Company Reports GAAP Net Income of $60.3 Million, or $0.77 per
Diluted Share
Western Region Operations and Government Contracts Segments Produce
Combined Net Income of $0.96 per Diluted Share in Third Quarter of 2015
Consolidated MCR Improves to 83.4 Percent in Third Quarter of 2015
Company Website:
http://www.healthnet.com
LOS ANGELES -- (Business Wire)
Health Net, Inc. (NYSE:HNT) today announced 2015 third quarter GAAP net
income of $60.3 million, or $0.77 per diluted share, compared with a
GAAP net loss of $8.9 million, or a loss of $0.11 per share, for the
third quarter of 2014 and GAAP net income of $58.4 million, or $0.75 per
diluted share, for the second quarter of 2015.
In the third quarter of 2015, Health Net incurred $21.7 million of
pretax expenses primarily as a result of information technology costs
associated with the suspension of the previously announced transaction
with a wholly owned subsidiary of Cognizant Technology Solutions
Corporation (Cognizant). In addition, this amount includes $5.2 million
of pretax expenses related to the company's previously announced
definitive merger agreement with Centene Corporation (Centene). Efforts
toward the commencement of services pursuant to the Cognizant
transaction were suspended in connection with Health Net’s July 2, 2015
announcement that it had entered into a definitive merger agreement with
Centene (see Recent Events).
The company’s Western Region Operations (Western Region) and Government
Contracts segments produced combined net income of $75.1 million, or
$0.96 per diluted share, in the third quarter of 2015 compared with
$58.5 million, or $0.72 per diluted share, in the third quarter of 2014
and $74.6 million, or $0.95 per diluted share, in the second quarter of
2015.
RECENT EVENTS
On July 2, 2015, Health Net announced that it had entered into a
definitive merger agreement with Centene under which Centene will
acquire all of the issued and outstanding shares of Health Net, subject
to the terms and conditions of the merger agreement.
Centene and Health Net received early termination of the waiting period
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
on August 11, 2015.
On October 23, 2015, Health Net's stockholders voted to approve the
adoption of the merger agreement with Centene. On the same date,
Centene’s stockholders voted to approve the issuance of Centene common
stock to stockholders of Health Net in connection with Centene’s pending
merger with Health Net.
Health Net continues to expect that the transaction will close in early
2016, subject to receipt of required regulatory approvals and
satisfaction of other customary closing conditions.
2015 GUIDANCE
Health Net is lowering GAAP earnings per diluted share guidance from
$2.70 to $2.50 for the full year 2015. This adjustment primarily
reflects third quarter expenses that were incurred as a result of
information technology costs in connection with the suspension of the
Cognizant transaction as well as costs related to the pending merger
transaction with Centene. Health Net is maintaining diluted EPS guidance
for the combined Western Region and Government Contracts segments at a
range of $3.25 to $3.35 for the full year 2015.
GAAP diluted EPS guidance and diluted EPS guidance for the combined
Western Region and Government Contracts segments for the full year 2015
do not include expected fourth quarter 2015 costs associated with the
pending merger transaction with Centene or expected fourth quarter 2015
expenses due to the suspension of the Cognizant transaction.
THIRD QUARTER 2015 HIGHLIGHTS
Highlights from the third quarter of 2015 include:
1. Health Net's total revenues grew 9.6 percent in the third quarter of
2015 compared with the third quarter of 2014, and health plan services
premiums revenues rose 9.5 percent over the same period;
2. Combined net income for Health Net's Western Region and Government
Contracts segments rose 28.3 percent in the third quarter of 2015
compared with the third quarter of 2014;
3. The company's Western Region pretax margin increased 140 basis points
to 4.3 percent in the third quarter of 2015 compared with the third
quarter of 2014 and increased 50 basis points compared with the second
quarter of 2015;
4. Enrollment in the company's Western Region health plans grew by
6.4 percent to 3.3 million members as of September 30, 2015 compared
with 3.1 million members as of September 30, 2014, and increased by
1.0 percent compared with 3.2 million members as of June 30, 2015;
5. Total Medicaid enrollment increased by 17.8 percent, or 279,000
members, to 1.8 million members as of September 30, 2015 compared with
September 30, 2014, and rose by 3.1 percent, or 56,000 members, compared
with June 30, 2015; and
6. Health Net's Western Region health plan services Medical Care Ratio
(MCR) improved by 210 basis points year-over-year to 83.4 percent in the
third quarter of 2015 and improved by 60 basis points sequentially
compared with the second quarter of 2015.
“The third quarter of 2015 continued our positive momentum that we
expected for this year,” said Jay Gellert, Health Net's president and
chief executive officer. “We will remain focused on a disciplined
execution of our strategy while we work to complete the Centene merger
transaction.”
CONSOLIDATED RESULTS
Health Net’s total revenues increased 9.6 percent in the third quarter
of 2015 to $4.2 billion from $3.8 billion in the third quarter of 2014
and were essentially flat compared with the second quarter of 2015. The
year-over-year increase in total revenues was primarily due to an
increase in enrollment in the company’s Western Region health plans.
Health plan services premiums revenues were approximately $4.0 billion
in the third quarter of 2015, an increase of 9.5 percent compared with
the third quarter of 2014.
Total expenses increased 6.2 percent in the third quarter of 2015 to
$4.0 billion from $3.8 billion in the third quarter of 2014 and were
essentially flat compared with the second quarter of 2015. Health plan
services expenses increased by 6.9 percent to approximately $3.3 billion
in the third quarter of 2015 compared with the third quarter of 2014.
Included in total expenses are $21.7 million, $26.4 million and
$47.3 million of expenses primarily related to the transaction with
Cognizant for the three months ended September 30, 2015, June 30, 2015
and March 31, 2015, respectively. With respect to the third quarter of
2015, these expenses were primarily information technology expenses
associated with the suspension of the Cognizant transaction. In
addition, these expenses in the third quarter of 2015 include
$5.2 million of pretax expenses related to Health Net's definitive
merger agreement with Centene.
Western Region Health Plan Services
Health plan services premiums revenues in the Western Region of
$4.0 billion in the third quarter of 2015 increased by 9.5 percent
compared with $3.6 billion in the third quarter of 2014, primarily due
to enrollment growth from Medicaid expansion.
Health plan services expenses in the company's Western Region of
$3.3 billion in the third quarter of 2015 increased by 6.9 percent
compared with $3.1 billion in the third quarter of 2014, primarily as a
result of enrollment growth from Medicaid expansion.
Government Contracts Segment
Government Contracts revenues in the third quarter of 2015 were
$160.7 million compared with $146.2 million in the third quarter of 2014
and $141.1 million in the second quarter of 2015. The increase in
Government Contracts revenues in the third quarter of 2015 was primarily
due to increased revenues from the Department of Veterans Affairs (VA)
Patient-Centered Community Care (PC3) program.
Government Contracts expenses in the third quarter of 2015 were $158.2
million compared with $123.6 million in the third quarter of 2014 and
$137.2 million in the second quarter of 2015.
As a result of the expedited implementation of the PC3 program, the
company experienced higher-than-expected costs in the third quarter of
2015. In total, the company expects to spend approximately $40 million
in ramp-up costs in 2015 which are not expected to recur in 2016.
As previously reported, the VA notified Health Net on July 27, 2015 of
its intent to exercise option period two for the PC3 program. This
one-year option period commenced on October 1, 2015, and continues the
health care services provided to veterans in all or portions of 37
states, the District of Columbia, Puerto Rico and the U.S. Virgin
Islands.
On July 23, 2015, Health Net responded to the U.S. Department of
Defense’s (DoD) request for proposal for the next generation TRICARE
contract which will reduce the three existing TRICARE regions to two
regions. In March 2015, the DoD modified the company's T-3 contract for
the TRICARE North Region to add three additional one-year option periods
and awarded Health Net the first of the three option periods, which
allows the company to continue providing access to health care services
to TRICARE beneficiaries through March 31, 2016.
