Exhibit 99.1
![]() | Health Net, Inc. | |||||
21650 Oxnard Street | ||||||
Woodland Hills, CA 91367 | ||||||
818.676.6000 | ||||||
800.291.6911 | ||||||
www.healthnet.com | ||||||
Investor | ||||
Contacts: | David Olson | Angie McCabe | ||
818.676.6978 | 818.676.8692 | |||
david.w.olson@healthnet.com | angeline.c.mccabe@healthnet.com | |||
Media | ||||
Contact: | Margita Thompson | |||
818.676.7912 | ||||
margita.n.thompson@healthnet.com | ||||
HEALTH NET REPORTS FOURTH QUARTER NET INCOME
OF $123.4 MILLION, OR $1.10 PER DILUTED SHARE
SMALL GROUPAND INDIVIDUAL MEMBERSHIP INCREASES
10.5PERCENTIN 2007 COMPAREDTO 2006
COMPANY REPURCHASED 4.3 MILLION SHARESFOR $230 MILLIONIN 2007
LOS ANGELES, February 5, 2008 – Health Net, Inc. (NYSE:HNT) today announced 2007 fourth quarter net income of $123.4 million, or $1.10 per diluted share, compared with 2006 fourth quarter net income of $84.8 million, or $0.72 per diluted share.
For the full year 2007, Health Net reported net income of $200.2 million, or $1.76 per diluted share. Included in the full year 2007 results is the full effect of $296.8 million pretax, or $216.0 million after-tax, charges incurred in the third quarter of 2007 as a result of Health Net reaching an agreement in principle to settle three class action lawsuits known as the McCoy, Wachtel and Scharfman lawsuits; the proposed resolution of regulatory issues with the New Jersey Department of Banking and Insurance; and other litigation matters.
The pretax charges are accounted for in two parts:
• | $201.5 million is included in third quarter of 2007 health plan services expenses for claims-related matters, class disbursements and remediations; and |
• | $95.3 million is included in the third quarter of 2007 general and administrative (G&A) expenses related to attorneys’ fees, regulatory fines and estimated liability for litigation unrelated to the class action lawsuits. |
A table outlining the allocation of the pretax charges in the third quarter of 2007 to the appropriate line items in the full year 2007 income statement is attached to this release.
Fourth Quarter and Full Year 2007 Highlights
Following are key highlights for the fourth quarter and full year of 2007:
• | Small group and individual membership increased 10.5 percent to 770,000 members as of December 31, 2007 compared to December 31, 2006; |
• | Medicare Advantage enrollment increased 18.6 percent to 236,000 members as of December 31, 2007 compared to December 31, 2006; |
• | Medicare Part D enrollment increased 3.8 percent sequentially and 26.3 percent year-over-year to 379,000 members at December 31, 2007; |
• | Health Net repurchased 353,459 shares during the fourth quarter of 2007, bringing its total share repurchases for the full year 2007 to 4.3 million shares at an average price of $53.24. The company has approximately $346 million in remaining repurchase authority; and |
• | Operating cash flow was $257.0 million in the fourth quarter of 2007 compared to $147.5 million in the fourth quarter of 2006. For the full year 2007, operating cash flow was $605.5 million compared to $286.2 million for the full year 2006. |
“We are very pleased with our performance in the fourth quarter and for the full year 2007,” said Jay Gellert, president and chief executive officer of Health Net, Inc. “Our results highlight our strategy of shifting our commercial business to the small and mid-markets, focusing on Medicare growth opportunities and managing expenses.”
2
Membership
Total health plan enrollment as of December 31, 2007 was approximately 3.8 million members, an increase of 55,000 members, or 1.5 percent, compared to December 31, 2006, and a sequential increase of 8,000 members.
Commercial risk enrollment declined by 26,000 members, or 1.2 percent, to approximately 2.2 million members as of December 31, 2007 compared to December 31, 2006, and increased slightly compared to September 30, 2007. Administrative Services Only (ASO) membership decreased by 41,000 members, or 37.6 percent, to nearly 68,000 members as of December 31, 2007 compared to December 31, 2006. Sequentially, ASO membership decreased by 22,000 members, or 24.4 percent, primarily in the company’s Northeast region.
Enrollment in the company’s Medicare Advantage plans grew by 37,000 members, or 18.6 percent, to 236,000 members during the 12 months ended December 31, 2007. During the fourth quarter of 2007, Medicare Advantage membership decreased by 3,000 members, or 1.3 percent. Membership in the company’s Medicare Part D plans as of December 31, 2007 was 379,000, an increase of 79,000 members, or 26.3 percent, from December 31, 2006. Medicare Part D membership increased by 14,000 members, or 3.8 percent, during the fourth quarter of 2007.
“Enrollment growth in 2007 was consistent with our strategy of growing the smaller end of the market while maintaining pricing discipline,” said Gellert. “As a result, the small group and individual segment grew by 10.5 percent during the year. Commercial new sales in California exceeded 50,000 members for the seventh consecutive quarter. In addition, our Medicare Advantage and Medicare Part D membership both experienced excellent growth during the year.”
Medicaid enrollment at December 31, 2007 was 846,000 members, an increase of 6,000 members, or approximately 1.0 percent, since December 31, 2006. During the fourth quarter of 2007, Medicaid enrollment increased by 17,000 members, or 2.1 percent.
Revenues, Health Care Costs and G&A Expenses
Health Net’s total revenues increased 11.7 percent in the fourth quarter of 2007 to $3.6 billion from $3.2 billion in the fourth quarter of 2006. Health plan services premium
3
revenues increased 11.4 percent to $2.9 billion in the fourth quarter of 2007 compared to $2.6 billion in the fourth quarter of 2006.
