health net 2007 #5 summer quarterly

Quarterly Magazine for Health Net Associates • Summer 2007

Looking at Health Net’s vision for the future

B e c o m i n g aG R E A Tcustomer solutionsC O M P A N Y

To understand what thecustomer wants–ask!Is a customer solutions strategy the answer?page 14

Becoming a GREAT customer solutions companypage 4

Right provider, right care, knownprice–paid for at the point of serviceCreating customer solutions through innovationpage 10

Planning the Web portal of the futureA new approach to business, a new approach to technologypage 18

Issue Highlights

OUR MISSION

Health Net will be recognized as a great customer solutions company

Health Net’s goals are to pursue profitable Growth, strengthen our operational Performance and make Health Net a Great Place to Work. These goals support our vision–to become a great customer solutions company. Our strategic themes are a part of our plan to achieve those goals and that vision. This supports our mission: To help people be healthy, secure and comfortable.

OUR STRATEGIC THEMES

GROWTHEfforts to expand and increase the

quality of Health Net’s business

Winning in our existingcommercial markets

Maintaining our government program

momentum

Pursuing value-basedopportunities

Repositioning businessprocesses for competitive

advantage

GREAT PLACE TO WORKA high-performance environment

to support associates in serving our customers

PERFORMANCEProgress to support Health Net’s

strategy and financial goals

ENVI RONMENTALLYAS TUTEO

PERATI ONALLYEFFECTI VE

OUR GOALS

1 2 3 4

OUR VISION

To help people be healthy, secure and comfortable

SHAPING HEALTH NET ’S FUTURE

“Customer solutions” is a term we hear quite a bit thesedays, and that’s good. Our vision for Health Net and ourstrategic plan are all about moving from a strong customersolutions company to a great customer solutions company.I rarely see a PowerPoint presentation that doesn’t havethe term embedded, sometimes on every page.

Customer solutions begins with great customer service.People turn to us in times of need, and serving them is the most critical thing thatwe do. It is the foundation for all that we do. Customer solutions builds on thatfoundation and goes even further. You have to really understand your customers.You have to be a partner to them.

This issue of Connections focuses on that. Read it thoroughly, and I promise thatyou’ll start thinking about our business and the future of our industry in completelynew and different ways. Kathleen Richard has championed this concept from the verybeginning. Her in-depth interview not only clearly defines what we mean when wesay “customer solutions,” but also gives us a road map for how we can get there.

Next, a story about innovation in managed care administration. Imagine a trip toyour doctor’s office where the “swipe” of a plastic card gives your provider all yourbenefit information online. The card can draw funds from your flexible spendingaccount (FSA) or act as a debit/credit card. Eventually, the card will be part of anelectronic health care record for every member. It’s in the not-too-distant future–we’re already working on Health Net’s card services strategy.

To create solutions to customers’ problems–to help them meet their needs andachieve their goals–we have to understand them. We’ve asked our current andpotential employer-customers what they want, and the message came throughloud and clear: They want a business partner. Read about our customer research,its implications and how it is helping us to better understand our customers–to

provide satisfaction every time we touch their world.

The key to all of this is reaching out to our customers in as many different ways as possible. More and more, Health Net touches its customers and businesspartners through our Web portals. Electronic transactions are a part of many of the basic services we provide. Technology is the foundation for our customer solutions strategy, and that’s why a cross-functional group of stakeholders met last May to focus on our Web portal strategy. A Web team is working diligently toalign our four Web portals (member/consumer, employer, provider and broker) tosupport our customer solutions strategy and to ensure satisfied loyal customers and business partners.

Our goal is to be the leader–a GREAT customer solutions managed care company.Read about our bright future in this issue of Connections.

Sincerely,

Jay Gellert

President & CEO

Health Net, Inc.

summer 2007 connections 3

Dear Associates,

Health Net, Inc. is among the nation’s largest publiclytraded managed health carecompanies. Its mission is to help people be healthy,secure and comfortable. For more information, go to www.healthnet.com.

