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8-K - FORM 8-K - HEALTH NET INCd8k.htm
EX-99.2 - PRESS RELEASE - HEALTH NET INCdex992.htm
Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day
February 17, 2011
Exhibit 99.1


Cautionary Statement
2
All statements in this presentation, other than statements of historical information provided herein, including but not limited
to the guidance for future periods included herein and the assumptions and underlying such projections, may be deemed to
be forward-looking statements and as such are subject to a number of risks and uncertainties. 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 guidance as to expected future period results and statements
including 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, health care reform, including the ultimate impact of the Affordable Care Act, which could materially adversely
affect the company’s financial condition, results of operations and cash flows through, among other things, reduced
revenues, new taxes, expanded liability, and increased costs (including medical, administrative, technology or other costs),
or require changes to the ways in which the company does business; rising health care costs; continued slow economic
growth or a further decline in the economy; negative prior period claims reserve developments; trends in medical care
ratios; membership declines; unexpected utilization patterns or unexpectedly severe or widespread illnesses; rate cuts
affecting the company’s Medicare or Medicaid businesses; costs, fees and expenses related to the post-closing
administrative services provided under the administrative services agreements entered into in connection with the sale of the
company’s Northeast business; potential termination of the administrative services agreements by the service recipients
should the company breach such agreements or fail to perform all or a material part of the services required thereunder; any
liabilities of the Northeast business that were incurred prior to the closing of its sale as well as those liabilities incurred
through the winding-up and running-out period of the Northeast business; litigation costs; regulatory issues with agencies
such as the California Department of Managed Health Care, the Centers for Medicare and Medicaid Services and state
departments of insurance, including the continued suspension of the marketing of and enrollment into the company’s
Medicare products for a significant period of time, which could have a material adverse impact on the company’s Medicare
business; operational issues; investment portfolio impairment charges; volatility in the financial markets; and general
business and market 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 Securities and Exchange Commission (“SEC”), and the risks discussed in the company’s other filings with the SEC.
Readers are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no
obligation to publicly revise its guidance, the assessment of the underlying assumptions or any of its forward-looking
statements to reflect events or circumstances that arise after the date of this presentation.


3
Non-GAAP Measures
These presentations include quarterly and full year
income statement measurements that are not calculated
and presented in accordance with Generally Accepted
Accounting Principles. Audience participants should refer
to the financial table included in the Appendix to the
presentations, which also is available on the company’s
website at www.healthnet.com, and reconciles certain
non-GAAP financial information to GAAP financial
information.


4
Agenda
8.30 a.m. –
9.00 a.m.
Welcoming Remarks
Angie McCabe, Vice President, Investor Relations
Introduction and Strategic Overview
Jay Gellert, President and Chief Executive Officer
9.00 a.m. –
10.00 a.m.
Commercial Growth and Margin Expansion
Steven Sell, President, Western Region Health Plan
Underwriting and Actuarial Review
Richard Hall, FSA, MAAA, Chief Actuarial Officer
10.00 a.m. –
10.15 a.m.
BREAK
10.15 a.m. –
11.15 a.m.
Medicare and State Programs
Scott Kelly, Chief Government Programs Officer
Federal Services
Steven Tough, President, Government Programs
11.15 a.m. –
12.15 p.m.
Operations Review
Juanell
Hefner, Chief Customer Services Officer
Jay Gellert, President and Chief Executive Officer
Financial Review
Joseph Capezza, Chief Financial Officer
12.15 p.m. –
12.30 p.m.
Closing Remarks
Jay Gellert, President and Chief Executive Officer
Note: Presentation times subject to change.


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Strategic Overview
Strategic Overview
Jay Gellert
President and
Chief Executive Officer


7
Emerging Environment
Emerging Environment
Economy is driving change
Federal and state budget pressures
will affect health care
Future implementation of Affordable Care Act
remains to be defined
Diverse book of businesses where value
differentiation is key


8
Our Strategy To Date
Our Strategy To Date
Build value-based products
Diverse book of businesses
Risk and fee
Medicaid, Medicare, TRICARE and commercial
Deemphasize volatile segments
e.g., individual
Invest in G&A efficiencies
Dispose of weak assets
Strengthen balance sheet


9
2011 Key Milestones
2011 Key Milestones
Stronger risk membership
TRICARE to ASO
Maintain low G&A ratio
Expand commercial margins
Continue to add new products
Use cash for benefit of shareholders