Health Net’s Government contracts revenues increased 13.5 percent in the fourth quarter of 2007 to $619.4 million from $545.9 million in the fourth quarter of 2006. The quarter-over-quarter increase was driven by higher revenues and health care costs in 2007 compared to the same period in 2006.
The health plan services medical care ratio (MCR) was 82.6 percent in the fourth quarter of 2007 compared to 81.7 percent in the fourth quarter of 2006. The MCR was 89.8 percent in the third quarter of 2007 including the impact of the $201.5 million health plan services expenses charge, and 82.9 percent in the third quarter of 2007 excluding the impact of the charge.
The commercial MCR of 81.8 percent in the fourth quarter of 2007 improved by 60 basis points compared to the fourth quarter of 2006. Including the impact of the charge, the commercial MCR was 93.2 percent in the third quarter of 2007. Excluding the impact of the charge, the commercial MCR was 82.7 percent in the third quarter of 2007.
In the fourth quarter of 2007, commercial premium yields on a per member per month (PMPM) basis increased by 11.8 percent compared to the 2006 fourth quarter.
Including the impact from the health plan services expenses charge, PMPM commercial health care costs for the full year 2007 increased by 12.5 percent compared to the full year 2006. Total PMPM commercial health care costs increased by 11.0 percent in the fourth quarter of 2007 compared to the fourth quarter of 2006.
“Compared to the full year 2006, commercial premium yields PMPM increased by 9.2 percent for the full year 2007 while commercial health care costs increased by 8.9 percent PMPM excluding the impact of the charges,” said Gellert.
The Government contracts cost ratio was 89.9 percent in the fourth quarter of 2007 compared to 93.6 percent in the fourth quarter of 2006. “Our Federal Services division, which consists of our Northern Region TRICARE Contract, Veterans Administration business and rapidly growing family counseling business with the Department of Defense, had another solid quarter,” said Jim Woys, Health Net’s chief operating officer and president of the Government and Specialty Services division. “We are honored to serve our military men and women and their families, and this year, we are celebrating our 20th anniversary in providing the military access to quality health care in partnership with our military counterparts.”
4
Total G&A expense was $307.1 million in the fourth quarter of 2007 compared with $301.9 million in the fourth quarter of 2006. “Our focus on expense management resulted in a 100 basis point improvement from 11.5 percent in the fourth quarter of 2006 to 10.5 percent in the fourth quarter of 2007 in our G&A expense ratio,” said Joseph C. Capezza, Health Net’s chief financial officer. “As we implement our G&A repositioning strategy in order to achieve greater cost savings and become more competitive, we expect the G&A ratio to decrease further in 2008.”
Health Net’s selling expenses of $90.3 million in the fourth quarter of 2007 increased by approximately $24.0 million compared to the fourth quarter of 2006. “As a result of our strategy of growing the individual and small and mid-size employer group segments and strengthening our relationships with the agents and brokers who sell our products, our selling expense ratio in the fourth quarter of 2007 increased 60 basis points,” said Capezza.
Balance Sheet
Cash and investments as of December 31, 2007 were $2.6 billion compared with $2.1 billion as of December 31, 2006.
Reserves for claims and other settlements increased by $251.6 million to $1.3 billion at December 31, 2007 from December 31, 2006, and include $201.5 million of reserves for the charges incurred in the third quarter of 2007 relating to class action litigation settlement, regulatory matters and other litigation expenses.
Days claims payable (DCP), including provider and other claim settlements, capitation payments and Medicare Part D expenses, increased by 5.1 days to 49.9 days in the fourth quarter of 2007 compared to 44.8 days in the fourth quarter of 2006 and increased by 8.0 days compared to the third quarter of 2007.
Excluding provider and other claim settlements, capitation payments and Medicare Part D, DCP in the fourth quarter of 2007 decreased by 4.3 days to 54.9 days compared to the 2006 fourth quarter and increased by 0.2 days sequentially (see footnote (a) in the Notes to Consolidated Financial Statements in the accompanying tables).
“The minor sequential change in DCP from the third quarter to the fourth quarter of 2007 reflects our reserves stability,” said Capezza. “We expect DCP to continue to remain stable in 2008 and beyond.”
5
The company’s debt-to-total capital ratio was 22.5 percent as of December 31, 2007 compared to 21.9 percent as of December 31, 2006 and 18.5 percent on September 30, 2007.
Interest expense decreased by $2.4 million in the fourth quarter of 2007 compared to the fourth quarter of 2006 as a result of refinancing activities with lower interest rates during 2007.
Cash Flow
Operating cash flow in the 2007 fourth quarter, which includes an extra monthly payment of $56.0 million from the Department of Health Services (DHS) for California Medicaid that should have been received in September 2007, was approximately $257.0 million, or 1.9 times net income plus depreciation and amortization, compared to $147.5 million in the fourth quarter of 2006. Operating cash flow for the full year 2007 was $605.5 million compared to $286.2 million for the full year 2006. “Excluding the extra DHS monthly payment, operating cash flow during the fourth quarter of 2007 was approximately $201.0 million, which is 1.5 times net income plus depreciation and amortization,” said Capezza. “Our strong cash flow is another affirmation of the quality of our earnings.”
Outlook
Health Net expects full year 2008 earnings per diluted share of $4.14 to $4.17 based on expected diluted weighted average shares outstanding of 109 million shares, with 38 percent of earnings per diluted share occurring in the first half of 2008. Therefore, the company expects earnings per diluted share of $0.67 based on a share count of approximately 112 million shares in the first quarter of 2008 with an expected G&A ratio of 10. 7 percent. Health Net expects the G&A ratios in subsequent quarters in 2008 to average less than 10.0 percent.