This publication contains forward-looking statements within the meaningof Section 21E of the SecuritiesExchange Act of 1934, as amended,and Section 27A of the Securities Actof 1933, as amended, that involve anumber of risks and uncertainties. Allstatements, other than statements ofhistorical information provided herein,may be deemed to be forward-lookingstatements. Readers are cautionednot to place undue reliance on theseforward-looking statements. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after thedate of this publication.

Connections is published byHealth Net, Inc. Its purpose is to promote, encourage andembrace the exchange of information and ideas among all Health Net associates.

David W. OlsonSenior Vice PresidentCorporate Communications

Betty Z. HenryVice PresidentInternal Communications

Margaret LongoDirectorInternal Communications

We welcome your feedback. Please [email protected].

For internal distribution only.

Health Net, Inc.21650 Oxnard StreetWoodland Hills, CA 91367

Connections: What do we mean by theterm a “customer solutions” company?Richard: There are two key elements. First, it’sabout targeting certain types of customers. Theseare the people who you believe are a fit with thesolutions or services you want to deliver. Second,it’s about integration– integrating a number of elements that have to be offered at the point of service in order to better meet the customer’s need or solve their problem. Those two elementsare essential to a customer solutions strategy: targeting your customers and seamlessly integratingmultiple services in order to provide solutions.

Connections: Who are Health Net’s target customers? Richard: At a very high level, we think about themember and the employer as our customers. That’snot enough to say who the “targeted” customer is,but at a basic level, our customers are the employerand the member.

Our senior management team made a very specific decision that we wouldn’t think of brokersand providers as customers. They’re our businesspartners. They have different information needs.What we do for a customer is different than whatwe do with a business partner. For example, I mayshare details of what I’m working on internallywith my business partner that I wouldn’t sharewith my customer. The way you work with a brokerto sell a service to an employer is different fromthe way you serve a customer.

GROWTH

connections summer 20074

B e c o m i n g aG R E A T

customer solutionsC O M P A N Y

Health Net’s vision for the future is to be a great

customer solutions company. But, what exactly does that

mean? Connections editors asked Kathleen Richard,

enterprise officer, Health Net, Inc. and leader of the

customer solutions revolution about what it takes to be

a great customer solutions company and how Health

Net will achieve that.

This distinction between customers and businesspartners has actually helped us provide better serviceto providers and brokers. Take Web services as anexample: We’re moving our processes further intotheir front offices. The technology that supportsour shared processes doesn’t end at our gate andturn into paper flow at theirs.

Connections: How did Health Net starton its customer solutions journey? Richard: It started in the summer of 2005 with adiscussion about medical management. Someoneasked the question, “What do our customersvalue?” It quickly became obvious during that and subsequent conversations that we didn’tunderstand what our customers wanted–what our value proposition was.

That September, a group of us met with a consultant. It was a great brainstorming session.We looked at the Treacy model (see page 7), whichreally resonated with our team. We liked the ideasbehind operational efficiencies and customer intimacy– it seemed like a good framework.Unfortunately, we didn’t have any competitorinformation in the room or any process in place tothink it through. But, we did leave with a sense ofpurpose about what we needed to do.

The Executive Operating Team was formed rightafter that meeting, and, at the first LeadershipSummit, Steve Nelson acknowledged that we haddone a survey of senior leaders only to discoverthat there was a lot of confusion over what ourbusiness strategy was–what we were trying toaccomplish together. That lack of alignment wascreating confusion and misuse of resources. It wasa compelling business case to move forward on thisstrategy work.

Connections: How did you proceed? Richard: We formed a small team who had different regional and business unit perspectives.We agreed that we would use the Treacy modeland go to the various markets with a process to doresearch. For example, we weren’t sure if we wouldneed a different strategy in Arizona than we wouldneed in Connecticut, or a different strategy for

MHN than for Federal Services. But, we agreed that we would let the markets tell us; we wouldlet the research answer that question.