WESTERN REGION OPERATIONS SEGMENT
Health Plan Membership
Total enrollment in the Western Region at September 30, 2015 was
approximately 3.3 million members, an increase of 6.4 percent from
enrollment at September 30, 2014, and an increase of 1.0 percent from
June 30, 2015.
Total enrollment in the company’s California health plans at
September 30, 2015 was approximately 2.9 million members, an increase of
10.2 percent from enrollment at September 30, 2014, and an increase of
1.8 percent from enrollment at June 30, 2015.
Western Region commercial enrollment at September 30, 2015 was
approximately 1.1 million, a decrease of 7.7 percent compared with
enrollment at September 30, 2014, and a decrease of 1.9 percent compared
with June 30, 2015. The year-over-year decrease was primarily due to
membership decreases in the company's large group business in California
and individual business in Arizona.
Membership in tailored network products represented 54.9 percent of the
company’s Western Region commercial membership at September 30, 2015, a
320 basis point increase compared with 51.7 percent at September 30,
2014, and up 20 basis points compared with 54.7 percent at June 30, 2015.
Enrollment in the company’s Medicare Advantage (MA) plans at
September 30, 2015 was 270,000 members, essentially flat when compared
with enrollment of 271,000 members at September 30, 2014 and 269,000
members at June 30, 2015.
Medicaid enrollment increased 17.8 percent to approximately 1.8 million
members at September 30, 2015 compared with approximately 1.6 million
members at September 30, 2014, and increased 3.1 percent compared with
June 30, 2015. These increases are primarily due to Medicaid expansion
under the Affordable Care Act (ACA).
In the third quarter of 2015, enrollment increased year-over-year in
each of the three health plan categories for members who are dually
eligible for both Medicare and Medicaid.
-
In MA plans for dually-eligible members, enrollment was approximately
28,000 members in Los Angeles and San Diego counties at September 30,
2015 compared with approximately 27,000 at September 30, 2014 and
June 30, 2015.
-
Membership in the company's managed long-term services and supports
(LTSS) program in these demonstration counties was approximately
120,000 at September 30, 2015 compared with approximately 37,000 at
September 30, 2014 and compared with approximately 112,000 at June 30,
2015.
-
Enrollment in Health Net's dual eligible demonstration project (Cal
MediConnect) was 24,000 at September 30, 2015, an increase of 15,000
members compared with enrollment of 9,000 at September 30, 2014, and a
decrease of 11.1 percent, or 3,000 members, compared with dual
eligible enrollment at June 30, 2015.
As of October 1, 2015, Health Net administered benefits to 42 percent of
the Cal MediConnect enrollment in Los Angeles County and 20 percent of
the enrollment in San Diego County. Enrollment in this line of business
continued to be challenged by higher-than-expected opt-out rates during
the third quarter of 2015.
Investment Income
Net investment income for the Western Region was $13.9 million in the
third quarter of 2015 compared with $11.0 million in the third quarter
of 2014 and $16.4 million in the second quarter of 2015.
Western Region Operations Premiums
Western Region premiums per member per month (PMPM) increased by
1.2 percent to approximately $406 in the third quarter of 2015 compared
with approximately $401 in the third quarter of 2014.
Western Region Health Care Cost Trends and
Medical Care Ratio (MCR)
Health care costs PMPM for the Western Region decreased by 1.2 percent
to approximately $338 in the third quarter of 2015 compared with
approximately $343 in the third quarter of 2014.
“Consistent with the first half of 2015, health care cost trends
remained moderate and within expectations in the third quarter,” said
James Woys, Health Net's chief financial and operating officer. “This
has helped lead to a continued improvement in the company's consolidated
medical care ratio.”
The Western Region health plan services consolidated MCR was 83.4
percent in the third quarter of 2015 compared with 85.5 percent in the
third quarter of 2014 and 84.0 percent in the second quarter of 2015,
representing an improvement of 210 basis points year-over-year and
60 basis points sequentially. The improvement is primarily due to better
performance in the company's Medicaid business.
General and Administrative (G&A) Expenses
G&A expenses in the Western Region were $420.6 million in the third
quarter of 2015 compared with $353.4 million in the third quarter of
2014 and $422.6 million in the second quarter of 2015. The G&A expense
ratio was 10.6 percent in the third quarter of 2015 compared with 9.7
percent in the third quarter of 2014 and 10.5 percent in the second
quarter of 2015.
Health Net's administrative expense ratio was 6.8 percent in the third
quarter of 2015, a 20 basis point increase compared with the third
quarter of 2014 and a 10 basis point decrease compared with the second
quarter of 2015. The administrative expense ratio does not include
premium taxes and ACA-related fees.
BALANCE SHEET
Cash and investments as of September 30, 2015 were approximately
$3.2 billion compared with approximately $2.8 billion as of
September 30, 2014.
Reserves for claims and other settlements were $1.7 billion as of
September 30, 2015 compared with $1.7 billion as of September 30, 2014
and $1.8 billion as of June 30, 2015.
Days claims payable (DCP) for the third quarter of 2015 was 46.7 days
compared with 51.4 days in the third quarter of 2014 and 47.6 days in
the second quarter of 2015.
On an adjusted1 basis, DCP for the third quarter of 2015 was
63.4 days compared with 65.3 days in the third quarter of 2014 and
59.1 days in the second quarter of 2015. Adjusted DCP met expectations
for the third quarter of 2015. Adjusted DCP for the second quarter of
2015 was lower, primarily due to the payment of provider risk sharing
and incentive programs.
The company’s debt-to-total capital ratio was 25.4 percent as of
September 30, 2015 compared with 22.1 percent as of September 30, 2014
and 26.3 percent as of June 30, 2015.
CASH FLOW FROM OPERATIONS
Operating cash flow was negative $30.7 million in the third quarter of
2015.
“Operating cash flow in the third quarter of 2015 was negatively
impacted by a $123 million net disbursement for ACA-related programs,
including payment of the health insurer fee and net settlements for the
ACA's risk adjustment and reinsurance programs for the year 2014,” noted
Woys.
The company noted that cash at the parent was $100.9 million at
September 30, 2015.
STOCK REPURCHASE UPDATE
Health Net did not repurchase any shares of its common stock in the
third quarter of 2015. At September 30, 2015, approximately $306 million
of authorization under the company’s existing $400 million stock
repurchase program remained.
The company's stock repurchase program is suspended for the balance of
2015 as a result of Health Net's pending merger agreement with Centene.
1See “Disclosures Regarding Non-GAAP Financial Information”
attached to this press release for a reconciliation of this information
to the comparable GAAP financial measure.
ABOUT HEALTH NET
Health Net, Inc. is a publicly traded managed care organization that
delivers managed health care services through health plans and
government-sponsored managed care plans. Its mission is to help people
be healthy, secure and comfortable. Health Net provides and administers
health benefits to approximately 6.1 million individuals across the
country through group, individual, Medicare (including the Medicare
prescription drug benefit commonly referred to as “Part D”), Medicaid
and dual eligible programs, as well as programs with the U.S. Department
of Defense and U.S. Department of Veterans Affairs. Health Net also
offers behavioral health, substance abuse and employee assistance
programs, and managed health care products related to prescription drugs.
For more information on Health Net, Inc., please visit the company’s
website at www.healthnet.com.