Conference Call
As previously announced, Health Net will discuss the company’s fourth quarter and full year 2007 results during a conference call on Tuesday, February 5, 2008, beginning at approximately 11:00 a.m. Eastern time. To listen to the call, please dial 877.874.1565, code7064474. 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 February 5, 2008 through February 9, 2008, by dialing
6
888.203.1112, code 7064474. 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 Reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 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
Health Net, Inc. and its representatives may from time to time make written and oral forward-looking statements, including statements contained in news releases, in Health Net’s filings with the Securities and Exchange Commission, in the company’s reports to shareholders and in meetings with investors and analysts, 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 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
7
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, regulatory fines, 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 subsequent 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.
# # #
[Eight pages of tables follow]
8
Health Net, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share, PMPM and ratio data)
Quarter Ended December 31, 2006 | Year Ended December 31, 2006 | Quarter Ended September 30, 2007 | Quarter Ended December 31, 2007 | Year Ended December 31, 2007 | ||||||||||||||||
REVENUES: | ||||||||||||||||||||
Health plan services premiums | $ | 2,619,222 | $ | 10,364,740 | $ | 2,930,151 | $ | 2,916,718 | $ | 11,435,314 | ||||||||||
Government contracts | 545,906 | 2,376,014 | 660,394 | 619,423 | 2,501,677 | |||||||||||||||
Net investment income | 28,229 | 111,042 | 29,298 | 31,630 | 120,176 | |||||||||||||||
Administrative services fees and other income | 14,816 | 56,554 | 12,085 | 15,482 | 51,104 | |||||||||||||||
Total revenues | 3,208,173 | 12,908,350 | 3,631,928 | 3,583,253 | 14,108,271 | |||||||||||||||
EXPENSES: | ||||||||||||||||||||
Health plan services | 2,139,063 | 8,600,443 | 2,631,211 | 2,409,332 | 9,762,896 | |||||||||||||||
Government contracts | 511,077 | 2,234,535 | 613,345 | 556,648 | 2,307,610 | |||||||||||||||
General and administrative | 301,927 | 1,165,313 | 397,168 | 307,099 | 1,265,555 | |||||||||||||||
Selling | 66,353 | 245,304 | 91,524 | 90,332 | 327,827 | |||||||||||||||
Depreciation | 6,216 | 21,541 | 7,956 | 8,816 | 30,282 | |||||||||||||||
Amortization | 1,092 | 4,050 | 4,782 | 4,782 | 12,700 | |||||||||||||||
Interest | 10,093 | 51,179 | 7,401 | 7,712 | 32,497 | |||||||||||||||
3,035,821 | 12,322,365 | 3,753,387 | 3,384,721 | 13,739,367 | ||||||||||||||||
Litigation costs | 37,093 | 37,093 | — | — | — | |||||||||||||||
Debt refinancing | — | 70,095 | — | — | — | |||||||||||||||
3,072,914 | 12,429,553 | 3,753,387 | 3,384,721 | 13,739,367 | ||||||||||||||||
Income from operations before income taxes | 135,259 | 478,797 | (121,459 | ) | 198,532 | 368,904 | ||||||||||||||
Income tax provision (benefit) | 50,474 | 149,484 | (17,614 | ) | 75,149 | 168,751 | ||||||||||||||
Net income | $ | 84,785 | $ | 329,313 | $ | (103,845 | ) | $ | 123,383 | $ | 200,153 | |||||||||
Basic earnings per share | $ | 0.74 | $ | 2.86 | $ | (0.93 | ) | $ | 1.12 | $ | 1.80 | |||||||||
Diluted earnings per share | $ | 0.72 | $ | 2.78 | $ | (0.93 | ) | $ | 1.10 | $ | 1.76 | |||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 114,841 | 115,128 | 111,111 | 110,087 | 111,316 | |||||||||||||||
Diluted | 117,707 | 118,310 | 111,111 | 112,255 | 113,829 | |||||||||||||||
Pretax margin | 4.2 | % | 3.7 | % | -3.3 | % | 5.5 | % | 2.6 | % | ||||||||||
Health plan services MCR | 81.7 | % | 83.0 | % | 89.8 | % | 82.6 | % | 85.4 | % | ||||||||||
Government contracts cost ratio | 93.6 | % | 94.0 | % | 92.9 | % | 89.9 | % | 92.2 | % | ||||||||||
G&A expense ratio | 11.5 | % | 11.2 | % | 13.5 | % | 10.5 | % | 11.0 | % | ||||||||||
Selling costs ratio | 2.5 | % | 2.4 | % | 3.1 | % | 3.1 | % | 2.9 | % | ||||||||||
Days claims payable(a) | 44.8 | 44.3 | 41.9 | 49.9 | 43.9 | |||||||||||||||
Days claims payable - adjusted(a) | 59.2 | 59.4 | 54.7 | 54.9 | 54.1 | |||||||||||||||
Effective tax rate | 37.3 | % | 31.2 | % | 14.5 | % | 37.9 | % | 45.7 | % | ||||||||||
Health plan services premiums PMPM | $ | 243.82 | $ | 243.70 | $ | 267.64 | $ | 266.88 | $ | 263.54 | ||||||||||
Health plan services costs PMPM | $ | 199.12 | $ | 202.22 | $ | 240.33 | $ | 220.45 | $ | 225.00 |
Health Net, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share, PMPM and ratio data)
Note:
This table presents the company’s consolidated operations for the year ended December 31, 2007 and the charges recorded in the consolidated statement of operations for the quarter ended September 30, 2007. Management believes that the presentation of certain financial information in the attached press release (such as MCR, health care costs and G&A expenses), excluding the charges that were recorded in the third quarter of 2007, all of which is non-GAAP financial information, is important to investors as it excludes one-time items that are not indicative of our core operating results. This non-GAAP financial information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP.