It’s fascinating that all the research pointed in the same direction. Different competitors drive what’s offered in different markets, but all customers want partners–someone who doesn’t just sell products or services, but offerssolutions to problems.

Connections: We used to hear about“customer intimacy.” What happened to that?Richard: Originally, we referred to “customer intimacy,” which is the terminology from theTreacy model, but the notion of solutions keptcoming up. “Customer solutions” is where we landed. “Solutions” companies, as opposed to “service” companies, share two characteristics:There is a greater number of services to bringtogether and the level of integration is more complex.



Connections: Can you give us an example?Richard: Think about a family who has just movedto a new location. They need a new provider, butthey don’t know who or where the doctors are. Alot has to come together to help them–networkservices, enrollment services, Web services–wehave to integrate all of these services to give them a solution to their problem.

Think of employers. They’re trying to figure outwhat to do about frequent absenteeism or workers’compensation; they want to offer better benefits,but they don’t want to pay more; they don’t wanttheir employees to have to change doctors becauseof network solutions they employ. The number ofservices we provide for that employer and the levelof integration for those services are fairly high.

Connections: So, how do we support thislevel of service and integration? Richard: Jay Gellert is very serious about ensuringthat we have a high-performing operating platformto support this strategy. At this year’s LeadershipSummit, he talked about how you can’t solve problems for your customers if you aren’t doing the basics well. Customers won’t give you the

opportunity. One of the highlights was when hesaid, “We’re going to target the customers we’regoing after, and we’re going to talk to them aboutwhat they need. That’s how we’ll make decisionsabout how we make investments, how we buildout our capabilities and where we put ourresources.”

Connections: Where are we now? Richard: We’ve got two work streams that deal with better targeting our customers. We’resegmenting our employers, based on what they’relooking for. Two important metrics to customersolutions companies are retention–how long yourcustomers stay customers–and penetration–thebreadth and depth of services you provide to a particular customer. What we’ve discovered is that we have many customers from a group we call “Bargain Hunters,” who are only interested in price and show little loyalty. We serve a much

smaller portion of the two segments that are looking for long-term partnership, but those arethe customers you want when you pursue a customer solutions strategy. We’re also doing aprofitability analysis to ensure that these targetedcustomers are going to be profitable customers as well.

On the member side, we’re looking at stratificationor segmentation based on what customers needfrom us. Who are the vulnerable populations? Forexample, how is what a pregnant woman needsdifferent from what a new mom needs? What is amember who is diabetic looking for? People tend tothink of segmentation as a marketing tool, but it’sfundamentally about how you serve your customers.

“Customers want partners–someone who doesn’t just sell products or services, but offers solutions.”

continued on page 8


The foundation for Health Net’s customer solutions strategy is

based, in part, on the Value Disciplines model of Michael Treacy

and Fred Wiersema. In their book The Discipline of Market Leaders,

the authors propose that successful companies provide the best

offer in the marketplace by excelling in one of three specific

value disciplines: operational excellence, product leadership or

customer intimacy.

Operational excellence is the result of efficiencies, reliabilityand convenience in operational processes that drive down cost.Product leadership requires breakthrough innovation in the formof products or services. Customer intimacy means effectively targeting specific customer segments and delivering a more preciseproduct or service to match their needs. Customer-intimate

companies are not about doing whatever the customer wants; nor do they try to be all things to all customers. Using data to target a select customer base, they offer products and services that create a total solution for that customer.

“As Health Net conducted market research, it became clear that our customerswanted better solutions to problems, not just better products and services,” saysKathleen Richard. Further research showed that the difference between a “customerservice” company and a “customer solutions” company is related to the number ofservices that need to be integrated to bring a solution to the customer. Our strategyisn’t based on selling a better health insurance policy; it’s based on helping employersmanage health costs while helping members get the right care. “That involves theintegration of multiple lines of service,” says Richard.