CAUTIONARY STATEMENTS
The company and its representatives may from time to time make written
and oral forward-looking statements within the meaning of the Private
Securities Litigation Reform Act (“PSLRA”) of 1995, including statements
in this and other press releases, in presentations, filings with the
Securities and Exchange Commission (“SEC”), reports to stockholders and
in meetings with investors and analysts. All statements in this press
release, other than statements of historical information provided
herein, including the guidance for future periods and the assumptions
underlying such projections, may be deemed to be forward-looking
statements and as such are intended to be covered by the safe harbor for
“forward-looking statements” provided by PSLRA. These statements are
based on management’s analysis, judgment, belief and expectation only as
of the date hereof, and are subject to changes in circumstances and a
number of risks and uncertainties. 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,” “feels,” “will,” “projects” and
other similar expressions are intended to identify forward-looking
statements. Actual results could differ materially from those expressed
in, or implied or projected by the forward-looking information and
statements due to a number of factors, variables or events. Certain of
these factors relate to the company’s proposed business combination with
Centene Corporation (“Centene”), including, among other things, the
expected closing date of the transaction; the possibility that the
expected synergies and value creation from the proposed merger will not
be realized, or will not be realized within the expected time period,
including as a result of conditions, terms, obligations or restrictions
imposed by regulators in connection with their approval of or consent to
the merger; the risk that the businesses will not be integrated
successfully; disruption from the merger making it more difficult to
maintain business and operational relationships; the risk that
unexpected costs will be incurred; the possibility that the merger does
not close, including, but not limited to, due to the failure to satisfy
the closing conditions; the risk that financing for the transaction may
not be available on favorable terms; and certain other risks associated
with the merger, as more fully discussed in the definitive joint proxy
statement/prospectus that was filed with the SEC on September 21, 2015,
in connection with the merger. Other factors include, among others,
health care reform and other increased government participation in and
taxation or regulation of health benefits and managed care operations,
including but not limited to the implementation of, and subsequent
modifications to, the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act of 2010 and the regulations
promulgated thereunder (collectively, the “ACA”) as well as any related
fees, assessments and taxes; the company’s ability to successfully
participate in California’s Coordinated Care Initiative, which is
subject to a number of risks inherent in untested health care
initiatives and requires the company to adequately predict the costs of
providing benefits to individuals that are generally among the most
chronically ill within each of Medicare and Medi-Cal and implement
delivery systems for benefits with which the company has limited
operating experience; the company’s ability to successfully participate
in the federal and state health insurance exchanges under the ACA, which
involve uncertainties related to the mix and volume of business that
could negatively impact the adequacy of the company’s premium rates and
may not be sufficiently offset by the risk apportionment provisions of
the ACA; increasing health care costs, including but not limited to
costs associated with the introduction of new treatments or therapies;
the company’s ability to reduce administrative expenses while
maintaining targeted levels of service and operating performance; the
recompetition of the company’s T-3 contract for the TRICARE North
region; negative prior period claims reserve developments; rate cuts and
other risks and uncertainties affecting the company’s Medicare or
Medicaid businesses; trends in medical care ratios; membership declines
or negative changes in the company’s health care product mix; unexpected
utilization patterns or unexpectedly severe or widespread illnesses;
failure to effectively oversee the company’s third-party vendors;
noncompliance by the company or the company’s business associates with
any privacy laws or any security breach involving the misappropriation,
loss or other unauthorized use or disclosure of confidential
information; the timing of collections on amounts receivable from state
and federal governments and agencies; litigation costs; regulatory
issues with federal and state agencies including, but not limited to,
the California Department of Managed Health Care and Department of
Health Care Services, the Arizona Health Care Cost Containment System,
the Centers for Medicare & Medicaid Services, the Office of Civil Rights
of the U.S. Department of Health and Human Services and state
departments of insurance; operational issues; changes in political,
economic or market conditions; investment portfolio impairment charges;
volatility in the financial markets; and general business and market
conditions. The factors described in the context of such forward-looking
statements in this press release could cause the company or Centene’s
plans with respect to the proposed merger, actual results, performance
or achievements, industry results and developments to differ materially
from those expressed in or implied by such forward-looking statements.
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 and the
other risks discussed in the company’s filings with the SEC. Readers are
cautioned not to place undue reliance on these forward-looking
statements. Except as may be required by law, the company undertakes no
obligation to address or publicly update any of its guidance, the
assessment of the underlying assumptions or forward-looking statements
to reflect events or circumstances that arise after the date of this
release.
The financial information presented in this press release is unaudited
and is subject to change as a result of subsequent events or
adjustments, if any, arising prior to the filing of the company’s