As Reported Year Ended December 31, 2007 | Impact of Selected Costs Recorded in the Quarter Ended September 30, 2007 | Excluding Impact of Selected Costs Recorded in the Quarter Ended September 30, 2007 | ||||||||||
REVENUES: | ||||||||||||
Health plan services premiums | $ | 11,435,314 | $ | 11,435,314 | ||||||||
Government contracts | 2,501,677 | 2,501,677 | ||||||||||
Net investment income | 120,176 | 120,176 | ||||||||||
Administrative services fees and other income | 51,104 | 51,104 | ||||||||||
Total revenues | 14,108,271 | 14,108,271 | ||||||||||
EXPENSES: | ||||||||||||
Health plan services | 9,762,896 | $ | 201,449 | 9,561,447 | ||||||||
Government contracts | 2,307,610 | 2,307,610 | ||||||||||
General and administrative | 1,265,555 | 95,308 | 1,170,247 | |||||||||
Selling | 327,827 | 327,827 | ||||||||||
Depreciation | 30,282 | 30,282 | ||||||||||
Amortization | 12,700 | 12,700 | ||||||||||
Interest | 32,497 | 32,497 | ||||||||||
13,739,367 | 296,757 | 13,442,610 | ||||||||||
Income from operations before income taxes | 368,904 | (296,757 | ) | 665,661 | ||||||||
Income tax benefit | 168,751 | (a) | (80,777 | ) | 249,528 | |||||||
Net income | $ | 200,153 | $ | (215,980 | ) | $ | 416,133 | |||||
Basic earnings per share | $ | 1.80 | $ | (1.94 | ) | $ | 3.74 | |||||
Diluted earnings per share | $ | 1.76 | $ | (1.90 | ) | $ | 3.66 | |||||
Weighted average shares outstanding: | ||||||||||||
Basic | 111,316 | 111,316 | ||||||||||
Diluted | 113,829 | 113,829 | ||||||||||
Pretax margin | 2.6 | % | -2.1 | % | 4.7 | % | ||||||
Health plan services MCR | 85.4 | % | 1.8 | % | 83.6 | % | ||||||
Government contracts cost ratio | 92.2 | % | — | 92.2 | % | |||||||
G&A expense ratio | 11.0 | % | 0.8 | % | 10.2 | % | ||||||
Selling costs ratio | 2.9 | % | — | 2.9 | % | |||||||
Effective tax rate | 45.7 | % | 8.3 | % | 37.5 | % |
Note
(a) | Includes $26.2 million of tax asset write-off related to the charge. |
Health Net, Inc.
Consolidated Balance Sheet
(Amounts in thousands, except ratio data)
December 31, 2006 | September 30, 2007 | December 31, 2007 | ||||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 704,806 | $ | 698,889 | $ | 1,007,017 | ||||||
Investments - available for sale | 1,416,038 | 1,472,717 | 1,557,278 | |||||||||
Premiums receivable, net | 177,625 | 299,705 | 264,691 | |||||||||
Amounts receivable under government contracts | 199,569 | 174,647 | 189,976 | |||||||||
Incurred but not reported (IBNR) health care costs receivable under TRICARE North contract |
| 272,961 |
|
| 295,241 |
|
| 266,767 |
| |||
Other receivables | 230,865 | 100,528 | 72,518 | |||||||||
Deferred taxes | 54,702 | 148,990 | 132,818 | |||||||||
Other assets | 161,280 | 203,928 | 210,039 | |||||||||
Total current assets | 3,217,846 | 3,394,645 | 3,701,104 | |||||||||
Property and equipment, net | 151,184 | 170,353 | 178,758 | |||||||||
Goodwill, net | 751,949 | 751,949 | 751,949 | |||||||||
Other intangible assets, net | 42,835 | 114,424 | 109,386 | |||||||||
Deferred taxes | 33,137 | 45,223 | 47,765 | |||||||||
Other noncurrent assets | 100,071 | 143,639 | 144,093 | |||||||||
Total Assets | $ | 4,297,022 | $ | 4,620,233 | $ | 4,933,055 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current Liabilities | ||||||||||||
Reserves for claims and other settlements | $ | 1,048,796 | $ | 1,313,104 | $ | 1,300,432 | ||||||
Health care and other costs payable under government contracts | 52,384 | 52,472 | 69,014 | |||||||||
IBNR health care costs payable under TRICARE North contract | 272,961 | 295,241 | 266,767 | |||||||||
Unearned premiums | 164,099 | 187,958 | 176,981 | |||||||||
Loans payable | 200,000 | — | 35,000 | |||||||||
Accounts payable and other liabilities | 371,263 | 400,878 | 457,367 | |||||||||
Total current liabilities | 2,109,503 | 2,249,653 | 2,305,561 | |||||||||
Senior notes payable | — | 398,020 | 398,071 | |||||||||
Loans payable | 300,000 | — | 112,363 | |||||||||
Other noncurrent liabilities | 108,554 | 213,376 | 235,022 | |||||||||
Total Liabilities | 2,518,057 | 2,861,049 | 3,051,017 | |||||||||
Stockholders’ Equity | ||||||||||||
Common stock and additional paid-in capital | 1,028,018 | 1,141,432 | 1,151,395 | |||||||||
Treasury common stock, at cost | (891,294 | ) | (1,104,904 | ) | (1,123,750 | ) | ||||||
Retained earnings | 1,653,478 | 1,732,170 | 1,855,553 | |||||||||
Accumulated other comprehensive loss | (11,237 | ) | (9,514 | ) | (1,160 | ) | ||||||
Total Stockholders’ Equity | 1,778,965 | 1,759,184 | 1,882,038 | |||||||||
Total Liabilities and Stockholders’ Equity | $ | 4,297,022 | $ | 4,620,233 | $ | 4,933,055 | ||||||
Debt-to-Total Capital Ratio | 21.9 | % | 18.5 | % | 22.5 | % |
Health Net, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Quarter Ended December 31, 2006 | Year Ended December 31, 2006 | Quarter Ended September 30, 2007 | Quarter Ended December 31, 2007 | Year Ended December 31, 2007 | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