Treacy and Wiersema stipulate that themodel’s other two dimensions (operationalexcellence and product leadership) cannotbe neglected–the company needs to be “atparity” with competitors in the remainingtwo disciplines. But the strongest focusfor efforts and resources goes into a strategythat supports the main value discipline–for Health Net, customer solutions. A company dominates the market byimproving its value year after year.

T H E O R I G I N S O F

‘customer solut ions ’

Using data to target a selectcustomer base, they offerproducts and services that create a total solution for that customer.


Connections: At the Leadership Summit,you referenced a strategy for customersolutions. What does that strategyinvolve?Richard: If you look at what our targeted customerssay they are looking for, customer service is very high on the list. But, we still have some performance gaps in basic areas. How can you be a customer solutions company if you aren’t even getting the basics right? We need to addressthose challenges first.

We’re also looking at branding. Brand is thepromise you make about what you’ll do on behalfof your customers. Everything in the organizationhas to align to support that. It isn’t just about having a good advertising campaign or providinggreat customer service. What is the Health Netbrand promise? Right now, we have confusion over that. So, in 2007, we’re looking at which customers we’re targeting and what “brand value”looks like to them. “Customer solutions” is thehigh-level value proposition. Now, we’re drillingdown and building the brand architecture.

A customer solutions company still needs to be at parity in other areas of business, or (usingthe Treacy model) at parity in product leadershipand operational excellence. You have to do that if you’re going to be competitive. We’ve launched a team that’s looking at what “product parity”means–what we need to do to ensure that Health Net doesn’t have any gaps in the product

lineup. In operational excellence, we’re looking atwhat we need to do to bring operational efficiencywhere it needs to be. In 2008, with research completed, we’ll start closing gaps to be at parity.That will put us in a position by 2009 to begin tobreak out of the pack on all those issues that areimportant to our targeted customers, and, by 2010,be seen as the leader in customer solutions.

Connections: What are the possibilitiesfor Health Net in partnering with financial institutions to better serve our customers?Richard: Think about a fundamental change in theway our customers experience health care–that’swhat we’re working on. How do we ensure thatmembers go to the right doctor for the right care at a known price that is paid for at the point ofservice? Those four elements should come togetherfor the member so that there’s no confusion. But,that’s not the way it works. Ending that confusionis a wonderful example of what being a customersolutions company is all about.

Health Net does the medical management part–the first two elements: right doctor, right care. Weneed the financial institution to cover the last twoelements: a known price paid for at the point of service. The integration of those two sets of elements is the project we’re currently working on.

“Health Net associates ...have the power to make us successful or not.”


Connections: How much of customersolutions is just a matter of better technology? Richard: Think about a house: You need a strongfoundation. That’s what technology is. It doesn’thave to be as robust as if you were aiming to be a product leadership company or an operationalexcellence company, but you have to be mindful of where and how you touch the customer. Onceyou lose your customer’s trust, you don’t get itback, so we’re looking at every touch point andensuring that the trust is never broken. Technologysupports many of the main touch points– it’s amajor avenue for service delivery. It has to beworking or you risk breaking the promise you’vemade to your customer.

Connections: What is required fromassociates if Health Net is to be a successful customer solutions company? Richard: The easy answer is that they have to be a part of the process of delivering solutions to customers. One of the great things about ourcompany is the number of people who have real passion and energy around delivering greatcustomer service. They get frustrated when theprocesses or the technology inhibit that. If youdon’t deal with those issues, the associates become cynical; they don’t believe you’re serious about good customer service.

Health Net associates are absolutely critical tothis–they have the power to make us successful or not. But, management also has to provide the environment and the toolsets to support ourassociates’ passion and energy. Better integrationof our services and processes is critical, too.Customers don’t care that someone in enrollmentdoesn’t talk to someone in claims because the company has silos. They want their experience tobe seamless, and we need to build the environmentthat supports that. Everyone has to work together.