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2015.
|
Health Net, Inc. |
Enrollment Data - By State |
(In thousands) |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| Change from |
| | | | | | | | | | | | | | | | June 30, 2015 |
|
|
| September 30, 2014 |
| | | | September 30, | | | | June 30, | | | | September 30, | | | | Increase/ |
|
|
| % |
|
|
| Increase/ |
|
|
| % |
| | | | 2015 |
|
|
| 2015 |
|
|
| 2014 |
|
|
| (Decrease) |
|
|
| Change |
|
|
| (Decrease) |
|
|
| Change |
California
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large Group
| | | |
450
| | | |
444
| | | |
477
| | | |
6
| | | | |
1.4
|
%
| | | |
(27
|
)
| | | |
(5.7
|
)%
|
Small Group
| | | |
236
| | | |
241
| | | |
243
| | | |
(5
|
)
| | | |
(2.1
|
)%
| | | |
(7
|
)
| | | |
(2.9
|
)%
|
Individual
| | | |
267
|
|
|
|
279
|
|
|
|
269
|
|
|
|
(12
|
)
|
|
|
|
(4.3
|
)%
|
|
|
|
(2
|
)
|
|
|
|
(0.7
|
)%
|
Commercial
| | | |
953
| | | |
964
| | | |
989
| | | |
(11
|
)
| | | |
(1.1
|
)%
| | | |
(36
|
)
| | | |
(3.6
|
)%
|
Medicare Advantage
| | | |
168
| | | |
168
| | | |
169
| | | |
0
| | | | |
0.0
|
%
| | | |
(1
|
)
| | | |
(0.6
|
)%
|
Medi-Cal
| | | |
1,777
| | | |
1,712
| | | |
1,485
| | | |
65
| | | | |
3.8
|
%
| | | |
292
| | | | |
19.7
|
%
|
Dual Eligibles
|
|
|
|
24
|
|
|
|
27
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
|
(11.1
|
)%
|
|
|
|
15
|
|
|
|
|
166.7
|
%
|
Total California
|
|
|
|
2,922
|
|
|
|
2,871
|
|
|
|
2,652
|
|
|
|
51
|
|
|
|
|
1.8
|
%
|
|
|
|
270
|
|
|
|
|
10.2
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Arizona
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large Group
| | | |
32
| | | |
36
| | | |
45
| | | |
(4
|
)
| | | |
(11.1
|
)%
| | | |
(13
|
)
| | | |
(28.9
|
)%
|
Small Group
| | | |
36
| | | |
37
| | | |
44
| | | |
(1
|
)
| | | |
(2.7
|
)%
| | | |
(8
|
)
| | | |
(18.2
|
)%
|
Individual
| | | |
65
|
|
|
|
69
|
|
|
|
97
|
|
|
|
(4
|
)
|
|
|
|
(5.8
|
)%
|
|
|
|
(32
|
)
|
|
|
|
(33.0
|
)%
|
Commercial
| | | |
133
| | | |
142
| | | |
186
| | | |
(9
|
)
| | | |
(6.3
|
)%
| | | |
(53
|
)
| | | |
(28.5
|
)%
|
Medicare Advantage
| | | |
38
| | | |
38
| | | |
46
| | | |
0
| | | | |
0.0
|
%
| | | |
(8
|
)
| | | |
(17.4
|
)%
|
Medicaid
|
|
|
|
67
|
|
|
|
76
|
|
|
|
80
|
|
|
|
(9
|
)
|
|
|
|
(11.8
|
)%
|
|
|
|
(13
|
)
|
|
|
|
(16.3
|
)%
|
Total Arizona
|
|
|
|
238
|
|
|
|
256
|
|
|
|
312
|
|
|
|
(18
|
)
|
|
|
|
(7.0
|
)%
|
|
|
|
(74
|
)
|
|
|
|
(23.7
|
)%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Northwest
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large Group
| | | |
25
| | | |
27
| | | |
28
| | | |
(2
|
)
| | | |
(7.4
|
)%
| | | |
(3
|
)
| | | |
(10.7
|
)%
|
Small Group
| | | |
22
| | | |
22
| | | |
23
| | | |
0
| | | | |
0.0
|
%
| | | |
(1
|
)
| | | |
(4.3
|
)%
|
Individual
| | | |
2
|
|
|
|
2
|
|
|
|
4
|
|
|
|
0
|
|
|
|
|
0.0
|
%
|
|
|
|
(2
|
)
|
|
|
|
(50.0
|
)%
|
Commercial
| | | |
49
| | | |
51
| | | |
55
| | | |
(2
|
)
| | | |
(3.9
|
)%
| | | |
(6
|
)
| | | |
(10.9
|
)%
|
Medicare Advantage
|
|
|
|
64
|
|
|
|
63
|
|
|
|
56
|
|
|
|
1
|
|
|
|
|
1.6
|
%
|
|
|
|
8
|
|
|
|
|
14.3
|
%
|
Total Northwest
|
|
|
|
113
|
|
|
|
114
|
|
|
|
111
|
|
|
|
(1
|
)
|
|
|
|
(0.9
|
)%
|
|
|
|
2
|
|
|
|
|
1.8
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Health Plan Enrollment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large Group
| | | |
507
| | | |
507
| | | |
550
| | | |
0
| | | | |
0.0
|
%
| | | |
(43
|
)
| | | |
(7.8
|
)%
|
Small Group
| | | |
294
| | | |
300
| | | |
310
| | | |
(6
|
)
| | | |
(2.0
|
)%
| | | |
(16
|
)
| | | |
(5.2
|
)%
|
Individual
| | | |
334
|
|
|
|
350
|
|
|
|
370
|
|
|
|
(16
|
)
|
|
|
|
(4.6
|
)%
|
|
|
|
(36
|
)
|
|
|
|
(9.7
|
)%
|
Commercial
| | | |
1,135
| | | |
1,157
| | | |
1,230
| | | |
(22
|
)
| | | |
(1.9
|
)%
| | | |
(95
|
)
| | | |
(7.7
|
)%
|
Medicare Advantage
| | | |
270
| | | |
269
| | | |
271
| | | |
1
| | | | |
0.4
|
%
| | | |
(1
|
)
| | | |
(0.4
|
)%
|
Medi-Cal/Medicaid
| | | |
1,844
| | | |
1,788
| | | |
1,565
| | | |
56
| | | | |
3.1
|
%
| | | |
279
| | | | |
17.8
|
%
|
Dual Eligibles
| | | |
24
|
|
|
|
27
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
|
(11.1
|
)%
|
|
|
|
15
|
|
|
|
|
166.7
|
%
|
Western Region Operations |
|
|
|
3,273
|
|
|
|
3,241
|
|
|
|
3,075
|
|
|
|
32
|
|
|
|
|
1.0
|
%
|
|
|
|
198
|
|
|
|
|
6.4
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
TRICARE - North Contract Eligibles |
|
|
|
2,829
|
|
|
|
2,829
|
|
|
|
2,849
|
|
|
|
0
|
|
|
|
|
0.0
|
%
|
|
|
|
(20
|
)
|
|
|
|
(0.7
|
)%
|
|
|
Health Net, Inc. |
Enrollment Data - Line of Business |
(In thousands) |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| Change from |
| | | | | | | | | | | | | | | | June 30, 2015 |
|
|
| September 30, 2014 |
| | | | September 30, | | | | June 30, | | | | September 30, | | | | Increase/ |
|
|
| % |
|
|
| Increase/ |
|
|
| % |
| | | | 2015 |
|
|
| 2015 |
|
|
| 2014 |
|
|
| (Decrease) |
|
|
| Change |
|
|
| (Decrease) |
|
|
| Change |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Large Group
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
California
| | | |
450
| | | |
444
| | | |
477
| | | |
6
| | | | |
1.4
|
%
| | | |
(27
|
)
| | | |
(5.7
|
)%
|
Arizona
| | | |
32
| | | |
36
| | | |
45
| | | |
(4
|
)
| | | |
(11.1
|
)%
| | | |
(13
|
)
| | | |
(28.9
|
)%
|
Northwest
| | | |
25
|
|
|
|
27
|
|
|
|
28
|
|
|
|
(2
|
)
|
|
|
|
(7.4
|
)%
|
|
|
|
(3
|
)
|
|
|
|
(10.7
|
)%
|
| | | |
507
|
|
|
|
507
|
|
|
|
550
|
|
|
|
0
|
|
|
|
|
0.0
|
%
|
|
|
|
(43
|
)
|
|
|
|
(7.8
|
)%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Small Group
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
California
| | | |
236
| | | |
241
| | | |
243
| | | |
(5
|
)
| | | |
(2.1
|
)%
| | | |
(7
|
)
| | | |
(2.9
|
)%
|
Arizona
| | | |
36
| | | |
37
| | | |
44
| | | |
(1
|
)
| | | |
(2.7
|
)%
| | | |
(8
|
)
| | | |
(18.2
|
)%
|
Northwest
| | | |
22
|
|
|
|
22
|
|
|
|
23
|
|
|
|
0
|
|
|
|
|
0.0
|
%
|
|
|
|
(1
|
)
|
|
|
|
(4.3
|
)%
|
| | | |
294
|
|
|
|
300
|
|
|
|
310
|
|
|
|
(6
|
)
|
|
|
|
(2.0
|
)%
|
|
|
|
(16
|
)
|
|
|
|
(5.2
|
)%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Individual
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
California
| | | |
267
| | | |
279
| | | |
269
| | | |
(12
|
)
| | | |
(4.3
|
)%
| | | |
(2
|
)
| | | |
(0.7
|
)%
|
Arizona
| | | |
65
| | | |
69
| | | |
97
| | | |
(4
|
)
| | | |
(5.8
|
)%
| | | |
(32
|
)
| | | |
(33.0
|
)%
|
Northwest
| | | |
2
|
|
|
|
2
|
|
|
|
4
|
|
