Health Net

Health Net, Inc.

Type	Public
Traded as	NYSE: HNT
Industry	Managed health care
Headquarters	Woodland Hills, Los Angeles, California
Key people	Jay Gellert (CEO)
Products	Health insurance
Employees	9,300
Website	healthnet.com

Health Net, Inc. is among the United States of America's largest publicly traded managed health care companies. The company's HMO, POS, insured PPO and government contracts subsidiaries provide health benefits to approximately 6.6 million individuals in all 50 states and the District of Columbia through group, individual, Medicare, Medicaid, Tricare and Veterans Affairs programs. Health Net's behavioral health services subsidiary, MHN, provides behavioral health, substance abuse and employee assistance programs (EAPs) to approximately 7.3 million individuals in various states, including the company's own health plan members. 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.

Health Net's headquarters are located in Woodland Hills, Los Angeles, California.

History

Health Net of California was first established as a non-profit corporation in 1977. A 1992 state of California order permitted the health care company to convert itself from a nonprofit into a for-profit company. At the same time, the state order required the new company to transfer 80% of its equity to the California Wellness Foundation, a successor charity to its non-profit status.^[1] Under the terms of the California Department of Corporations' conversion order approving Health Net's for-profit status, the California Wellness Foundation received $300 million plus 80 percent of the equity of Health Net's parent holding company.^[2]

In August 1993, Health Net merged with Qualmed to form Health Systems International. The merger created a 1.8 million member HMO with a market value of $725 million, one of the biggest publicly traded health care companies at the time. Dr. Malik Hasan had founded Qual-Med, with his wife Seeme Hasan in southern Colorado. Qual-Med first went public in June 1991.^[3]

In May 1997 Health Systems International merged with Foundation Health Corporation to form Foundation Health Systems. At the time of the merger the newly created Foundation Health was valued at $1.27 billion and was the 4th largest health insurer in the U.S. and the second largest HMO in California. It had more than 5 million members in 17 states and in 2.8 California.^[3] In November 2000 Foundation Health Systems officially changed its name to Health Net, Inc. when the company started trading on the New York Stock under the symbol HNT.^[4][5]

State-specific divisions existed under a variety of names prior to the 2000 renaming of Health Net, Inc.:

• Health Net of California Inc., the company’s California division, incorporated in 1977^[6]
• Founded as QualMed Oregon Health Plan, it was officially renamed Health Net Health Plan of Oregon in 2000, Inc.^[7]
• Health Net of Arizona, Inc. was founded in 1981, as Intergroup of Arizona by a multi-specialty medical group in Tucson. In 1994, Intergroup became a wholly owned subsidiary of Foundation Health Corporation.^[8]

Divestures

In July 2009, UnitedHealth Group bought Health Net's northeastern licensed subsidiaries for $450 million. At the time,the subsidiaries had 578,000 members in Connecticut, New York and New Jersey.^[9][10] In January 2012, Health Net sold its Medicare Prescription Drug Plan business to a subsidiary of CVS Caremark for approximately $160 million in cash.^[11]

Divisions and Subsidiaries

Health Net Insurance Health Net offers health insurance plans for individuals and families, groups/companies, and Medicare beneficiaries in Arizona, California, Oregon, and Washington.29 In addition, Health Net provides health coverage for California State Plans such as “Healthy Families” and “Medi-Cal.”^[12]

• Its individual and family plans include Preferred Provider Organization (PPO), Health Maintenance Organization (HMO), short term health insurance plans, and health savings account (HSA) health insurance options.