10
Future Opportunities
Future Opportunities
Broadening commercial business
Rebound in Medicare
Medicaid expansion
Department of Defense options
G&A leverage
Balance sheet flexibility


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Commercial Growth
Commercial Growth
and Margin Expansion
and Margin Expansion
Steven Sell
President, Western Region Health Plan


Commercial: Positioned for Growth
Commercial: Positioned for Growth
Economy is driving HMO demand
Health Net has a strong and sustainable
HMO market position
Tailored products and networks drive growth
Margin expansion opportunities
13


Economy Driving Demand
Market research shows customers looking for:
Affordable solutions
Convenient access
Clear and simple choices
Consumer-directed health plans (CDHP)
show some stress
Among highest premium increases
HMO value proposition: “back to the future”
Affordable premiums
Primary care leadership
Comprehensive benefits / low copays
14


Health Care Reform
Health Care Reform
Favors Managed Care
Favors Managed Care
PPO benefit advantages being reduced
Elimination of annual and lifetime limits in 2011
Zero copay
preventive care in 2011
Deductible caps coming in 2014
Traditional ASO vs. risk
Risk still best value in California –
even for large,
national employers
Providers will play more prominent role
Incentives in law to create managed care
infrastructure (e.g., accountable care organizations)
Seeking to balance Medicare and Medicaid revenue
pressures with commercial growth
15


16
Health Net:
Health Net:
Strong HMO Market Share
Strong HMO Market Share
Dominant network HMO player in California market
Steady market share growth over the last four years
Small group market share increase: 31 percent
to 41 percent in the past four years
Source:  Data from Department of Managed Health Care and excludes Kaiser and all PPO data.
Percent share reflects percent share of top statewide competitors.
Small Group Network Model HMO Market Share


The Power of Capitation
The Power of Capitation
Focuses providers on cost management and commercial growth
Stabilizes trends and makes them more predictable
Reduces administrative costs as claims processing is delegated
Source:  Based on Health Net internal data as of December 31, 2010.
More than 80 percent of HNCA’s
commercial membership is enrolled
in capitated
medical groups
More than 30 percent of HNCA’s
commercial capitated
membership is
enrolled in tailored network plans
17


Drives volume to “high value”
providers (low cost/high quality)
Employer premiums up to 30 percent lower
Offers comprehensive coverage
Increased interest in new geographies and segments
Strong and Evolving Tailored Networks
Strong and Evolving Tailored Networks
18
Source:  Based on Health Net internal data
HNT Tailored Network Membership


How Tailored Network Products Work
How Tailored Network Products Work
Foundation is traditional HMO capitated
networks
Broad physician panel in group or IPA
Includes wide range of institutional options
Comprehensive benefits with low copays
Tailored networks
Include cost-effective provider groups
Stronger partnerships built on higher volume
and joint marketing
Includes select institutional options that optimize
cost and quality
Substantial savings accrue to customer by excluding
high cost, geographically remote institutions
Comprehensive benefits with low copays
19


Growth with Margin Expansion
Growth with Margin Expansion
Strategically changing mix
Segment: small group and mid-market
Product: tailored network products
Geographic: Southern California vs.
Northern California
Targeted sales and improved retention
Disciplined underwriting and pricing
Continued focus on health care cost containment
Stronger provider partnerships
20


Well Positioned for Growth
Well Positioned for Growth
Growing market share in California
Product solutions meeting market demand
Opportunities to apply solutions to
Arizona and Oregon
Margin expansion driven by:
Improved product and segment mix
Consistent underwriting and pricing discipline
Provider-payor
relationships evolving
21


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Underwriting and
Underwriting and
Actuarial Review
Actuarial Review
Richard T. Hall, FSA, MAAA
Chief Actuarial Officer


A New Commercial Environment
A New Commercial Environment
Underwriting and pricing discipline
Return to HMO plans / pressure on
less managed plans
Regulatory pressure and individual
market issues
Providers seeking commercial share to
offset growing cost shift
2011 pricing assumptions and outlook
24


Underwriting and Pricing Discipline
Underwriting and Pricing Discipline
Rigorous planning process
Analyze membership
Identify best gross margin opportunities
Sensitivity analyses
Targeted geographies, segments and
products where we have a clear
competitive advantage
Enhanced sales and underwriting process to
optimize profitable membership growth
25