Net income (loss) | $ | 84,785 | $ | 329,313 | $ | (103,845 | ) | $ | 123,383 | $ | 200,153 | |||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Amortization and depreciation | 7,308 | 25,591 | 12,738 | 13,598 | 42,982 | |||||||||||||||
Debt refinancing charge | — | 70,095 | — | — | — | |||||||||||||||
Share-based compensation expense | 5,294 | 20,115 | 6,072 | 6,457 | 24,298 | |||||||||||||||
Other changes | 1,583 | 13,624 | 120 | (3,498 | ) | (7,955 | ) | |||||||||||||
Changes in assets and liabilities, net of the effects of dispositions/acquisitions: | ||||||||||||||||||||
Premiums receivable and unearned premiums | 80,802 | 11,907 | (320,490 | ) | 24,037 | (74,184 | ) | |||||||||||||
Other receivables, deferred taxes and other assets | (131,634 | ) | (127,066 | ) | (66,147 | ) | 38,884 | 45,154 | ||||||||||||
Amounts receivable/payable under government contracts | (35,499 | ) | (86,925 | ) | 53,431 | 1,213 | 26,223 | |||||||||||||
Reserves for claims and other settlements | 13,422 | 8,624 | 228,643 | (12,672 | ) | 251,636 | ||||||||||||||
Accounts payable and other liabilities | 121,409 | 20,952 | 58,310 | 65,565 | 97,175 | |||||||||||||||
Net cash provided by (used in) operating activities | 147,470 | 286,230 | (131,168 | ) | 256,967 | 605,482 | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Sales of investments | 144,021 | 464,787 | 94,682 | 242,421 | 807,649 | |||||||||||||||
Maturities of investments | 37,424 | 113,125 | 41,493 | 65,606 | 213,833 | |||||||||||||||
Purchases of investments | (200,611 | ) | (635,611 | ) | (173,198 | ) | (397,611 | ) | (1,180,854 | ) | ||||||||||
Proceeds from sale of property and equipment | — | 4,242 | — | — | 96,748 | |||||||||||||||
Purchases of property and equipment | (23,978 | ) | (72,807 | ) | (14,485 | ) | (17,342 | ) | (64,850 | ) | ||||||||||
Cash paid for acquisition of assets and businesses | — | (73,999 | ) | — | — | (80,277 | ) | |||||||||||||
Purchases and Sales of restricted investments and other | (1,982 | ) | 15,384 | 9,991 | 7,127 | (22,444 | ) | |||||||||||||
Net cash used in investing activities | (45,126 | ) | (184,879 | ) | (41,517 | ) | (99,799 | ) | (230,195 | ) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from exercise of stock options and employee stock purchases | 23,883 | 70,294 | 27,496 | 2,525 | 72,622 | |||||||||||||||
Repurchases of common stock | (250,671 | ) | (253,502 | ) | (135,384 | ) | (27,052 | ) | (232,220 | ) | ||||||||||
Excess tax benefits from share-based compensation | 3,881 | 11,889 | 3,312 | 487 | 17,987 | |||||||||||||||
Borrowings under financing arrangements | — | 497,334 | — | 175,000 | 668,535 | |||||||||||||||
Repayment of borrowings under financing arrangements | — | (465,045 | ) | — | — | (600,000 | ) | |||||||||||||
Net cash (used in) provided by financing activities | (222,907 | ) | (139,030 | ) | (104,576 | ) | 150,960 | (73,076 | ) | |||||||||||
Net (decrease) increase in cash and cash equivalents | (120,563 | ) | (37,679 | ) | (277,261 | ) | 308,128 | 302,211 | ||||||||||||
Cash and cash equivalents, beginning of period | 825,369 | 742,485 | 976,150 | 698,889 | 704,806 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 704,806 | $ | 704,806 | $ | 698,889 | $ | 1,007,017 | $ | 1,007,017 | ||||||||||
Health Net, Inc.
Notes to Consolidated Financial Statements
Notes:
(a) | Management believes that days claims payable (excluding capitation, provider and other claim 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 and other claim settlements and Medicare Part D) and days claims payable, the most directly comparable financial measure calculated and presented in accordance with GAAP: |
Q4 2006 | FY 2006 | Q3 2007 | Q4 2007 | FY 2007 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Reserve for Claims and Other Settlements | $ | 1,048.8 | $ | 1,048.8 | $ | 1,313.1 | $ | 1,300.4 | $ | 1,300.4 | ||||||||||
Less: Capitation Payable, Provider and Other Claim Settlements and Medicare Part D | (85.3 | ) | (85.3 | ) | (290.7 | ) | (299.3 | ) | (299.3 | ) | ||||||||||
Adjusted Reserve for Claims and Other Settlements | 963.5 | 963.5 | 1,022.4 | 1,001.1 | 1,001.1 | |||||||||||||||
(1) Average Reserve for Claims and Other Settlements | 1,042.1 | 1,044.5 | 1,198.8 | 1,306.8 | 1,174.6 | |||||||||||||||
(2) Average Adjusted Reserve for Claims and Other Settlements | 949.2 | 954.2 | 1,004.0 | 1,011.8 | 982.3 | |||||||||||||||
(3) Health Plan Services Cost | 2,139.1 | 8,600.4 | 2,631.2 | 2,409.3 | 9,762.9 | |||||||||||||||
Less: Capitation Payable, Provider and Other Claim Settlements and Medicare Part D | (662.8 | ) | (2,735.4 | ) | (942.0 | ) | (715.2 | ) | (3,129.7 | ) | ||||||||||
(4) Adjusted Health Plan Services Cost | 1,476.3 | 5,865.0 | 1,689.2 | 1,694.1 | 6,633.2 | |||||||||||||||
(5) Number of Days in Period | 92 | 365 | 92 | 92 | 365 | |||||||||||||||
= (1) / (3) * (5) Days Claims Payable | 44.8 | 44.3 | 41.9 | 49.9 | 43.9 | |||||||||||||||
= (2) / (4) * (5) Days Claims Payable - Adjusted | 59.2 | 59.4 | 54.7 | 54.9 | 54.1 |
Health Net, Inc.