Connections: What do Health Net associates need to know about customersolutions? What’s most important?Richard: First, the customer solutions strategy isalive. It’s real, and it’s not the flavor of the month.It’s exciting, but it’s a lot of hard work.

We are working on what it takes to be a greatcustomer solutions company–who our target customers are, what services we’re delivering andhow we integrate those services so it’s seamless to those customers. It’s a different way of thinkingabout what we do: We don’t fulfill functions; we provide services and solutions. This isn’t a marketing or sales initiative; being a customersolutions company encompasses everything we do.

It’s about thoroughly understanding our targetedcustomers. For example, you don’t just targetwomen; you target working women with childrenconfronting a particular set of health issues. Thenit’s about finding out what those particular womenwant and building out services and offerings thatappeal to them. Then, we can have call centers thatrecognize a member as a particular kind of woman

needing a particular kind of service. What kind ofdoctors does this kind of woman like? Let’s makesure we have them in our network. We want todevelop a deep understanding so that we can veryspecifically meet that member’s needs. Every timeshe deals with us, we want her to feel that weunderstand her–we understand what she’s upagainst and we’re helping her get through it.

There’s much to be done, and everybody has arole to play.

“It’s a different way of thinkingabout what we do: We don’tfulfill functions; we provideservices and solutions.”

How do we improve the customer’s experienceand level of satisfaction? With membership

identification, credit card and FSA debit card functionality all rolled into one card.

Imagine a trip to the grocerystore: You go in. You get whatyou need. A cashier tells you thecost. You hand over your debitcard. You pay. You leave. Imagine

a trip to your doctor using the samemodel: You go in. You get what youneed. A receptionist tells you the cost.You hand over your debit card. You pay.You leave.

This is the next major step in making customer solutions a reality.Interjecting the convenience of adebit/credit card into the administrativeside of managed care will radicallychange the customer experience.

“It all starts with the swipe of acard,” says Kathleen Richard, enterpriseofficer, Health Net, Inc. “The card willfunction as a membership card and–ifthe member chooses–as either an FSAdebit card or as a typical credit card.”The “swipe” will give the memberaccess to funds, and eventually it


Right provider, right care, known price

Creating customer solutions through innovation


– paid for at the point of service

will provide input into an electronic health record. It will give the provider memberbenefit information and will initiate payment.

Our card services strategy is tobuild an electronic health careplatform using best-of-breedpartners and tools. The card is the “trigger” that can driveinnovation and offerings in support of the customer solutionsstrategy. It will create growth inour businesses and loyalty in ourcustomers, and it reduces thecosts related to payment.

“There’s tremendous potentialto lower Health Net’s operatingcosts by creating an electronicadministrative services platform

that gets the transaction rightthe first time–and in real time,”says Jim Woys, Health Net’s actingCFO. “It helps our providers, who are facing rising paymentcomplexities and increasing baddebt, and our customers, whodon’t have to spend time dealingwith claims issues or managingflexible spending accounts.”

A first step might include amultipurpose card, real-timecapabilities and the availability of both debit and credit functions with the card. Future project phases might provide integrated access tohealth information and real-time adjudication of claims. As Connections goes to print, the partner, the full scope and exact functionality to be offered is still being determined. Associates can log on to HN Connect for updates going forward.

“We want to ensure that our members receive flawlessservice,” says Richard. “We needto make sure we can get it right.”

“We’ve been talking about ‘pursuing value-based opportunities’for some time now,” says Jay Gellert, president and CEO of Health Net, Inc. “But, I’m not confident that all of ourassociates understand what that means. This is a classicexample of a ‘value-based opportunity.’

“ ‘Right provider, right care,known price and paid for at the point of service’ is themantra for a customer solutionscompany. It’s an opportunitywith tremendous value.”

“There’s tremendous potential to lower Health Net’s

operating costs by creating an electronic

administrative services platform that gets the

transaction right the first time–and in real time.”