26
2010 Results Affirm Strategy
2010 Results Affirm Strategy
Targeted pricing to improve mix in large group
MCR of renewing groups in California was better
than canceled groups by 100 basis points in 2010
Implemented processes to achieve an improved
retention rate
From 81 percent in 2010 to 91 percent in
January 2011
Industry standard is approximately 82 percent
Membership and margin opportunities in small group segment
MCR of renewing groups was better than canceled groups by
210 basis points in 2010


Return to HMO
Return to HMO
Demonstrable premium differential for
equivalent benefits
ASO vs. risk: California experience
Growing out-of-pocket limits not sustainable
for members and providers
Health care reform and economy limit ability
to shift costs to employees
27


Premium Differentials
Premium Differentials
Traditional HMO vs. PPO –
HMO is 30 percent less
Example: Los Angeles County
HMO –
$30 copay
/ $2,000 out-of-pocket maximum
PPO –
$30 copay
in-network / $500 deductible /
$2,000 out-of-pocket maximum
Tailored network 10 percent to 25 percent less than
traditional HMO
Targeted to specific, cost-effective provider groups
Better performing MCR than traditional HMO
Less expensive than Kaiser in many cases
28


Regulatory Pressure
Regulatory Pressure
and Individual Market Issues
and Individual Market Issues
Cautious approach to individual market
Emerging regulatory environment
External focus on rate increases
Preparing for implementation of exchanges
29


Changing the Provider-Payor
Changing the Provider-Payor
Paradigm
Paradigm
30
Market driving to integrated approach
Health Net offers value to providers
People and relationships
True local presence
Business model
All segment focus
Providers seeking to retain and build
commercial market share
Joint efforts in cost and quality management


2011 Commercial Pricing Assumptions
2011 Commercial Pricing Assumptions
2010 physician and institutional utilization
moderated from 2009
2011 pricing assumes upward pressure on
physician and institutional utilization
2011 unit cost trends expected to be lower
than 2010 trends
2011 pharmacy cost increases expected to
be similar to 2010
31


Beyond 2011
Beyond 2011
Sectoral
not cyclical –
changes in market
Driven by health care reform and economy
Trends remain moderate by historical standards
Growing impact of tailored network plans
and focus on affordability
Steadily growing influence of capitated
systems
Institutional providers seek new partnerships to
achieve cost effectiveness and enhance
competitive position
32


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Medicare and
Medicare and
State Programs
State Programs
Scott Kelly
Chief Government
Programs Officer


Solid Medicare Outlook
Solid Medicare Outlook
Balance Medicare Advantage revenue,
benefits/premiums and costs to ensure:
Stable margins
Continued competitive product offerings
Continued focus on capitated
networks
Enhance strategic provider partnerships in
coordination with commercial business
Position Part D book for 2012 growth
Strengthening operations and controls to
respond to CMS sanction issues
35


Medicare Advantage: 2011
Medicare Advantage: 2011
Building from solid 2010
January enrollment results better than
initial expectations
Total revenues PMPM expected to be up 1.5 percent
Member premiums up 3.4 percent PMPM
Expect MCR to be flat year-over-year
Health care cost stability
Benefit changes: hospital and outpatient
copays, deductibles
Preparing for 2012 bidding process
36


Medicare Part D
Medicare Part D
2010 margins maintained by favorable
prescription drug performance and unit costs
2011 enrollment expected to decline
14 percent to 16 percent compared with 2010
Guiding to breakeven 2011 performance due to
effects of CMS sanctions
37


CMS Sanctions
CMS Sanctions
What Happened?
CMS identified issues in HNT’s
Part D program
What’s Next?
Corrective actions are in process
Plan to review corrective actions with CMS in
second quarter of 2011
Broader compliance initiatives in place to
ensure appropriate administration of
government business overall
38


Medicare Advantage
Medicare Advantage
Provider Networks
Provider Networks
Nearly 40 percent of health care costs capitated
Over 50 percent in California market
More than 135 provider groups in 21 counties
Mostly percent of premium contracts
Collaboration with organized health systems to
reduce total costs to achieve margin stability
Working closely on risk adjuster capture and
accuracy with key groups
39


State Health Programs
State Health Programs
Potential for growth
Health care reform
Seniors and Persons
with Disabilities (SPD)
New counties
40
Total State Program Revenues


Medi-Cal Position
Medi-Cal Position
753,700 members at year-end 2010, an
increase of 7 percent year-over-year
Second largest Medi-Cal plan in California
58 percent of membership in
Los Angeles County
34 percent in Central Valley
Market share stable at over 24 percent
Remain the highest ranking Medi-Cal HMO plan
in California by U.S. News and World Report
41


