Health Net

About Health Net

Health Net has woven together a web of health plan services. The company provides managed health care medical coverage to about 6 million members. The company's health plan services unit offers HMO, PPO, Medicare, and Medicaid plans, as well as vision, dental care, and pharmacy benefit programs to customers in Arizona, California, Oregon, and Washington. Its – more... Managed Health Network subsidiary provides behavioral health and employee assistance to employers and traditional health plan customers. Health Net's products are marketed to commercial clients through its sales force and external brokers; individual plans are sold mostly through independent agents.

Operations

Health Net's core health plan business is firmly focused on the western US, with California comprising its largest health plan market. HN California, Health Net's California HMO, is part of the Children's Health Insurance Program (known as Healthy Families) and insures some 136,000 children. Other key states include Arizona and Oregon.

In addition, the company's Health Net Federal Services subsidiary holds a contract with the government's TRICARE program through which the company provides health benefits to some 3 million military members in the northern US. TRICARE serves employees within the US Department of Defense, the US State Department, and the US Department of Veterans' Affairs.

Financial Analysis

In recent years Health Net's earnings have softened due, in part, to inking a smaller TRICARE contract and losses in its non-core markets. Health Net's income was beginning to recover from recession-linked investment losses in 2008 and 2009 when it was pinched again in 2011 by a court ruling that cost it $181 million. That ruling came from litigation tied to a business it no longer owned, but held liability for. During 2011, Health Net's revenues dropped by 13% to some $11.9 billion and its net income decreased 65% to about $72 million.

Strategy

In recent years, Health Net has reshaped its operations to focus on the western US by steadily divested its non-western operations. It has made plans to sell its remaining Medicare Part D prescription drug plan business in Connecticut and New Jersey to an affiliate of CVS Caremark.

The company is also increasingly focused on creating tailored products targeting specific groups of people. Like traditional HMO capitated networks (in which a provider is given a set fee per patient, regardless of service performed), these new products are intended to lower costs while still offering comprehensive benefits and a broad provider network with low copays. For example, its HMO Silver Network is one such product and is a network of doctors, specialists, and hospitals in ten counties in California. Another tailored network product, Salud Con Health Net, has plans targeted at the Latino community in Southern California. More than 45% of Health Net's capitated members in California are enrolled in tailored products. – less

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