Enrollment Data - By State
(In thousands)
Change from | ||||||||||||||||||
September 30, 2007 | December 31, 2006 | |||||||||||||||||
Dec 31, 2007 | Sept 30, 2007 | Dec 31, 2006 | Increase/ (Decrease) | % Change | Increase/ (Decrease) | % Change | ||||||||||||
California | ||||||||||||||||||
Large Group | 991 | 992 | 1,064 | (1 | ) | (0.1 | )% | (73 | ) | (6.9 | )% | |||||||
Small Group and Individual | 477 | 477 | 419 | 0 | 0.0 | % | 58 | 13.8 | % | |||||||||
Commercial Risk | 1,468 | 1,469 | 1,483 | (1 | ) | (0.1 | )% | (15 | ) | (1.0 | )% | |||||||
ASO | 6 | 5 | 6 | 1 | 20.0 | % | 0 | 0.0 | % | |||||||||
Total Commercial | 1,474 | 1,474 | 1,489 | 0 | 0.0 | % | (15 | ) | (1.0 | )% | ||||||||
Medicare Advantage | 112 | 112 | 104 | 0 | 0.0 | % | 8 | 7.7 | % | |||||||||
Medi-Cal | 712 | 698 | 710 | 14 | 2.0 | % | 2 | 0.3 | % | |||||||||
Total California | 2,298 | 2,284 | 2,303 | 14 | 0.6 | % | (5 | ) | (0.2 | )% | ||||||||
Connecticut | ||||||||||||||||||
Large Group | 136 | 138 | 153 | (2 | ) | (1.4 | )% | (17 | ) | (11.1 | )% | |||||||
Small Group and Individual | 25 | 26 | 30 | (1 | ) | (3.8 | )% | (5 | ) | (16.7 | )% | |||||||
Commercial Risk | 161 | 164 | 183 | (3 | ) | (1.8 | )% | (22 | ) | (12.0 | )% | |||||||
ASO | 32 | 54 | 67 | (22 | ) | (40.7 | )% | (35 | ) | (52.2 | )% | |||||||
Total Commercial | 193 | 218 | 250 | (25 | ) | (11.5 | )% | (57 | ) | (22.8 | )% | |||||||
Medicare Advantage | 45 | 44 | 34 | 1 | 2.3 | % | 11 | 32.4 | % | |||||||||
Medicaid | 90 | 87 | 84 | 3 | 3.4 | % | 6 | 7.1 | % | |||||||||
Total Connecticut | 328 | 349 | 368 | (21 | ) | (6.0 | )% | (40 | ) | (10.9 | )% | |||||||
New York | ||||||||||||||||||
Large Group | 116 | 114 | 122 | 2 | 1.8 | % | (6 | ) | (4.9 | )% | ||||||||
Small Group and Individual | 118 | 117 | 102 | 1 | 0.9 | % | 16 | 15.7 | % | |||||||||
Commercial Risk | 234 | 231 | 224 | 3 | 1.3 | % | 10 | 4.5 | % | |||||||||
ASO | 13 | 13 | 17 | 0 | 0.0 | % | (4 | ) | (23.5 | )% | ||||||||
Total Commercial | 247 | 244 | 241 | 3 | 1.2 | % | 6 | 2.5 | % | |||||||||
Medicare Advantage | 3 | 9 | 6 | (6 | ) | (66.7 | )% | (3 | ) | (50.0 | )% | |||||||
Total New York | 250 | 253 | 247 | (3 | ) | (1.2 | )% | 3 | 1.2 | % | ||||||||
New Jersey | ||||||||||||||||||
Large Group | 30 | 30 | 44 | 0 | 0.0 | % | (14 | ) | (31.8 | )% | ||||||||
Small Group and Individual | 60 | 60 | 59 | 0 | 0.0 | % | 1 | 1.7 | % | |||||||||
Commercial Risk | 90 | 90 | 103 | 0 | 0.0 | % | (13 | ) | (12.6 | )% | ||||||||
ASO | 17 | 18 | 19 | (1 | ) | (5.6 | )% | (2 | ) | (10.5 | )% | |||||||
Total Commercial | 107 | 108 | 122 | (1 | ) | (0.9 | )% | (15 | ) | (12.3 | )% | |||||||
Medicaid | 44 | 44 | 46 | 0 | 0.0 | % | (2 | ) | (4.3 | )% | ||||||||
Total New Jersey | 151 | 152 | 168 | (1 | ) | (0.7 | )% | (17 | ) | (10.1 | )% | |||||||
Arizona | ||||||||||||||||||
Large Group | 81 | 81 | 75 | 0 | 0.0 | % | 6 | 8.0 | % | |||||||||
Small Group and Individual | 56 | 55 | 50 | 1 | 1.8 | % | 6 | 12.0 | % | |||||||||
Commercial Risk | 137 | 136 | 125 | 1 | 0.7 | % | 12 | 9.6 | % | |||||||||
Medicare Advantage | 51 | 49 | 35 | 2 | 4.1 | % | 16 | 45.7 | % | |||||||||
Total Arizona | 188 | 185 | 160 | 3 | 1.6 | % | 28 | 17.5 | % | |||||||||
Oregon | ||||||||||||||||||
Large Group | 101 | 98 | 96 | 3 | 3.1 | % | 5 | 5.2 | % | |||||||||
Small Group and Individual | 34 | 35 | 37 | (1 | ) | (2.9 | )% | (3 | ) | (8.1 | )% | |||||||
Commercial Risk | 135 | 133 | 133 | 2 | 1.5 | % | 2 | 1.5 | % | |||||||||
Medicare Advantage | 21 | 21 | 20 | 0 | 0.0 | % | 1 | 5.0 | % | |||||||||