2011 Medi-Cal Outlook
2011 Medi-Cal Outlook
Expect 6 percent membership growth
Maintain stable financial performance
Rate environment understood
Key strategic position for health care reform
SPD program offers potential significant
growth opportunity
42


Healthy Families
Healthy Families
145,800 members at year-end 2010, a
decrease of 4.7 percent year-over-year
Market share remains flat as general
statewide enrollment declines
2011 program outlook
Expect 6 percent membership decline
Margin stable
43


State Programs Provider Networks
State Programs Provider Networks
80 percent of State Programs enrollment
linked to capitated
provider groups
Over 45 percent of health care costs under
capitated
arrangements
75 percent of physician costs
27 percent of hospital costs
Noncapitated
hospital rates on Medicaid
fee schedule
44


Stable Government Programs
Stable Government Programs
Margin stability in long-standing Medicare
Advantage network-model markets
Predictable cost structure
Solid membership retention
Medi-Cal: prepare for growth of SPDs
and
health care reform expansion
2011 focus on strong operational and
regulatory performance and preparations
for 2012 open enrollment
45


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Federal Services
Federal Services
Steve Tough
President,
Government Programs


Government Contracts Highlights
Government Contracts Highlights
New TRICARE contract begins April 1, 2011
ASO, fee-based, five-year contract
Improves company balance between risk
and fee-based businesses
Opens door to new opportunities as
Department of Defense (DoD) faces
budget pressures
48


2011: A Transition Year
2011: A Transition Year
Contract financial structure changes from cost
plus risk sharing to cost plus incentive
New contract accounted for as ASO
2011 includes ¼
year of current contract,
¾
year of new contract, plus current contract
phase-out revenues and expenses
Expect 2011 pretax contribution from
Government Contracts to decline by
approximately $25 million from 2010
49


Current Contract to New Contract:
Current Contract to New Contract:
Incentive and Risk Changes
Incentive and Risk Changes
Fixed-dollar underwriting fee
Administrative efficiencies under a fixed
administrative budget
Underwriting incentives –
network discount, network
usage and national cost trend
National cost trend incentive based on our PMPM
health care cost trend for contractor enrollees vs.
national health care expenditure per capita trend
Performance guarantees and incentives
Award fee calculated twice yearly (Q2 and Q4) under
new contract vs. quarterly under current contract
50


Growth Opportunities
Growth Opportunities
Military & Family Life Consultant (MFLC)
program success
Apply MFLC model to other federal customers
DoD
efforts under way –
budget challenges create
potential opportunities
Extend services to National Guard and Reservists
Managed solutions for TRICARE for Life
Behavioral health outreach requirements continue to
grow as needs escalate
Veterans Affairs (VA) seeks expansion of its rural
behavioral health support program
Existing services and products have application to other
government programs
51


Key Takeaways
Key Takeaways
Well positioned to continue leadership role
with DoD
and VA
Transition to new contract on track
Wide range of behavioral health opportunities
Build on MFLC success
Continue to expand VA and state
administrative footprint
52


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Operations Review
Operations Review
Jay Gellert
President and
Chief Executive Officer
Juanell Hefner
Chief Customer Services Officer


Operations Strategy
Operations Strategy
and Stranded Costs
and Stranded Costs
Announced a three-year effort to restructure
operations in 2007
Built around these goals:
Optimize outsourcing
Eliminate operations and system inefficiencies
Enhance scalability
Improve competitive platform
Reduce “stranded costs”
associated with sale of
Northeast and new TRICARE contract
Goal: support sustained long-term margin improvement
55


G&A Expense Reductions
G&A Expense Reductions
Invested $145 million after tax in G&A expense
reduction activities over the last three years
(i.e., severance, asset impairment, etc.)
Without these investments, Western Region G&A
would have been higher by approximately
$100 million pretax in 2010
Achieved additional savings in the Northeast and
Government Contracts division
Targeting an additional $100 million in pretax
savings in 2011 and 2012 to compensate for
Northeast stranded costs and TRICARE gap
Savings primarily from headcount reductions
56