A new path to

customer satisfaction

1

13

2

3

‘One Card’ improves the customer’sexperience and creates a path to loyalty

CUSTOMER SERVICE LINKSMember and provider contactcapabilities include call centers,e-mail, Internet/Intranet Webportals.

ID CARD AUTO-GENERATEDEnrollment info is transferred to vendor for ID card generation.

MEMBER RECEIVES ONE CARDMember receives ID card(One Card) and WelcomeKit in the mail.

12

ENROLLMENTCustomer/Associate enrolls inappropriate health care plan.

PHARMACY BENEFITS If member fills prescriptions at the pharmacy, One Card is used as member ID card. Payments may be processed with One Card against member’s FSA account or using the credit card functionality.


4

5

7

10

8

11

9MEMBER CO-PAYSELECTRONICALLYMember co-payment isprocessed using the FSAdebit card feature or thecredit card functionality,if available.

MEMBER RECEIVES CAREMember receives healthcare services.

CLAIM SUBMISSIONProvider uploads and submitsencounter and other claim information via the provider portal.

MEDICAL BENEFITS VERIFIED ELECTRONICALLYMember visits the PCP office forhealth care services. Member eligibility and co-paymentamount is determined beforeservices are provided by swipingthe ID card in a wedge readerconnected to provider’s PC.

BACK-UP PROCEDURE –BENEFITS PRINTED ONONE CARDIf provider does not have the special POS terminal or if provider is out of network,eligibility and co-payment can be determined using theprinted information on themember’s One Card.

FSA DEBIT FEATURE ACTIVATED (OPTIONAL)If member is enrolled in anFSA plan, One Card acts as adebit card against member’sFSA deposits–also as a creditcard if member applies for acredit line.

SETTLEMENTClaims submitted via provider portal for non-capitated services are processed and settled faster than at present. Capitation payment process remains as is.

MEMBER NOTIFIED OF REMAININGCHARGES DUEAny remaining memberresponsibility on theclaim is communicated to member after claimadjudication is completeusing current process.

6

To understand whatthe customer wants-ask!

A customer solutions company does more than product development.

Customers aren’t just buyers, they’re long-term partners. The partnership

allows you to understand them–to help them solve their problems and

achieve their business goals. But, is partnership what Health Net’s

customers really want? Is our customer solutions strategy on target?

Is a customer solutions strategy the answer?


Its a fundamental question, and we needed an answer,” says Peter Diaz,director, Product Advisory and Management, Health Net, Inc. “If you want to knowwhat your customers value, you have to ask them.”

And so, we did. Last fall, Health Net engaged representatives from every region to map out and launch a Web survey to learn more about current and potential employer–customers. The survey asked questions regarding the employers’ currenthealth care carriers, their attitudes toward health care, the factors they considerwhen choosing a carrier and trade-offs they are willing to make, for example, customer service versus price. The findings revealed a wealth of information andsome good news–our customers value the long-term partnership we’re working to support.

More than 60 percent of the Mid-Market are Core Value Buyers and Quality Buyers who are willing to pay for networks and services and who want to have a businesspartnership with their carrier of choice. Even better: There is a gap between thenumber who would like to have a business partner and the number who feel they currently do.

“There’s an immediate opportunity for Health Net to pursue more business withCore Value and Quality Buyers,” says Tina Liu, director of Marketing for Health Netof California, and a leader in the research effort. “They are much more willing to pay for top-notch plans and services, they want to take an active role in keepingtheir employees healthy and they want to build a long-term partnership with their health insurance carrier.” Efforts are also under way to take this framework to the Small Group business line as well.

“You need to determine how to allocate your resources–which customers youwant to spend time and energy pursuing,” says Liu. “We wanted to statisticallydefine concrete market segments with addressable characteristics. Then we canidentify the segments that are most valuable to Health Net and put our resourcesto work there.”

More thorough research will confirm and better articulate these segments’ needsand priorities. “We also need to confirm the metrics around profitability,” says Diaz. “You want to be sure that the customer you’re targeting is a profitable one.”