• The company’s large and small business portfolio of products include HMO, PPO, tailored networks, health savings account HSA and "Salud", a plan specifically for Hispanics.^[13]

• The health insurance company offers public health insurance through California State programs such as Medicaid, Healthy Families, Healthy Kids (welfare), and Medi-Cal. The state of California offers low-cost health insurance for children under 19 years of age via its Healthy Families Program; while, low income individuals can enroll for California’s Medi-Cal.^[14]

Health Net Federal Services, Inc. (HNFS) is the government operations division of Health Net. It is the TRICARE North region provider as of July 1, 2004. Health Net's bid for the Tricare North region business contract, effective starting April 1, 2010, was given to Aetna,^[15] however Aetna's contract has been suspended pending the outcome of Health Net's protest. On November 4, 2009 the GAO upheld Health Net's protest.^[16] On May 13, 2010 Health Net Federal Services was formally awarded the contract as the TRICARE Managed Care Support (MCS) contractor for the TRICARE North Region by the United States Department of Defense (DoD).^[17] The announcement followed the May 5, 2010 news of the DoD's intent to award.

HNFS was awarded the T-3 TRICARE39 North Region contract beginning on April 1, 2011, which includes the following states: Connecticut, Delaware, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, Washington DC, West Virginia, and Wisconsin.^[5] HNFS also provides health care for U.S. Veterans nationwide. HNFS’s programs include community based outpatient clinics, recovery audit services, and rural mental health programs.^[5]

Health Net Dental is based in Irvine, CA and offers dental coverage for Healthy Families, Los Angeles Medi-Cal and Sacramento Medi-Cal customers.

Managed Health Network, Inc. is a subsidiary that offers Employee assistance program (EAPs), behavioral health solutions, integrated disease management, as well as work/life balance, wellness, employee productivity and organizational efficiency programs.^[18]

Awards and Recognitions

In 2010, Healthnet.com and the newly launched Health Net Mobile app received numerous Awards: Official Honoree (Insurance Category) - 2010 Webby Awards^[19] Silver Award Winner (Insurance Site) - 2010 W3 Awards^[20] Silver Award Winner (Health & Wellness Mobile App) - 2010 W3 Awards^[20]

Sponsorships and Philanthropy

Health net does not value its brokers.

Health Net Foundation

The Health Net Foundation was created in 2007 as the philanthropic arm of Health Net. It makes charitable contributions to organizations that promote wellness and preventive care, combat childhood obesity and support health programs for military families in communities where Health Net does business. Health Net launched its Foundation in September 2007 by providing a Three-Year $1.35 Million Grant to the American Heart Association.^[21] The Health Net Foundation has provided other grants such as the $175,000 given to twelve California schoolbased health centers and community medical clinics to improve dental care and oral health.^[22]

Other Sponsorships

In addition to its Foundation, Health Net Federal Services has also participated in philanthropic causes. The division established a scholarship to be administered through National Military Family Association (NMFA) designating $150,000 to be awarded to military spouses in the TRICARE North Region.^[5] Health Net Federal Services sponsors military-related sports-related events and veterans’ sports clinics such as the National Veterans Golden Age Games in Honolulu^[23] and the Veterans Wheelchair Games.

Since the 1980s, Health Net has been a sponsor of the March of Dimes' largest fund-raising event, March for Babies. In 2008, more than 300 Health Net associates walked in March for Babies events across California contributing more than $325,000 through various fund-raising efforts.

For a number of years, Health Net sponsored the Health Net Pro Cycling Team, which now is sponsored by UnitedHealth Group. Health Net Pro Cycling Team Presented by Maxxis was run by Momentum Sports Group and based in the United States. Health Net won the team title in the 2004, 2005, 2006 and 2007 USA Cycling National Racing Calendar series competition.

Quality of care

Lack of Broker Appreciation In California's Health Care Quality Report Card 2011 Edition by California's Office of the Patient Advocate, HealthNet (CA) received 2 out of 4 stars in Meeting National Standards of Care.^[24]

Controversies

Health Net does not value its brokers. Therefore all brokers and agents should stop selling Health Net plans effective immediately.