|
|
0
|
|
|
|
|
0.0
|
%
|
|
|
|
(2
|
)
|
|
|
|
(50.0
|
)%
|
| | | |
334
|
|
|
|
350
|
|
|
|
370
|
|
|
|
(16
|
)
|
|
|
|
(4.6
|
)%
|
|
|
|
(36
|
)
|
|
|
|
(9.7
|
)%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Commercial
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
California
| | | |
953
| | | |
964
| | | |
989
| | | |
(11
|
)
| | | |
(1.1
|
)%
| | | |
(36
|
)
| | | |
(3.6
|
)%
|
Arizona
| | | |
133
| | | |
142
| | | |
186
| | | |
(9
|
)
| | | |
(6.3
|
)%
| | | |
(53
|
)
| | | |
(28.5
|
)%
|
Northwest
| | | |
49
|
|
|
|
51
|
|
|
|
55
|
|
|
|
(2
|
)
|
|
|
|
(3.9
|
)%
|
|
|
|
(6
|
)
|
|
|
|
(10.9
|
)%
|
| | | |
1,135
|
|
|
|
1,157
|
|
|
|
1,230
|
|
|
|
(22
|
)
|
|
|
|
(1.9
|
)%
|
|
|
|
(95
|
)
|
|
|
|
(7.7
|
)%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Medicare Advantage
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
California
| | | |
168
| | | |
168
| | | |
169
| | | |
0
| | | | |
0.0
|
%
| | | |
(1
|
)
| | | |
(0.6
|
)%
|
Arizona
| | | |
38
| | | |
38
| | | |
46
| | | |
0
| | | | |
0.0
|
%
| | | |
(8
|
)
| | | |
(17.4
|
)%
|
Northwest
| | | |
64
|
|
|
|
63
|
|
|
|
56
|
|
|
|
1
|
|
|
|
|
1.6
|
%
|
|
|
|
8
|
|
|
|
|
14.3
|
%
|
| | | |
270
|
|
|
|
269
|
|
|
|
271
|
|
|
|
1
|
|
|
|
|
0.4
|
%
|
|
|
|
(1
|
)
|
|
|
|
(0.4
|
)%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Medi-Cal/Medicaid
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
California
| | | |
1,777
| | | |
1,712
| | | |
1,485
| | | |
65
| | | | |
3.8
|
%
| | | |
292
| | | | |
19.7
|
%
|
Arizona
| | | |
67
|
|
|
|
76
|
|
|
|
80
|
|
|
|
(9
|
)
|
|
|
|
(11.8
|
)%
|
|
|
|
(13
|
)
|
|
|
|
(16.3
|
)%
|
| | | |
1,844
|
|
|
|
1,788
|
|
|
|
1,565
|
|
|
|
56
|
|
|
|
|
3.1
|
%
|
|
|
|
279
|
|
|
|
|
17.8
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Dual Eligibles
| | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California
| | | |
24
|
|
|
|
27
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
|
(11.1
|
)%
|
|
|
|
15
|
|
|
|
|
166.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Health Plan Enrollment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large Group
| | | |
507
| | | |
507
| | | |
550
| | | |
0
| | | | |
0.0
|
%
| | | |
(43
|
)
| | | |
(7.8
|
)%
|
Small Group
| | | |
294
| | | |
300
| | | |
310
| | | |
(6
|
)
| | | |
(2.0
|
)%
| | | |
(16
|
)
| | | |
(5.2
|
)%
|
Individual
| | | |
334
|
|
|
|
350
|
|
|
|
370
|
|
|
|
(16
|
)
|
|
|
|
(4.6
|
)%
|
|
|
|
(36
|
)
|
|
|
|
(9.7
|
)%
|
Commercial
| | | |
1,135
| | | |
1,157
| | | |
1,230
| | | |
(22
|
)
| | | |
(1.9
|
)%
| | | |
(95
|
)
| | | |
(7.7
|
)%
|
Medicare Advantage
| | | |
270
| | | |
269
| | | |
271
| | | |
1
| | | | |
0.4
|
%
| | | |
(1
|
)
| | | |
(0.4
|
)%
|
Medi-Cal/Medicaid
| | | |
1,844
| | | |
1,788
| | | |
1,565
| | | |
56
| | | | |
3.1
|
%
| | | |
279
| | | | |
17.8
|
%
|
Dual Eligibles
| | | |
24
|
|
|
|
27
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
|
(11.1
|
)%
|
|
|
|
15
|
|
|
|
|
166.7
|
%
|
Western Region Operations |
|
|
|
3,273
|
|
|
|
3,241
|
|
|
|
3,075
|
|
|
|
32
|
|
|
|
|
1.0
|
%
|
|
|
|
198
|
|
|
|
|
6.4
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
TRICARE - North Contract Eligibles |
|
|
|
2,829
|
|
|
|
2,829
|
|
|
|
2,849
|
|
|
|
0
|
|
|
|
|
0.0
|
%
|
|
|
|
(20
|
)
|
|
|
|
(0.7
|
)%
|
|
|
Health Net, Inc. |
Consolidated Statements of Operations |
($ in thousands, except per share data) |
|
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
| | | |
September 30,
| | | |
June 30,
| | | |
September 30,
|
REVENUES: | | | |
2015
| | | |
2015
| | | |
2014
|
Health plan services premiums
| | | |
$
|
3,977,891
| | | |
$
|
4,003,432
| | | |
$
|
3,631,617
| |
Government contracts
| | | | |
160,661
| | | | |
141,055
| | | | |
146,183
| |
Net investment income
| | | | |
13,915
| | | | |
16,424
| | | | |
10,964
| |
Administrative services fees and other income
| | | |
|
1,200
| | | |
|
2,712
| | | |
|
1,106
|
|
Total revenues
| | | |
|
4,153,667
| | | |
|
4,163,623
| | | |
|
3,789,870
|
|
| | | | | | | | | | | |
|
EXPENSES: | | | | | | | | | | | | |
Health plan services
| | | | |
3,318,415
| | | | |
3,363,742
| | | | |
3,104,010
| |
Government contracts
| | | | |
158,124
| | | | |
137,262
| | | | |
124,403
| |
General and administrative
| | | | |
442,326
| | | | |
448,713
| | | | |
373,623
| |
Selling
| | | | |
66,155
| | | | |
69,190
| | | | |
66,111
| |
Depreciation and amortization
| | | | |
6,882
| | | | |
4,202
| | | | |
6,500
| |
Interest
| | | | |
8,417
| | | | |
8,412
| | | | |
7,810
| |
Asset impairment
| | | |
|
—
| | | |
|
—
| | | |
|
84,690
|
|
Total expenses
| | | |
|
4,000,319
| | | |
|
4,031,521
| | | |
|
3,767,147
|
|
Income from operations before income taxes
| | | | |
153,348
| | | | |
132,102
| | | | |
22,723
| |
Income tax provision
| | | |
|
93,095
| | | |
|
73,734
| | | |
|
31,662
|
|
Net income (loss)
| | | |
$
|
60,253
| | | |
$
|
58,368
| | | |
$
|
(8,939
|
)
|
| | | | | | | | | | | |
|
Net income (loss) per share:
| | | | | | | | | | | | |
Basic
| | | |
$
|
0.78
| | | |
$
|
0.76
| | | |
$
|
(0.11
|
)
|
Diluted
| | | |
$
|
0.77
| | | |
$
|
0.75
| | | |
$
|
(0.11
|
)
|
| | | | | | | | | | | |
|
Weighted average shares outstanding:
| | | | | | | | | | | | |
Basic
| | | | |
77,288
| | | | |
77,172
| | | | |
80,235
| |
Diluted
| | | | |
78,405
| | | | |
78,157
| | | | |
80,235
| |
|
|
Health Net, Inc. |
Condensed Consolidated Balance Sheets |
(Amounts in thousands, except ratio data) |
|
|
|
|
|
September 30,
|
|
|
|
June 30,
|
|
|
|
September 30,
|
| | | |
2015
| | | |
2015
| | | |
2014
|
ASSETS | | | | | | | | | | | | |
Current Assets
| | | | | | | | | | | | |
Cash and cash equivalents
| | | |
$
|
972,908
| | | | |
$
|
756,797
| | | | |
$
|
1,114,558
| |
Investments - available for sale
| | | | |
2,221,278
| | | | | |
2,371,540
| | | | | |
1,664,830
| |
Premiums receivable, net
| | | | |
832,785
| | | | | |
434,067
| | | | | |
579,515
| |
Amounts receivable under government contracts
| | | | |
165,073
| | | | | |
223,160
| | | | | |
143,662
| |
Other receivables
| | | | |
430,987
| | | | | |
459,090
| | | | | |
307,369
| |
Deferred taxes
| | | | |
76,495
| | | | | |
62,983
| | | | | |
71,434
| |
Assets held for sale
| | | | |
—
| | | | | |
50,000
| | | | | |
50,000
| |
Other assets
| | | |
|
309,543
|
| | | |
|
501,200
|
| | | |
|
157,066
|
|
Total current assets
| | | | |
5,009,069
| | | | | |
4,858,837
| | | | | |
4,088,434
| |
Property and equipment, net
| | | | |
139,083