Total Oregon | 156 | 154 | 153 | 2 | 1.3 | % | 3 | 2.0 | % | |||||||||
Other States | ||||||||||||||||||
Medicare Advantage | 4 | 4 | 0 | 0 | 0.0 | % | 4 | 0.0 | % | |||||||||
Medicare PDP (stand-alone) | 379 | 365 | 300 | 14 | 3.8 | % | 79 | 26.3 | % | |||||||||
Total Health Plan Enrollment | ||||||||||||||||||
Large Group | 1,455 | 1,453 | 1,554 | 2 | 0.1 | % | (99 | ) | (6.4 | )% | ||||||||
Small Group and Individual | 770 | 770 | 697 | 0 | 0.0 | % | 73 | 10.5 | % | |||||||||
Commercial Risk | 2,225 | 2,223 | 2,251 | 2 | 0.1 | % | (26 | ) | (1.2 | )% | ||||||||
ASO | 68 | 90 | 109 | (22 | ) | (24.4 | )% | (41 | ) | (37.6 | )% | |||||||
Total Commercial | 2,293 | 2,313 | 2,360 | (20 | ) | (0.9 | )% | (67 | ) | (2.8 | )% | |||||||
Medicare Advantage | 236 | 239 | 199 | (3 | ) | (1.3 | )% | 37 | 18.6 | % | ||||||||
Medicare PDP (stand-alone) | 379 | 365 | 300 | 14 | 3.8 | % | 79 | 26.3 | % | |||||||||
Medi-Cal/Medicaid | 846 | 829 | 840 | 17 | 2.1 | % | 6 | 0.7 | % | |||||||||
Total Health Plans | 3,754 | 3,746 | 3,699 | 8 | 0.2 | % | 55 | 1.5 | % | |||||||||
TRICARE - North Contract Eligibles | 2,895 | 2,913 | 2,930 | (18 | ) | (0.6 | )% | (35 | ) | (1.2 | )% | |||||||
Health Net, Inc.
Enrollment Data - Line of Business
(In thousands)
Change from | ||||||||||||||||||
September 30, 2007 | December 31, 2006 | |||||||||||||||||
Dec 31, 2007 | Sept 30, 2007 | Dec 31, 2006 | Increase/ (Decrease) | % Change | Increase/ (Decrease) | % Change | ||||||||||||
Large Group | ||||||||||||||||||
California | 991 | 992 | 1,064 | (1 | ) | (0.1 | )% | (73 | ) | (6.9 | )% | |||||||
Connecticut | 136 | 138 | 153 | (2 | ) | (1.4 | )% | (17 | ) | (11.1 | )% | |||||||
New York | 116 | 114 | 122 | 2 | 1.8 | % | (6 | ) | (4.9 | )% | ||||||||
New Jersey | 30 | 30 | 44 | 0 | 0.0 | % | (14 | ) | (31.8 | )% | ||||||||
Arizona | 81 | 81 | 75 | 0 | 0.0 | % | 6 | 8.0 | % | |||||||||
Oregon | 101 | 98 | 96 | 3 | 3.1 | % | 5 | 5.2 | % | |||||||||
1,455 | 1,453 | 1,554 | 2 | 0.1 | % | (99 | ) | (6.4 | )% | |||||||||
Small Group and Individual | ||||||||||||||||||
California | 477 | 477 | 419 | 0 | 0.0 | % | 58 | 13.8 | % | |||||||||
Connecticut | 25 | 26 | 30 | (1 | ) | (3.8 | )% | (5 | ) | (16.7 | )% | |||||||
New York | 118 | 117 | 102 | 1 | 0.9 | % | 16 | 15.7 | % | |||||||||
New Jersey | 60 | 60 | 59 | 0 | 0.0 | % | 1 | 1.7 | % | |||||||||
Arizona | 56 | 55 | 50 | 1 | 1.8 | % | 6 | 12.0 | % | |||||||||
Oregon | 34 | 35 | 37 | (1 | ) | (2.9 | )% | (3 | ) | (8.1 | )% | |||||||
770 | 770 | 697 | 0 | 0.0 | % | 73 | 10.5 | % | ||||||||||
Commercial Risk | ||||||||||||||||||
California | 1,468 | 1,469 | 1,483 | (1 | ) | (0.1 | )% | (15 | ) | (1.0 | )% | |||||||
Connecticut | 161 | 164 | 183 | (3 | ) | (1.8 | )% | (22 | ) | (12.0 | )% | |||||||
New York | 234 | 231 | 224 | 3 | 1.3 | % | 10 | 4.5 | % | |||||||||
New Jersey | 90 | 90 | 103 | 0 | 0.0 | % | (13 | ) | (12.6 | )% | ||||||||
Arizona | 137 | 136 | 125 | 1 | 0.7 | % | 12 | 9.6 | % | |||||||||
Oregon | 135 | 133 | 133 | 2 | 1.5 | % | 2 | 1.5 | % | |||||||||
2,225 | 2,223 | 2,251 | 2 | 0.1 | % | (26 | ) | (1.2 | )% | |||||||||
ASO | ||||||||||||||||||
California | 6 | 5 | 6 | 1 | 20.0 | % | 0 | 0.0 | % | |||||||||
Connecticut | 32 | 54 | 67 | (22 | ) | (40.7 | )% | (35 | ) | (52.2 | )% | |||||||
New York | 13 | 13 | 17 | 0 | 0.0 | % | (4 | ) | (23.5 | )% | ||||||||
New Jersey | 17 | 18 | 19 | (1 | ) | (5.6 | )% | (2 | ) | (10.5 | )% | |||||||
68 | 90 | 109 | (22 | ) | (24.4 | )% | (41 | ) | (37.6 | )% | ||||||||
Total Commercial | ||||||||||||||||||