Northeast Wind-down and
Overhead Reductions
Northeast Wind-down and
Overhead Reductions
Operations Strategy
Operations Strategy
Infrastructure outsourcing
Application outsourcing
Business process outsourcing
Management restructuring
Operational efficiencies
Vendor management
Wind-down of NE operations
Finance outsourcing
Additional operations outsourcing
Managerial restructuring
Arizona systems migration
Print and fulfillment
Real estate cost improvements
Operational efficiencies
Areas of Savings
Areas of Savings
57


Improved Operations
Improved Operations
Operations are better integrated
More consistent procedures
Greater flexibility to use staff and
resources efficiently
Improved performance management
Have realized benefits from business process
outsourcing of noncustomer facing functions
Scalability
Cost improvements
High levels of quality and performance
58


Improved Operational Performance
Improved Operational Performance
Claims
Accuracy
Claims turnaround time
Call center performance
First call resolution
Enrollment and eligibility performance
Enrollment accuracy
Enrollment timeliness
Eligibility accuracy
All key operational metrics have improved or
All key operational metrics have improved or
stabilized over the past three years
stabilized over the past three years
59


Positioned for the Future
Improved speed to market
Outsourcing allows for rapid capacity
ramp-up to support growth
Can leverage vendor expertise and
resources to create new and expanded
operational capabilities
Technology infrastructure now positioned to
support future performance and growth
New equipment and software upgrades
Network upgrades
Investment in strategic applications
60


Key Takeaways
Key Takeaways
Further G&A reductions will contribute
to margin improvement
Operations positioned to support
long-term growth
G&A positioned to offset minimum
MCR requirements
Eliminating stranded costs associated with
Northeast business and new TRICARE contract
Improved operations enhance capacity to deliver
new products and services
61


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Financial Review
Financial Review
Joseph C. Capezza
Chief Financial Officer


64
Original Guidance
Actual
Year-end membership
Commercial: -1% to -2%
Medicaid: +5% to +6%
Medicare Advantage: -2% to -3%
PDP: +1% to +2%
-4.4%
+5.1%
-2.2%
-7.2%
Consolidated revenues
$13 billion to $13.5 billion
$13.6 billion
Commercial premium yields
(a)
~ 8.3% to 8.8%
(Western Region 2009: ~$316 PMPM)
7.9%
Commercial health care cost
trends
(a)
~ 20-40 bps < premium yields
(Western Region 2009: ~$274 PMPM)
Government Contracts ratio
~ 94.5% to 95%
94.7%
G&A Expense ratio
~ 8.8% to 9%
8.9%
Weighted-average fully
diluted shares outstanding
103 million to 104 million
GAAP EPS
Combined Western Region
Operations and Government
Contracts EPS
$1.92 to $2.02
$2.32 to $2.42
$2.06
(a)
Commercial premium yields and commercial health care cost comparisons are on a same-store basis for the company’s Western Region Operations only for both
2009 and 2010.
80 bps
80 bps
99.2 M
99.2 M
$2.60
$2.60
2010 Results
2010 Results


65
A Solid 2010 Sets Stage for 2011
A Solid 2010 Sets Stage for 2011
Strong year: met or exceeded key commitments
Commercial margin expansion
2010 gross margin increased 13 percent to
$47 per member per month (PMPM)
Commercial enrollment stabilized in the second half
of 2010
Strong cash: operating cash flow of $271 million, or
1.3 times net income
Repurchased 9 percent of 2009 shares outstanding
Further margin improvement opportunities


Stronger Balance Sheet
Stronger Balance Sheet
66
2010
2009
Current ratio
1.70
1.68
Adjusted days claims payable
*
57.2
54.2
Debt-to-total capital ratio
19%
26%
Tangible net equity per share
$11
$10
Risk-based capital
>400%
>400%
*See Appendix for a reconciliation of this metric to the comparable GAAP financial measure 


Northeast Transaction Net Cash
Northeast Transaction Net Cash
67
2009
$377 million
2010
$63 million
2011
$80 million to $100 million
Total
$520 million to $540 million
Original
Guidance
$490 million to $610 million