| | | | | |
80,816
| | | | | |
92,193
| |
Goodwill
| | | | |
558,886
| | | | | |
558,886
| | | | | |
558,886
| |
Other intangible assets, net
| | | | |
9,712
| | | | | |
10,415
| | | | | |
12,526
| |
Deferred taxes
| | | | |
16,520
| | | | | |
43,588
| | | | | |
34,580
| |
Investments - available for sale - noncurrent
| | | | |
20,064
| | | | | |
6,544
| | | | | |
3,055
| |
Other noncurrent assets
| | | |
|
270,097
|
| | | |
|
300,572
|
| | | |
|
173,230
|
|
Total Assets
| | | |
$
|
6,023,431
|
| | | |
$
|
5,859,658
|
| | | |
$
|
4,962,904
|
|
| | | | | | | | | | | |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | |
Current Liabilities
| | | | | | | | | | | | |
Reserves for claims and other settlements
| | | |
$
|
1,684,423
| | | | |
$
|
1,757,939
| | | | |
$
|
1,733,307
| |
Health care and other costs payable under government contracts
| | | | |
56,417
| | | | | |
75,092
| | | | | |
62,796
| |
Unearned premiums
| | | | |
121,061
| | | | | |
190,021
| | | | | |
125,363
| |
Accounts payable and other liabilities
| | | |
|
1,486,133
|
| | | |
|
1,168,014
|
| | | |
|
540,968
|
|
Total current liabilities
| | | | |
3,348,034
| | | | | |
3,191,066
| | | | | |
2,462,434
| |
Senior notes payable
| | | | |
399,658
| | | | | |
399,607
| | | | | |
399,453
| |
Deferred taxes
| | | | |
—
| | | | | |
—
| | | | | |
—
| |
Borrowings under revolving credit facility
| | | | |
210,000
| | | | | |
210,000
| | | | | |
100,000
| |
Other noncurrent liabilities
| | | |
|
277,922
|
| | | |
|
346,915
|
| | | |
|
235,393
|
|
Total Liabilities
| | | |
|
4,235,614
|
| | | |
|
4,147,588
|
| | | |
|
3,197,280
|
|
| | | | | | | | | | | |
|
Stockholders' Equity
| | | | | | | | | | | | |
Common stock
| | | | |
154
| | | | | |
154
| | | | | |
152
| |
Additional paid-in capital
| | | | |
1,489,532
| | | | | |
1,481,691
| | | | | |
1,432,513
| |
Treasury common stock, at cost
| | | | |
(2,454,067
|
)
| | | | |
(2,453,869
|
)
| | | | |
(2,272,180
|
)
|
Retained earnings
| | | | |
2,757,886
| | | | | |
2,697,633
| | | | | |
2,604,363
| |
Accumulated other comprehensive (loss) income
| | | |
|
(5,688
|
)
| | | |
|
(13,539
|
)
| | | |
|
776
|
|
Total Stockholders' Equity
| | | |
|
1,787,817
|
| | | |
|
1,712,070
|
| | | |
|
1,765,624
|
|
Total Liabilities and Stockholders' Equity
| | | |
$
|
6,023,431
|
| | | |
$
|
5,859,658
|
| | | |
$
|
4,962,904
|
|
| | | | | | | | | | | |
|
Debt-to-Total Capital Ratio
| | | | |
25.4
|
%
| | | | |
26.3
|
%
| | | | |
22.1
|
%
|
|
|
Health Net, Inc. |
Condensed Consolidated Statements of Cash Flows |
(Amounts in thousands) |
|
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
| | | |
September 30,
| | | |
June 30,
| | | |
September 30,
|
| | | |
2015
| | | |
2015
| | | |
2014
|
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | |
Net income (loss)
| | | |
$
|
60,253
| | | | |
$
|
58,368
| | | | |
$
|
(8,939
|
)
|
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
| | | | | | | | | | | | |
Amortization and depreciation
| | | | |
6,882
| | | | | |
4,202
| | | | | |
6,500
| |
Share-based compensation expense
| | | | |
7,724
| | | | | |
7,067
| | | | | |
6,109
| |
Deferred income taxes
| | | | |
9,289
| | | | | |
2,691
| | | | | |
(38,231
|
)
|
Excess tax benefits from share-based compensation
| | | | |
(74
|
)
| | | | |
(1,653
|
)
| | | | |
(241
|
)
|
Asset impairment
| | | | |
—
| | | | | |
—
| | | | | |
84,690
| |
Net realized gain on sale on investments
| | | | |
82
| | | | | |
(1,564
|
)
| | | | |
(346
|
)
|
Other changes
| | | | |
9,210
| | | | | |
12,296
| | | | | |
7,264
| |
Changes in assets and liabilities:
| | | | | | | | | | | | |
Premiums receivable and unearned premiums
| | | | |
(467,678
|
)
| | | | |
(105,357
|
)
| | | | |
264,032
| |
Other current assets, receivables and noncurrent assets
| | | | |
136,889
| | | | | |
(128,040
|
)
| | | | |
(34,671
|
)
|
Amounts receivable/payable under government contracts
| | | | |
30,893
| | | | | |
2,439
| | | | | |
12,369
| |
Reserves for claims and other settlements
| | | | |
(73,516
|
)
| | | | |
(155,839
|
)
| | | | |
244,985
| |
Accounts payable and other liabilities
| | | |
|
249,365
|
| | | |
|
45,115
|
| | | |
|
44,434
|
|
Net cash (used in) provided by operating activities
| | | |
|
(30,681
|
)
| | | |
|
(260,275
|
)
| | | |
|
587,955
|
|
| | | | | | | | | | | |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | |
Sales of investments
| | | | |
342,013
| | | | | |
447,939
| | | | | |
104,628
| |
Maturities of investments
| | | | |
23,911
| | | | | |
24,393
| | | | | |
21,064
| |
Purchases of investments
| | | | |
(110,065
|
)
| | | | |
(517,529
|
)
| | | | |
(133,014
|
)
|
Purchases of property and equipment
| | | | |
(17,731
|
)
| | | | |
(19,108
|
)
| | | | |
(18,439
|
)
|
Sales and purchases of restricted investments and other
| | | |
|
2,176
|
| | | |
|
1,258
|
| | | |
|
2,002
|
|
Net cash provided by (used in) investing activities
| | | |
|
240,304
|
| | | |
|
(63,047
|
)
| | | |
|
(23,759
|
)
|
| | | | | | | | | | | |
|
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | |
Proceeds from exercise of stock options and employee stock purchases
| | | | |
2,008
| | | | | |
6,860
| | | | | |
14,945
| |
Repurchases of common stock
| | | | |
(161
|
)
| | | | |
(298
|
)
| | | | |
(57,168
|
)
|
Excess tax benefits from share-based compensation
| | | | |
74
| | | | | |
1,653
| | | | | |
241
| |
Borrowings under financing arrangements
| | | | |
15,000
| | | | | |
95,000
| | | | | |
—
| |
Repayment of borrowings under financing arrangements
| | | | |
(15,000
|
)
| | | | |
(80,000
|
)
| | | | |
—
| |
Net (decrease) increase in checks outstanding, net of deposits
| | | | |
(8,230
|
)
| | | | |
8,230
| | | | | |
—
| |
Customer funds administered
| | | |
|
12,797
|
| | | |
|
30,321
|
| | | |
|
(10,753
|
)
|
Net cash provided by (used in) financing activities
| | | |
|
6,488
|
| | | |
|
61,766
|
| | | |
|
(52,735
|
)
|
| | | | | | | | | | | |
|
Net increase (decrease) in cash and cash equivalents
| | | | |
216,111
| | | | | |
(261,556
|
)
| | | | |
511,461
| |
Cash and cash equivalents, beginning of period
| | | |
|
756,797
|
| | | |
|
1,018,353
|
| | | |
|
603,097
|
|
Cash and cash equivalents, end of period
| | | |
$
|
972,908
|
| | | |
$
|
756,797
|
| | | |
$
|
1,114,558
|
|
|
|
Health Net, Inc. |
SEGMENT INFORMATION |
($ in thousands, except per share and PMPM data) |
|
The following table presents Health Net's operating segment
information.