Upcoming focus groups will help provide clarity and answers to questions such as “What do you consider to be superior customer service?” and “What can HealthNet do to achieve a long-term partnership with you?” This will lead to regional segment-specific marketing plans and distribution channel strategies.

“Last October’s survey was a good place to start,” says Diaz. “It gave validation toour customer solutions strategy, but it was truly just the beginning. There are stilllots of questions to answer. You can’t be a customer solutions company unless youreally know your customer.”

,, ,

Peter DiazDirectorProduct Advisory and Management

Tina LiuDirectorHNCA Marketing



#1 The network

#2 Low prices

#3 Superior customerservice

54% chose cutting-edge technology

43% chose broker recommendations

Attitudes on health

What drives the decision in choosing a health plan?

The majority of Mid-Marketemployers (more than 80%)believe:

MOST IMPORTANT TO EMPLOYERS LEAST IMPORTANT TO EMPLOYERS

• Employers have an obligation to provide health

care coverage to employees

• The health plan is a large part of employees’

total compensation package

• The health plan should be proactive in keeping

employees healthy

• Employees should take more responsibility for

their health care choices and behavior


The survey clearly identified five market segmentsbased on the employers’ values, purchase patternsand attitudes toward health care and health plans.

Core Value BuyersThese employers want the fundamentals–a good network,good customer service and a long-term partnership with a carrier who has a solid reputation. They are slightly more concerned about price than the Quality Buyers, but less so than all other segments.

Quality BuyersThese employers are willing to pay for superior customerservice. They, too, want a long-term partnership with acarrier who has a solid reputation, a good network andflexible plan designs.

Bargain HuntersThese employers want low-cost plans with flexible andinnovative designs. These buyers are highly susceptibleto a broker’s influence.

Economical Service SeekersThese employers want superior customer service and easy-to-administer plans, but they aren’t willing to pay for them.

Active Health Care AdvocatesThese employers place great emphasis on cutting-edge technology and health andwellness programs. They believe in taking an active role in managing employees’health, so data is of critical importance to them.

care and health plans

Provider Employer Broker Member


‘Touch point’ is an important term in a customer

solutions strategy. Whenever Health Net interacts

with a customer, we create a touch point. Whether

it’s a phone call, a visit to our Web site or a mailing

received, it’s an opportunity to ensure customer loyalty.

Planning the

Web portal of the future

A new approach to business, a new approach to technology

W ith a vision to be the leaderin managed health care customer solutions by 2010,

we’ll need a Web portal that supportsthat vision,” said Kathleen Richard,enterprise officer, Health Net, Inc. “Formany customers, HealthNet.com is themain source of their interaction with us. Every transaction–every touchpoint–must be useful and satisfying.”

Thus began Health Net’s Web portalroad map planning session, whereassociates representing a cross sectionof our businesses met in early May. The purpose: To begin development of the four-year plan to align our four Web portals (provider, employer,broker and member) with our customersolutions strategy.

Research shows that almost three-quarters of members will contact theirhealth plans over the course of the yearwith a question to be answered or anissue to be resolved. For most, whetherthey see their insurer as advocate oradversary is based on these interactions.“It leads to a different way of thinkingabout your Web site,” said Carlton Doty,senior analyst, Forrester Research, and a speaker at the session. “Instead ofasking what functionality we shouldoffer, the question becomes What userneeds should we serve? How can wehelp our members achieve their goals?”

Imagine two scenarios. In the first,the health plan member goes to a Website to review a recent claim. The claimhas been denied, but the reason isunclear. The member sends an e-mailrequest for more detail. After 24 hourswith no response, the member calls customer service to repeat the request.Voice recognition software routes thecall to Claims, where the member

repeats the request again. The claimsrepresentative explains the rules andthen resubmits the claim. Having reiterated the inquiry four times withno resolution, the member feels mildlyfrustrated and vaguely annoyed at best.

