | |
Total Health Plans | | 3,717 | | 3,662 | | 3,704 | | 55 | | | 1.5 | % | | 13 | | | 0.4 | % |
| | | | | | | | | | | | | | | | | | |
TRICARE—North Contract Eligibles | | 2,913 | | 2,930 | | 2,932 | | (17 | ) | | (0.6 | )% | | (19 | ) | | (0.6 | )% |
Page 12
Health Net, Inc.
Enrollment Data—Line of Business
(In thousands)
| | | | | | | | | | | | | | | | | | |
| | | June 30,
2007 | | March 31,
2007 | | June 30,
2006 | | Change from | |
| | | | | | March 31, 2007 | | | June 30, 2006 | |
| | | | | | Increase/
(Decrease) | | | %
Change | | | Increase/
(Decrease) | | | %
Change | |
Large Group | | | | | | | | | | | | | | | | | | |
California | | 1,013 | | 1,009 | | 1,063 | | 4 | | | 0.4 | % | | (50 | ) | | (4.7 | )% |
Connecticut | | 142 | | 143 | | 156 | | (1 | ) | | (0.7 | )% | | (14 | ) | | (9.0 | )% |
New York | | 116 | | 116 | | 120 | | 0 | | | 0.0 | % | | (4 | ) | | (3.3 | )% |
New Jersey | | 32 | | 36 | | 47 | | (4 | ) | | (11.1 | )% | | (15 | ) | | (31.9 | )% |
Arizona | | 80 | | 78 | | 72 | | 2 | | | 2.6 | % | | 8 | | | 11.1 | % |
Oregon | | 96 | | 96 | | 99 | | 0 | | | 0.0 | % | | (3 | ) | | (3.0 | )% |
| | | | | | | | | | | | | | | | | | |
| | 1,479 | | 1,478 | | 1,557 | | 1 | | | 0.1 | % | | (78 | ) | | (5.0 | )% |
| | | | | | | | | | | | | | | | | | |
Small Group and Individual | | | | | | | | | | | | | | | | | | |
California | | 425 | | 413 | | 422 | | 12 | | | 2.9 | % | | 3 | | | 0.7 | % |
Connecticut | | 27 | | 29 | | 31 | | (2 | ) | | (6.9 | )% | | (4 | ) | | (12.9 | )% |
New York | | 117 | | 109 | | 96 | | 8 | | | 7.3 | % | | 21 | | | 21.9 | % |
New Jersey | | 62 | | 61 | | 58 | | 1 | | | 1.6 | % | | 4 | | | 6.9 | % |
Arizona | | 53 | | 52 | | 47 | | 1 | | | 1.9 | % | | 6 | | | 12.8 | % |
Oregon | | 35 | | 35 | | 37 | | 0 | | | 0.0 | % | | (2 | ) | | (5.4 | )% |
| | | | | | | | | | | | | | | | | | |
| | 719 | | 699 | | 691 | | 20 | | | 2.9 | % | | 28 | | | 4.1 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | | | | | | | | | | | | | | | | | |
California | | 1,438 | | 1,422 | | 1,485 | | 16 | | | 1.1 | % | | (47 | ) | | (3.2 | )% |
Connecticut | | 169 | | 172 | | 187 | | (3 | ) | | (1.7 | )% | | (18 | ) | | (9.6 | )% |
New York | | 233 | | 225 | | 216 | | 8 | | | 3.6 | % | | 17 | | | 7.9 | % |
New Jersey | | 94 | | 97 | | 105 | | (3 | ) | | (3.1 | )% | | (11 | ) | | (10.5 | )% |
Arizona | | 133 | | 130 | | 119 | | 3 | | | 2.3 | % | | 14 | | | 11.8 | % |
Oregon | | 131 | | 131 | | 136 | | 0 | | | 0.0 | % | | (5 | ) | | (3.7 | )% |
| | | | | | | | | | | | | | | | | | |
| | 2,198 | | 2,177 | | 2,248 | | 21 | | | 1.0 | % | | (50 | ) | | (2.2 | )% |
| | | | | | | | | | | | | | | | | | |
ASO | | | | | | | | | | | | | | | | | | |
California | | 5 | | 5 | | 5 | | 0 | | | 0.0 | % | | 0 | | | 0.0 | % |
Connecticut | | 58 | | 57 | | 69 | | 1 | | | 1.8 | % | | (11 | ) | | (15.9 | )% |
New York | | 15 | | 15 | | 17 | | 0 | | | 0.0 | % | | (2 | ) | | (11.8 | )% |