|
|
|
|
Quarter Ended September 30, 2015
|
|
|
Quarter Ended June 30, 2015
|
|
|
Quarter Ended September 30, 2014
|
| |
Western
|
| |
| |
| | | |
Western
|
| |
| |
| | | |
Western
|
| |
| |
| |
| |
Region
| |
Government
| |
Corporate/
| | | | |
Region
| |
Government
| |
Corporate/
| | | | |
Region
| |
Government
| |
Corporate/
| | |
| |
Operations1 |
|
Contracts2 |
|
Other3 |
|
Consolidated
| | |
Operations1Contracts2Other4Consolidated
| | |
Operations1 |
|
Contracts2 |
|
Other5 |
|
Consolidated
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Commercial premiums
| |
$
|
1,412,264
| | | | | | |
$
|
1,412,264
| | |
$
|
1,412,920
| | | | | | |
$
|
1,412,920
| | |
$
|
1,430,769
| | | | | | |
$
|
1,430,769
| |
Medicare premiums
| | |
778,237
| | | | | | | |
778,237
| | | |
782,412
| | | | | | | |
782,412
| | | |
763,327
| | | | | | | |
763,327
| |
Medicaid premiums
| | |
1,668,091
| | | | | | | |
1,668,091
| | | |
1,673,083
| | | | | | | |
1,673,083
| | | |
1,397,732
| | | | | | | |
1,397,732
| |
Dual Eligibles premiums
| |
|
119,299
|
|
|
|
|
|
|
|
119,299
| | |
|
135,017
|
|
|
|
|
|
|
|
135,017
| | |
|
39,789
|
|
|
|
|
|
|
|
39,789
|
|
Health plan services premiums
| | |
3,977,891
| | | | | | | |
3,977,891
| | | |
4,003,432
| | | | | | | |
4,003,432
| | | |
3,631,617
| | | | | | | |
3,631,617
| |
Government contracts
| | | | |
160,661
| | | | |
160,661
| | | | | |
141,055
| | | | |
141,055
| | | | | |
146,183
| | | | |
146,183
| |
Net investment income
| | |
13,915
| | | | | | | |
13,915
| | | |
16,424
| | | | | | | |
16,424
| | | |
10,964
| | | | | | | |
10,964
| |
Administrative services fees and other income
| |
|
1,200
|
|
|
|
|
|
|
|
1,200
| | |
|
2,712
|
|
|
|
|
|
|
|
2,712
| | |
|
1,106
|
|
|
|
|
|
|
|
1,106
|
|
Total revenues
| | |
3,993,006
| | | |
160,661
| | | | |
4,153,667
| | | |
4,022,568
| | | |
141,055
| | | | |
4,163,623
| | | |
3,643,687
| | | |
146,183
| | | | |
3,789,870
| |
Health plan services
| | |
3,318,415
| | | | | | | |
3,318,415
| | | |
3,363,742
| | | | | | | |
3,363,742
| | | |
3,104,010
| | | | | | | |
3,104,010
| |
Government contracts
| | | | |
158,158
| | |
(34
|
)
| | |
158,124
| | | | | |
137,248
| | |
14
| | | |
137,262
| | | | | |
123,571
| | |
832
| | | |
124,403
| |
Premium tax
| | |
71,374
| | | | | | | |
71,374
| | | |
67,954
| | | | | | | |
67,954
| | | |
53,417
| | | | | | | |
53,417
| |
Health insurer fee
| | |
58,408
| | | | | | | |
58,408
| | | |
58,500
| | | | | | | |
58,500
| | | |
31,947
| | | | | | | |
31,947
| |
Other ACA fees
| | |
22,163
| | | | | | | |
22,163
| | | |
21,495
| | | | | | | |
21,495
| | | |
26,643
| | | | | | | |
26,643
| |
Administrative expenses
| |
|
268,628
|
|
|
|
|
|
21,753
|
|
|
|
290,381
| | |
|
274,610
|
|
|
|
|
|
26,154
|
|
|
|
300,764
| | |
|
241,352
|
|
|
|
|
|
20,264
|
|
|
|
261,616
|
|
Total general and administrative
| | |
420,573
| | | | | |
21,753
| | | |
442,326
| | | |
422,559
| | | | | |
26,154
| | | |
448,713
| | | |
353,359
| | | | | |
20,264
| | | |
373,623
| |
Selling
| | |
66,155
| | | | | | | |
66,155
| | | |
69,190
| | | | | | | |
69,190
| | | |
66,111
| | | | | | | |
66,111
| |
Depreciation and amortization
| | |
6,882
| | | | | |
—
| | | |
6,882
| | | |
3,958
| | | | | |
244
| | | |
4,202
| | | |
6,500
| | | | | | | |
6,500
| |
Interest
| | |
8,417
| | | | | | | |
8,417
| | | |
8,412
| | | | | | | |
8,412
| | | |
7,810
| | | | | | | |
7,810
| |
Asset impairment
| |
|
|
|
|
|
—
|
|
|
|
—
| | |
|
|
|
|
|
—
|
|
|
|
—
| | |
|
|
|
|
|
84,690
|
|
|
|
84,690
|
|
Total expenses
| |
|
3,820,442
|
|
|
|
158,158
|
|
|
21,719
|
|
|
|
4,000,319
| | |
|
3,867,861
|
|
|
|
137,248
|
|
|
26,412
|
|
|
|
4,031,521
| | |
|
3,537,790
|
|
|
|
123,571
|
|
|
105,786
|
|
|
|
3,767,147
|
|
Income (loss) from operations before income taxes
| | |
172,564
| | | |
2,503
| | |
(21,719
|
)
| | |
153,348
| | | |
154,707
| | | |
3,807
| | |
(26,412
|
)
| | |
132,102
| | | |
105,897
| | | |
22,612
| | |
(105,786
|
)
| | |
22,723
| |
Income tax provision (benefit)
| |
|
98,812
|
|
|
|
1,182
|
|
|
(6,899
|
)
|
|
|
93,095
| | |
|
82,300
|
|
|
|
1,587
|
|
|
(10,153
|
)
|
|
|
73,734
| | |
|
61,085
|
|
|
|
8,918
|
|
|
(38,341
|
)
|
|
|
31,662
|
|
Income (loss) from operations
| |
$
|
73,752
|
|
|
$
|
1,321
|
|
$
|
(14,820
|
)
|
|
$
|
60,253
| | |
$
|
72,407
|
|
|
$
|
2,220
|
|
$
|
(16,259
|
)
|
|
$
|
58,368
| | |
$
|
44,812
|
|
|
$
|
13,694
|
|
$
|
(67,445
|
)
|
|
$
|
(8,939
|
)
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Basic earnings (loss) per share
| |
$
|
0.95
| | |
$
|
0.02
| |
$
|
(0.19
|
)
| |
$
|
0.78
| | |
$
|
0.94
| | |
$
|
0.03
| |
$
|
(0.21
|
)
| |
$
|
0.76
| | |
$
|
0.56
| | |
$
|
0.17
| |
$
|
(0.84
|
)
| |
$
|
(0.11
|
)
|
Diluted earnings (loss) per share
| |
$
|
0.94
| | |
$
|
0.02
| |
$
|
(0.19
|
)
| |
$
|
0.77
| | |
$
|
0.92
| | |
$
|
0.03
| |
$
|
(0.21
|
)
| |
$
|
0.75
| | |
$
|
0.55
| | |
$
|
0.17
| |
$
|
(0.84
|
)
| |
$
|
(0.11
|
)
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Basic weighted average shares outstanding
| | |
77,288
| | | |
77,288
| | |
77,288
| | | |
77,288
| | | |
77,172
| | | |
77,172
| | |
77,172
| | | |
77,172
| | | |
80,235
| | | |
80,235
| | |
80,235
| | | |
80,235
| |
Diluted weighted average shares outstanding
| | |
78,405
| | | |
78,405
| | |
77,288
| | | |
78,405
| | | |
78,157
| | | |
78,157
| | |
77,172
| | | |
78,157
| | | |
81,513
| | | |
81,513
| | |
80,235
| | | |
80,235
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Pretax margin
| | |
4.3
|
%
| | | | | | | | | |
3.8
|
%
| | | | | | | | | |
2.9
|
%
| | | | | | |
Western Region Operations premium yield
| | |
1.2
|
%
| | | | | | | | | |
8.0
|
%
| | | | | | | | | |
13.7
|
%
| | | | | | |
Western Region Operations premium PMPM
| |
$
|
405.73
| | | | | | | | | |
$
|
414.68
| | | | | | | | | |
$
|
400.91
| | | | | | | |
Western Region Operations health care cost trend
| | |
(1.2
|
)%
| | | | | | | | | |
7.1
|
%
| | | | | | | | | |
15.3
|
%
| | | | | | |
Western Region Operations health care cost PMPM
| |
$
|
338.46
| | | | | | | | | |
$
|
348.42
| | | | | | | | | |
$
|
342.66
| | | | | | | |
Western region operations health plan services MCR
| | |
83.4
|
%
| | | | | | | | | |
84.0
|
%
| | | | | | | | | |
85.5
|
%
| | | | | | |
Administrative expense ratio
| | |
6.8
|
%
| | | | | | | | | |
6.9
|
%
| | | | | | | | | |
6.6
|
%
| | | | | | |
Total G&A expense ratio
| | |
10.6
|
%
| | | | | | | | | |
10.5
|
%
| | | | | | | | | |
9.7
|
%
| | | | | | |
Selling costs ratio
| | |
1.7
|
%
| | | | | | | | | |
1.7
|
%
| | | | | | | | | |
1.8
|
%
| | | | | | |
|
1 |
|
Includes the operations of the company's commercial, Medicare,
Medicaid and Dual Eligibles health plans in California, Arizona,
Oregon and Washington, as well as the operations of the company's
health and life insurance companies, primarily in Arizona,
California, Oregon and Washington, and the operations of the
company's behavioral health and pharmaceutical services subsidiaries
in several states including California, Arizona and Oregon.