68
2011 Earnings Guidance
2011 Earnings Guidance
Year-end membership
(a)
Medicaid: +6% to +7%
Medicare Advantage
(d)
: -15% to -17%
Total Western Region Operations
medical membership: +2% to +3%
PDP
(d)
: -14% to -16%
Consolidated revenues
(b)(d)
$12.0 to $12.5 billion
Commercial premium yields
(a)
~ 7.8% to 8.3%
Commercial health care cost trends
(a)
G&A expense ratio
(a)
~ 8.7%  to 8.9%
Weighted-average fully
diluted shares outstanding
(c)
96 million to 97 million
GAAP EPS
(c)(d)
Combined Western Region Operations and
Government Contracts segments EPS
(c)(d)
At least $2.05
Commercial: +1% to +2%
Commercial: +1% to +2%
~
~
40
40
to
to
60
60
bps
bps
<
<
Premium
Premium
Yields
Yields
(a)
For the company’s Western Region Operations segment
(b)
For the combined Western Region Operations and Government Contracts segments
(c)
The company’s guidance does not include the impact of share repurchases other than to counter dilution.
(d)
Includes
the
impact
of
the
CMS
sanctions
previously
announced
on
November
19,
2010
At least $2.75
At least $2.75


69
2011 Cash at Parent
2011 Cash at Parent
Beginning cash (12/31/10)
$204
Sources of cash
Net cash flow from subsidiaries
NE proceeds
$225 -
$235
$80 -
$100
Uses of cash
Share repurchases through 1/31/11
Other corporate uses
$34
~$85
Ending cash*
(12/31/11)
~$390 -
$420
*Excludes the impact of any future share repurchases
$ in millions


70
HNT: On Track
HNT: On Track
Continued commercial gross margin expansion
Commercial membership growth
Seamless transition to new TRICARE contract
Continued strong cash flow performance
Opportunities for further capital deployment


Appendix
Appendix


Disclosures Regarding
Disclosures Regarding
Non-GAAP Financial Information
Non-GAAP Financial Information
72
Q4 2010
Q3 2010
Q4 2009
FY 2010
FY 2009
(1)Reserve for Claims and Other Settlements
$942.0
$904.4
$951.7
$942.0
$951.7
Less: Reserve for Claims and Other Settlements for Divested Businesses
-
-
-
-
-
Less: Capitation Payable, Provider and Other Claim Settlements and Medicare Part D
(108.7)
(130.0)
(162.8)
(108.7)
(162.8)
(2)Reserve
for
Claims
and
Other
Settlements -
Adjusted
$833.3
$774.4
$788.9
$833.3
$788.9
(3)Health Plan Services Cost
$2,100.0
$2,134.7
$2,557.1
$8,609.1
$10,732.0
Less: Health Plan Services Cost for Divested Businesses
-
-
(460.7)
-
(2,123.0)
Less: Capitation Payable, Provider and Other Claim Settlements and Medicare Part D
(762.6)
(804.4)
(818.4)
(3,291.1)
(3,296.0)
(4)Health Plan Services Cost -
Adjusted
$1,337.4
$1,330.3
$1,278.0
$5,318.0
$5,313.0
(5)Number of Days in Period
92
92
92
365
365
=
(1)
/
(3)
*
(5)
Days
Claims
Payable
-
(using
end
of
period
reserve
amount)
41.3
39.0
34.2
39.9
32.4
=
(2)
/
(4)
*
(5)
Days
Claims
Payable
-
Adjusted
(using
end
of
period
reserve
amount)
57.3
53.6
56.8
57.2
54.2
Management believes that adjusted days claims payable (adjusted for divested businesses, capitation, provider and other claim settlements
and
Medicare
Part
D),
a
non-GAAP
financial
measure,
provides
useful
information
to
investors
because
the
adjusted
days
claims
payable
calculation excludes amounts related to divested businesses and health care costs for which no or minimal reserves are maintained.
Therefore,
management
believes
that
adjusted
days
claims
payable
may
present
a
more
accurate
reflection
of
days
claims
payable
calculated
from claims-based reserves than does GAAP days claims payable, which includes 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 adjusted days claims payable and days claims payable, the most directly comparable GAAP financial
measure. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In
evaluating the adjusted amounts, you should be aware that we have incurred expenses that are the same as or similar to some of
the adjustments in the current presentation and we may incur them again in the future.
Our
presentation
of
the
adjusted
amounts
should
not
be
construed
as
an
inference
that
our
future
results
will
be
unaffected
by
unusual
or
non-recurring items.
$ in millions


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day


Closing Remarks
Closing Remarks
Jay Gellert
President and
Chief Executive Officer


75
HNT: Building Shareholder Value
HNT: Building Shareholder Value
Strategic response to changing environment
Diverse book of stable businesses
Opportunities for growth and further
gross margin and G&A improvements
Financial flexibility


Health Net, Inc.
Health Net, Inc.
2011 Investor Day
2011 Investor Day