New Jersey | | 18 | | 19 | | 20 | | (1 | ) | | (5.3 | )% | | (2 | ) | | (10.0 | )% |
| | | | | | | | | | | | | | | | | | |
| | 96 | | 96 | | 111 | | 0 | | | 0.0 | % | | (15 | ) | | (13.5 | )% |
Total Commercial | | | | | | | | | | | | | | | | | | |
California | | 1,443 | | 1,427 | | 1,490 | | 16 | | | 1.1 | % | | (47 | ) | | (3.2 | )% |
Connecticut | | 227 | | 229 | | 256 | | (2 | ) | | (0.9 | )% | | (29 | ) | | (11.3 | )% |
New York | | 248 | | 240 | | 233 | | 8 | | | 3.3 | % | | 15 | | | 6.4 | % |
New Jersey | | 112 | | 116 | | 125 | | (4 | ) | | (3.4 | )% | | (13 | ) | | (10.4 | )% |
Arizona | | 133 | | 130 | | 119 | | 3 | | | 2.3 | % | | 14 | | | 11.8 | % |
Oregon | | 131 | | 131 | | 136 | | 0 | | | 0.0 | % | | (5 | ) | | (3.7 | )% |
| | | | | | | | | | | | | | | | | | |
| | 2,294 | | 2,273 | | 2,359 | | 21 | | | 0.9 | % | | (65 | ) | | (2.8 | )% |
Medicare Advantage | | | | | | | | | | | | | | | | | | |
California | | 112 | | 108 | | 104 | | 4 | | | 3.7 | % | | 8 | | | 7.7 | % |
Connecticut | | 43 | | 40 | | 32 | | 3 | | | 7.5 | % | | 11 | | | 34.4 | % |
New York | | 9 | | 8 | | 7 | | 1 | | | 12.5 | % | | 2 | | | 28.6 | % |
Arizona | | 48 | | 45 | | 35 | | 3 | | | 6.7 | % | | 13 | | | 37.1 | % |
Oregon | | 20 | | 20 | | 19 | | 0 | | | 0.0 | % | | 1 | | | 5.3 | % |
Other States | | 4 | | 2 | | 0 | | 2 | | | 100.0 | % | | 4 | | | | |
| | | | | | | | | | | | | | | | | | |
| | 236 | | 223 | | 197 | | 13 | | | 5.8 | % | | 39 | | | 19.8 | % |
Medi-Cal/Medicaid | | | | | | | | | | | | | | | | | | |
California | | 708 | | 694 | | 726 | | 14 | | | 2.0 | % | | (18 | ) | | (2.5 | )% |
Connecticut | | 85 | | 85 | | 87 | | 0 | | | 0.0 | % | | (2 | ) | | (2.3 | )% |
New Jersey | | 46 | | 46 | | 47 | | 0 | | | 0.0 | % | | (1 | ) | | (2.1 | )% |
| | | | | | | | | | | | | | | | | | |
| | 839 | | 825 | | 860 | | 14 | | | 1.7 | % | | (21 | ) | | (2.4 | )% |
Medicare PDP (stand-alone) | | 348 | | 341 | | 288 | | 7 | | | 2.1 | % | | 60 | | | 20.8 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total Health Plan Enrollment | | | | | | | | | | | | | | | | | | |
Large Group | | 1,479 | | 1,478 | | 1,557 | | 1 | | | 0.1 | % | | (78 | ) | | (5.0 | )% |
Small Group and Individual | | 719 | | 699 | | 691 | | 20 | | | 2.9 | % | | 28 | | | 4.1 | % |
| | | | | | | | | | | | | | | | | | |
Commercial Risk | | 2,198 | | 2,177 | | 2,248 | | 21 | | | 1.0 | % | | (50 | ) | | (2.2 | )% |
ASO | | 96 | | 96 | | 111 | | 0 | | | 0.0 | % | | (15 | ) | | (13.5 | )% |
| | | | | | | | | | | | | | | | | | |
Total Commercial | | 2,294 | | 2,273 | | 2,359 | | 21 | | | 0.9 | % | | (65 | ) | | (2.8 | )% |
Medicare Advantage | | 236 | | 223 | | 197 | | 13 | | | 5.8 | % | | 39 | | | 19.8 | % |
Medicare PDP (stand-alone) | | 348 | | 341 | | 288 | | 7 | | | 2.1 | % | | 60 | | | 20.8 | % |
Medi-Cal/Medicaid | | 839 | | 825 | | 860 | | 14 | | | 1.7 | % | | (21 | ) | | (2.4 | )% |