Restatement

On February 11, 2004, the company restated its results for the first three quarters of 2003 and for the full years of 2002 and 2001. The adjustments amounted to a $4.4 million increase in net income for the first three quarters of 2003, or about 3 cents a share.^[25]

Patsy Bates Lawsuit

In 2007, Patsy Bates, a California beautician, sued Health Net claiming that they wrongfully terminated her care in the middle of her chemotherapy treatments. Internal company documents made public during the lawsuit revealed that the company had tied bonuses to dropping coverage in order to encourage its analysts in charge of recission reviews to discover reasons (such as application fraud) to discontinue coverage to clients who the company deems will cost them money. The company pointed out that Bates had withheld critical information - that she had damaged her heart by the use of fen-phen for diet purposes and stated an inaccurate weight; Bates replied that the insurance broker had filled out the form for her and she had been busy in her salon.^[26] In February 2008 the court ruled in favor of Bates, ordering Health Net to pay $8.4 million in punitive damages and $750,000 for emotional distress.^[27]

Connecticut Attorney General Investigation

In November 2009, Connecticut attorney general Richard Blumenthal said Health Net lost the personal information of nearly 450,000 state residents and "failed to inform consumers for six months."^[28][29] The data on the drive was unencrypted and included information about financial, health, and personal information.^[29] It was discovered missing from the company's Connecticut office.^[29] Health Net circulated a letter to customers in December 2009, including an offer of free credit protection from a company called Debix for two years.

CMS Suspension

On November 19, 2010, the Centers for Medicare and Medicaid Services (CMS) immediately suspended Health Net because the insurer improperly administered the Medicare drug benefit in contracts for its national prescription drug plan and local Medicare Advantage prescription drug plans.^[30] The suspension required Health Net to cease marketing and enrollment of new members of all Health Net Medicare Advantage Prescription Drug (MAPD) and stand-alone Prescription Drug Plan (Part D) contracts, effective November 20, 2010. The sanctions relate to compliance with certain Part D requirements. The suspension did not affect existing Health Net Medicare enrollees.^[31]

Although the company was allowed to resume marketing its Medicare products in August 2011, on January 6, 2012, the company agreed to sell its Medicare stand-alone Prescription Drug Plan (PDP) business to CVS Caremark Corp. (CVS) for about $160 million in cash. Health Net would continue to provide prescription drug plans as part of its Medicare Advantage plan offerings.^[32]

Network Data Breach

On March 14, 2011 Health Net disclosed that nine server drives, containing personal information of 1.9 million members and providers, went missing from its Rancho Cordova (CA) data center. The insurer found out about the security lapse on January 21 when IBM, which manages the company's IT infrastructure, informed Health Net it was unable to locate the missing server drives.^[33]

Health Net's missing computer records represent the largest data breach reported to the Office for Civil Rights (OCR) website and the third largest medical information breach in the Privacy Rights Clearinghouse database.^[34] The data breech effects roughly 1.9 million people including 845,000 Californians, 100,000 Oregonians, 3,500 Vermonters and thousands more in other states. 

The company offered two years free credit monitoring along with identity theft insurance to those affected. The Californian Department of Managed Health Care and the Department of Insurance have announced separate investigations into the breach.^[35]

Los Angeles County Medical Association Lawsuit

On September 13, 2012, the Los Angeles County Medical Association joined two patients in suing Health Net for illegally denying medically necessary treatment, including cancer care. The lawsuit alleges that Health Net routinely and systematically denies claims based on its own definition of "medical necessity", violating well-established standards set forth by California law. According to the suit, Health Net is "the leader" in this calculated corporate practice to avoid paying claims.^[36][37]

See also

• Top 100 US Federal Contractors

References

External links

• Health Net Federal Services website

Rancho Cordova's Health Net division may see layoffs

• http://www.sacbee.com/103/story/766746.html

Health insurer tied bonuses to dropping sick policyholders

• http://www.latimes.com/business/la-fi-insure9nov09,1,5878955,print.story?ctrack=5&cset=true

February 23, 2008: Health Insurer Fined $9M for Dropping Calif. Breast Cancer Patient in Middle of Her Chemo

• http://www.rawstory.com/news/mochila/Insurer_that_cut_client_s_care_fine_02232008.html