In the second scenario, the memberagain goes to the Web site to review a claim. The site displays full claimsinformation and also invites the memberto read content related to the diagnosis.As the member reads, the site asks,“Would you like to speak with a nurse-counselor about your condition now?”The counselor picks up where the siteleft off, enrolling the member in a support program and demonstratingsite tools that will be useful in trackingprogress. The member remains satisfied,healthy and loyal to Health Net.

Health Net’s past approach to its portals has been project-based, with a focus on products and information.Going forward, the approach will betransaction-based, with a focus on the customer. We will not only takeadvantage of the synergies a Web experience can provide with integrationacross multiple touch points, but alsowill take advantage of the more efficient cost structures and use of resources Web technology offers.

Whether the portal is designed for our customers (member and employerportals) or our business partners(providers and brokers), the goal is to create touch points from the user’spoint of view. Creating the road map is just the beginning; satisfied, loyalcustomers are the destination.

“The Portal

Team

Co-leads:Katie Magill

Mark Brooks

Provider Portal

Anne Kao (lead)

Sahlem Kharaka

Broker Portal

RoxanneTulenfeld (lead)

Joshua Fuller

Member Portal

Victoria Albert (lead)

Michele Stankowski

Employer Portal

Katie Magill (lead)


Health Net is being considered for inclusion onFortune magazine’s 2008 100 Best Companies to Work for® in America list. The list is compiled by the Great Place to Work® Institute and published in Fortune magazine.

As part of the process, a survey has been distributed to a group of randomly selected associates to get feedback about different aspectsof working here. Our company must also respond toa two-part questionnaire that provides informationabout our programs and culture. The 2008 Fortunelist will be announced in early January.

“It’s an honor for our company to be asked toparticipate,” says Jay Gellert, president and CEO,Health Net, Inc. “At the very least, we expect thatour experience in going through the process willprovide valuable insights into what we’re doingright and where we can improve. And, as a best-case scenario, we might join the 99 other companies on this respected list. Not every companymakes it the first time around–and some nevermake it–but we see it as a great opportunity forour associates and our company to be recognized.”

Health Net has moved up to #189 from its rankinglast year at #191 on the 2007 Fortune 500 list.Fortune magazine ranks top companies each year as measured by revenues and profits. By these measures, Health Net outranks other major companies, such as Pepsi Bottling (#191), Colgate-Palmolive (#200), General Mills (#213) and Google (#241).

The Top Companies in Health CareInsurance and Managed Care sector–2007 Fortune 500 list

Company Fortune 500 Revenues Ranking ($millions)

1 UnitedHealth Group 21 71,542.0

2 Wellpoint 35 56,953.0

3 Aetna 85 25,568.6

4 Humana 110 21,416.5

5 Cigna 139 16,547.0

6 Health Net 189 12,908.4

* Source: Fortune magazine Web site

Health Care Insurance/Managed Care Companies2007 Barron’s 500 list

Company Barron’s 500 GPA Ranking

1 Aetna 9 3.5

2 Wellpoint 33 3.25

3 Health Net 34 3.25

4 Humana 35 3.25

5 Cigna 46 3.0

6 UnitedHealth Group 111 2.75

* Source: Barron’s magazine, May 14, 2007

Health Net rocketed to #34 (from #380 in 2006)with a grade-point average (GPA) of 3.25 on theannual Barron’s 500 list. The Barron’s 500 seeks to identify the best U.S. and Canadian companies in terms of stock market performance, earningsand cash flow returns on investment.

The rankings in Barron’s 500 are based on ananalysis of each company in categories such astotal return to shareholders, adjusted median cash flow return on investment and sales growth.Based on these grades, a total GPA is calculated,with 4.0 being the highest.

Health Net considered for inclusion onFortune 100 Best Companies to Work For list

Health Net ranks #189 on the 2007 Fortune 500 list

Health Net ranks #34 on the 2007 Barron’s 500 list

health net 2007 #5 summer quarterly

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