|
| |
|
2 | |
Includes administrative services provided under the T-3 Managed Care
Support Contract for the TRICARE North Region and other health
care-related Department of Defense and Veterans Affairs government
contracts.
|
| |
|
3 | |
Primarily includes costs related to the company's transaction with
Cognizant. Also includes costs related to the company's pending
merger with Centene.
|
| |
|
4 | |
Primarily includes costs related to the company's transaction with
Cognizant. Also includes severance expenses.
|
| |
|
5 | |
Primarily includes costs related to the company's transaction with
Cognizant and related asset impairment.
|
| |
|
Health Net, Inc.
Disclosures Regarding Non-GAAP Financial Information
($ in millions)
Set forth below is a reconciliation of adjusted days claims payable
(DCP), a non-GAAP financial measure, to the comparable GAAP financial
measure, DCP. DCP is calculated by dividing the amount of reserve for
claims and other settlements (claims reserve) by health plan services
cost (health plan costs) during the quarter and multiplying that amount
by the number of days in the quarter. In this press release, management
presents an adjusted DCP metric which subtracts capitation and Medicare
Advantage-Prescription Drug (MAPD) payables/costs from the claims
reserve and health plan costs.
Management believes that adjusted DCP provides useful information to
investors because the adjusted DCP calculation excludes from both claims
reserve and health plan costs amounts related to health care costs for
which no or minimal reserves are maintained. Therefore, management
believes that adjusted DCP may present a more accurate reflection of DCP
than does GAAP DCP, which includes such amounts. This non-GAAP financial
information should be considered in addition to, not as a substitute
for, financial information prepared in accordance with GAAP.
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
nonrecurring items.
|
Reconciliation of Days Claims Payable: |
|
|
|
Q3 2015
|
|
|
|
Q2 2015
|
|
|
|
Q3 2014
|
(1)
|
|
Reserve for Claims and Other Settlements - GAAP
| | | |
$
|
1,684.4
| | | | | |
1,757.9
| | | | | |
1,733.3
| |
| |
Less: Capitation and MAPD Payables
| | | |
|
(251.2
|
)
| | | |
|
(374.4
|
)
| | | |
|
(407.1
|
)
|
(2)
| |
Reserve for Claims and Other Settlements - Adjusted
| | | |
$
|
1,433.2
| | | | | |
1,383.5
| | | | | |
1,326.2
| |
| | | | | | | | | | | | | |
|
(3)
| |
Health Plan Services Cost - GAAP
| | | |
$
|
3,318.4
| | | | |
$
|
3,363.7
| | | | |
$
|
3,104.0
| |
| |
Less: Capitation and MAPD Costs
| | | |
|
(1,237.6
|
)
| | | |
|
(1,233.0
|
)
| | | |
|
(1,236.0
|
)
|
(4)
| |
Health Plan Services Cost - Adjusted
| | | |
$
|
2,080.8
| | | | |
$
|
2,130.7
| | | | |
$
|
1,868.0
| |
| | | | | | | | | | | | | |
|
(5)
| |
Number of Days in Period
| | | | |
92
| | | | | |
91
| | | | | |
92
| |
| | | | | | | | | | | | | |
|
= (1) / (3) * (5) Days Claims Payable - GAAP Basis (using end of
period reserve amount)
| | | | |
46.7
| | | | | |
47.6
| | | | | |
51.4
| |
= (2) / (4) * (5) Days Claims Payable - Adjusted Basis (using end of
period reserve amount)
| | | | |
63.4
| | | | | |
59.1
| | | | | |
65.3
| |
|
|
Health Net, Inc. |
Reconciliation of Reserves for Claims and Other Settlements |
($ in millions) |
|
|
|
|
| Health Plan Services |
| | | |
YTD 9/2015
|
|
|
|
FY 2014
|
|
|
|
FY 2013
|
| | | | |
|
|
| |
|
|
| |
Reserve for claims (a), beginning of period
| | | |
$
|
1,186.3
| | | | |
$
|
807.4
| | | | |
$
|
808.7
| |
Incurred claims related to:
| | | | | | | | | | | | |
Current Year (f)
| | | | |
4,777.0
| | | | | |
5,613.0
| | | | | |
4,666.0
| |
Prior Years (c)
| | | |
|
(109.4
|
)
|
|
|
|
|
(14.6
|
)
|
|
|
|
|
(56.2
|
)
|
Total Incurred (b)
| | | | |
4,667.6
| | | | | |
5,598.4
| | | | | |
4,609.8
| |
| | | | | | | | | | | |
|
Paid claims related to:
| | | | | | | | | | | | |
Current Year
| | | | |
3,540.8
| | | | | |
4,443.2
| | | | | |
3,872.5
| |
Prior Years
| | | |
|
1,035.3
|
|
|
|
|
|
776.3
|
|
|
|
|
|
738.6
|
|
Total Paid (b)
| | | |
|
4,576.1
|
|
|
|
|
|
5,219.5
|
|
|
|
|
|
4,611.1
|
|
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
Reserve for claims (a), end of period
| | | | |
1,277.8
| | | | | |
1,186.3
| | | | | |
807.4
| |
Add:
| | | | | | | | | | | | |
Claims Payable (d)
| | | | |
104.5
| | | | | |
175.4
| | | | | |
67.0
| |
Other (e)
| | | | |
302.1
| | | | | |
534.3
| | | | | |
109.7
| |
| | | |
|
|
|
|
|
|
|
|
|
Reserves for claims and other settlements, end of period
| | | |
$
|
1,684.4
|
|
|
|
|
$
|
1,896.0
|
|
|
|
|
$
|
984.1
|
|
|
(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. Negative amounts in this line
represent favorable development in estimated prior years' health
care costs. Positive amounts in this line represent unfavorable
development in estimated prior years' health care costs. The
favorable developments related to prior years do not directly
correspond to an increase in our operating results because any
favorable prior period reserve development increases current period
net income only to the extent that the current period provision for
adverse deviation (see footnote (f)) is less than the benefit
recognized from the prior period favorable development. The
favorable development related to prior years that was recorded in
the nine months ended September 30, 2015 consisted of $31.7 million
in favorable prior year development primarily due to the growth of
the new Medicaid expansion population in 2014 and a release of $77.7
million of the provision for adverse deviation held at December 31,
2014. For a detailed description of reserve development for fiscal
years 2014 and 2013, see Note 2 to the Consolidated Financial
Statements in the company's Annual Report on Form 10-K for the year
ended December 31, 2014.
|
| |
|
(d)
| |
Includes amount accrued for litigation and regulatory-related
expenses.
|
| |
|
(e)
| |
Includes accrued capitation, shared risk settlements, provider
incentives and other reserve items.
|
| |
|
(f)
| |
Our IBNR estimate also includes a provision for adverse deviation,
which is an estimate for known environmental factors that are
reasonably likely to affect the required level of IBNR reserves.
Such amounts were $84.3 million, $77.7 million and $53.4 million as
of September 30, 2015, December 31, 2014, and December 31, 2013,
respectively.
|
| |
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20151102005499/en/
Contacts:
Health Net, Inc.
Investor Contact:
Peter
O’Neill, 818-676-8692
peter.oneill@healthnet.com
or
Media
Contact:
Brad Kieffer, 818-676-6833
brad.kieffer@healthnet.com
Source: Health Net, Inc.
© 2024 Canjex Publishing Ltd. All rights reserved.