| | | | | | | | | | | | | | | | | | |
Total Health Plans | | 3,717 | | 3,662 | | 3,704 | | 55 | | | 1.5 | % | | 13 | | | 0.4 | % |
| | | | | | | | | | | | | | | | | | |
Page 13
Health Net, Inc.
Reconciliation of Reserves for Claims and Other Settlements
(In millions)
| | | | | | | | | | | | |
| | | Health Plan Services | |
| | | YTD 6/2007 | | | Year 2006 | | | Year 2005 | |
Reserve for claims (a), beginning of period | | $ | 754.2 | | | $ | 768.7 | | | $ | 794.6 | |
| | | |
Incurred claims related to: | | | | | | | | | | | | |
Current Year | | | 2,826.8 | | | | 5,222.0 | | | | 5,130.4 | |
Prior Years (c) | | | (2.3 | ) | | | (77.3 | ) | | | (114.5 | ) |
| | | | | | | | | | | | |
Total Incurred (b) | | | 2,824.5 | | | | 5,144.7 | | | | 5,015.9 | |
| | | |
Paid claims related to: | | | | | | | | | | | | |
Current Year | | | 2,071.0 | | | | 4,485.7 | | | | 4,401.3 | |
Prior Years | | | 688.1 | | | | 673.5 | | | | 640.5 | |
| | | | | | | | | | | | |
Total Paid (b) | | | 2,759.1 | | | | 5,159.2 | | | | 5,041.8 | |
| | | |
Reserve for claims (a), end of period | | | 819.6 | | | | 754.2 | | | | 768.7 | |
Add: | | | | | | | | | | | | |
Claims Payable | | | 173.7 | | | | 203.9 | | | | 177.2 | |
Other (d) | | | 91.2 | | | | 90.7 | | | | 94.3 | |
| | | | | | | | | | | | |
Reserves for claims and other settlements, end of period | | $ | 1,084.5 | | | $ | 1,048.8 | | | $ | 1,040.2 | |
| | | | | | | | | | | | |
| (a) | Consists of incurred but not reported claims and received but unprocessed claims and reserves for loss adjustment expenses. |
| (b) | Includes medical claims only. Capitation, pharmacy and other payments including provider settlements are not included. |
| (c) | This line represents the change in reserves attributable to the difference between the original estimate of incurred claims for prior years and the revised estimate. In developing the revised estimate, there have been no changes in the approach used to determine the key actuarial assumptions, which are the completion factor and medical cost trend. Claims liabilities are estimated under actuarial standards of practice and generally accepted accounting principles. The majority of the reserve balance held at each quarter-end is associated with the most recent months’ incurred services because these are the services for which the fewest claims have been paid. The majority of the adjustments to reserves relate to variables and uncertainties associated with actuarial assumptions. The degree of uncertainty in the estimates of incurred claims is greater for the most recent months’ incurred services. Revised estimates for prior years are determined in each quarter based on the most recent updates of paid claims for prior years. |
| (d) | Includes accrued capitation, shared risk settlements, provider incentives and other reserve items. |