California | 1,474 | 1,474 | 1,489 | 0 | 0.0 | % | (15 | ) | (1.0 | )% | ||||||||
Connecticut | 193 | 218 | 250 | (25 | ) | (11.5 | )% | (57 | ) | (22.8 | )% | |||||||
New York | 247 | 244 | 241 | 3 | 1.2 | % | 6 | 2.5 | % | |||||||||
New Jersey | 107 | 108 | 122 | (1 | ) | (0.9 | )% | (15 | ) | (12.3 | )% | |||||||
Arizona | 137 | 136 | 125 | 1 | 0.7 | % | 12 | 9.6 | % | |||||||||
Oregon | 135 | 133 | 133 | 2 | 1.5 | % | 2 | 1.5 | % | |||||||||
2,293 | 2,313 | 2,360 | (20 | ) | (0.9 | )% | (67 | ) | (2.8 | )% | ||||||||
Medicare Advantage | ||||||||||||||||||
California | 112 | 112 | 104 | 0 | 0.0 | % | 8 | 7.7 | % | |||||||||
Connecticut | 45 | 44 | 34 | 1 | 2.3 | % | 11 | 32.4 | % | |||||||||
New York | 3 | 9 | 6 | (6 | ) | (66.7 | )% | (3 | ) | (50.0 | )% | |||||||
Arizona | 51 | 49 | 35 | 2 | 4.1 | % | 16 | 45.7 | % | |||||||||
Oregon | 21 | 21 | 20 | 0 | 0.0 | % | 1 | 5.0 | % | |||||||||
Other States | 4 | 4 | 0 | 0 | 0.0 | % | 4 | 0.0 | % | |||||||||
236 | 239 | 199 | (3 | ) | (1.3 | )% | 37 | 18.6 | % | |||||||||
Medi-Cal/Medicaid | ||||||||||||||||||
California | 712 | 698 | 710 | 14 | 2.0 | % | 2 | 0.3 | % | |||||||||
Connecticut | 90 | 87 | 84 | 3 | 3.4 | % | 6 | 7.1 | % | |||||||||
New Jersey | 44 | 44 | 46 | 0 | 0.0 | % | (2 | ) | (4.3 | )% | ||||||||
846 | 829 | 840 | 17 | 2.1 | % | 6 | 0.7 | % | ||||||||||
Medicare PDP (stand-alone) | 379 | 365 | 300 | 14 | 3.8 | % | 79 | 26.3 | % | |||||||||
Total Health Plan Enrollment | ||||||||||||||||||
Large Group | 1,455 | 1,453 | 1,554 | 2 | 0.1 | % | (99 | ) | (6.4 | )% | ||||||||
Small Group and Individual | 770 | 770 | 697 | 0 | 0.0 | % | 73 | 10.5 | % | |||||||||
Commercial Risk | 2,225 | 2,223 | 2,251 | 2 | 0.1 | % | (26 | ) | (1.2 | )% | ||||||||
ASO | 68 | 90 | 109 | (22 | ) | (24.4 | )% | (41 | ) | (37.6 | )% | |||||||
Total Commercial | 2,293 | 2,313 | 2,360 | (20 | ) | (0.9 | )% | (67 | ) | (2.8 | )% | |||||||
Medicare Advantage | 236 | 239 | 199 | (3 | ) | (1.3 | )% | 37 | 18.6 | % | ||||||||
Medicare PDP (stand-alone) | 379 | 365 | 300 | 14 | 3.8 | % | 79 | 26.3 | % | |||||||||
Medi-Cal/Medicaid | 846 | 829 | 840 | 17 | 2.1 | % | 6 | 0.7 | % | |||||||||
Total Health Plans | 3,754 | 3,746 | 3,699 | 8 | 0.2 | % | 55 | 1.5 | % | |||||||||
TRICARE - North Contract Eligibles | 2,895 | 2,913 | 2,930 | (18 | ) | (0.6 | )% | (35 | ) | (1.2 | )% | |||||||
Health Net, Inc.
Reconciliation of Reserves for Claims and Other Settlements
(In millions)
Health Plan Services | |||||||||||
Year 2007 | Year 2006 | Year 2005 | |||||||||
Reserve for claims (a), beginning of period | $ | 754.2 | $ | 768.7 | $ | 794.6 | |||||
Incurred claims related to: | |||||||||||
Current Year | 5,790.7 | 5,222.0 | 5,130.4 | ||||||||
Prior Years (c) | 0.6 | (77.3 | ) | (114.5 | ) | ||||||
Total Incurred (b) | 5,791.3 | 5,144.7 | 5,015.9 | ||||||||
Paid claims related to: | |||||||||||
Current Year | 4,972.3 | 4,485.7 | 4,401.3 | ||||||||
Prior Years | 734.5 | 673.5 | 640.5 | ||||||||
Total Paid (b) | 5,706.8 | 5,159.2 | 5,041.8 | ||||||||
Reserve for claims (a), end of period | 838.7 | 754.2 | 768.7 | ||||||||
Add: | |||||||||||
Claims Payable (d) | 365.7 | 203.9 | 177.2 | ||||||||
Other (e) | 96.0 | 90.7 | 94.3 | ||||||||
Reserves for claims and other settlements, end of period | $ | 1,300.4 | $ | 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 amount accrued for litigation and regulatory-related expenses. |
(e) | Includes accrued capitation, shared risk settlements, provider incentives and other reserve items. |