health net connections internal brand print magazine #1

Health Net Ramps Up to Attract MembersRegional plans roll out innovative solutions

The Making of a Great Place to Work

A Year After KatrinaMHN is Still Aiding Recovery Efforts

Inside:

Quarterly Magazine for Health Net Associates • Fall-Winter 2006

Cover Story:

National Provider NetworkManagement

THE ROOTSof Health Net

fall 2006 connections 4

PERFORMANCEProgress and achievements thatsupport Health Net’s business

strategy and financial goals

GROWTHEfforts to expand and increasethe quality of Health Net’s

business

GREAT PLACE TO WORKExamples of a high-performance

environment that supports associates and serves

customers well

Rolling Out an Array of Senior ProductsNew plans, new geographies, new advertisingpage 20

Health Net Ramps Up to Attract MembersRegional plans roll out innovative solutionspage 9

The Roots of Health NetNational Provider Network Management page 3

We Live Here, TooHNOR Rides the Cycling Craze in Portlandpage 8

Published by: Health Net, Inc.Corporate Communications

21650 Oxnard StreetMail Code CA-102-22-07

Woodland Hills, CA 91367

We welcome your ideas and feedback. Contact Linda Lalande

or Margaret Longo at:[email protected].

For internal distribution only

Health Net, Inc. is among thenation’s largest publicly traded

managed health care companies. 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 meaning of Section 21E of the Securities

Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that

involve a number of risks and uncertainties. All statements, other than statements of historical information provided herein, may be deemed to

be forward-looking statements. Readers are cautionednot to place undue reliance on these forward-looking

statements. The company undertakes no obligation topublicly revise these forward-looking statements toreflect events or circumstances that arise after the

date of this publication.

The Making of a Great Place to WorkBeginning our journey–and why it’s importantpage 22

PANE

OR

Images of the Themes that Unite Us Look for these icons to identify Health Net’s three important themes. The icons are used in communications about what is going on in the company and how we are succeeding.

Issue Highlights

fall-winter 2006 connections 1

Did you like Connections?Overwhelmingly, YES. “Finally,

a way to get information thatdoesn’t require a keyboard andmouse… layout was clean, colorful…graphics were interesting and creative… articles were easy to

read and enjoyable… I can read this at my own pace onbreak or at home… it’s one more way to feel a part of such a big organization.”

Counterpoint: “Can’t we do this online?”Like the difference between snapshots and a family

portrait–our HN Connect online “newspaper” reports current, time-sensitive news in an ever-changing format,while Connections takes a broader, enterprise perspective to show how we’re changing and advancing over time.Connections also is proving to be a welcome source of company information to many associates who don’t havetime during their workday to access HN Connect on a regular basis.

Did Connections help you become better informed?“I found the articles ‘got right to the point’ about what is

going on with the company, and our goals, and how we areworking together to achieve them… some articles were a little long… I’ve read some of the stories on HN Connect.”

Connections’ purpose is to provide context. At times itreinforces messages from HN Connect–and we work hard to add a fresh viewpoint.

We’re all ears. Keep reading and sending your feedback–everyone benefits! For an online copy of this magazine, live links to related stories and to submitideas and feedback go to: HN Connect > Find It Fast > Newsletters > Connections.

GREAT PLACE TO WORK

Last quarter’s launch of Connections magazine began a partnership. We asked for your readership, participation and feedback–and you responded. Here’s what you said.

Your Voice: What you said you’d like to see inConnections is already shaping the magazine.

“Connections is telling me why Health Net is a qualitycompany for the customer. What are we doing to helpourselves?” See page 22–The Making of a Great Place to Work.

“How about something fun included with all the information?” See page 18–HN Dollar and page 25–Earnings Lingo quiz.

“Some comparative stories across the business units?”See page 9–Regional plans roll out innovative solutions.

“Features on various departments within the companyand what they do to move us forward – how they affector support other areas.” See page 3–first in a series ofdepartment profiles.

“I want to feel more of a family atmosphere, to get toknow more about the people and what they do.” “More stories about and from associates, more faces of associates.” See page 19–MHN and Katrina recovery,and refer to Associate Place weekly profiles on HNConnect.

“Updates and changes in the health care industry.” Look for industry perspectives in future issues and see the Daily News Summary on the front page of HN Connect for industry news.

“More about our benefits… like the 401(k) article.” See page 22–The Making of a Great Place to Work, and future articles, as well as updates on HN Connect,with details found in HR Link.

“More about the programs that each region is a part of in their communities.” See page 8–HNOR Rides the Cycling Craze in Portland.

“More local events, updates on projects.” Look to HN Connect for time-critical, events-based reporting and project updates.

Thanks for Making the Connections

C O N N E C T I O N S D E F I N E D

Connections is a quarterly associate magazine thatshowcases what Health Net does, how and why wedo it and who is making it happen. Stories focus onour Performance, Growth and Great Place to Workthemes, and feature information and perspectives tohelp us work together, better serve our customersand build a culture of performance.

connections fall-winter 20062

Scenario: A Health Net member is diagnosed with a severe medical condition.Faced with difficult decisions and in unfamiliar territory, how can Health Net best help this personnavigate through this challenging situation–and do so in a way that our assistance is welcomed, and the member ultimately experiences a better outcome because we were involved?

What’s Health Net’s Business?

A message from Scott Law, chief network officer, Health Net, Inc. and Health Net of California.

Giving back to the communities we serve is all in a day’s work at Health Net. In December, HealthNet will host our company’s signature holiday event, Celebration of Children (CoC), in six cities across the country.

Fifteen years ago, CoC began as the brainchild of Health Net Chairman Roger Greaves, his wife,Erika, and a group of associates who decided they would rather give to kids than have holidayoffice parties. Ensuring its success, Erika has continued hands-on involvement, nurturing the

colorful affair into a heartwarming company tradition that brightens the lives of thousands of youngsters.

Join the happy Health Net elves. Volunteers are needed for this year’s Celebration of Children. Give a toy, give an hour to wrap gifts, give a morning during the events. Look for information from your local volunteer coordinator and on HN Connect.

Reaching out in other ways? We recognize the generosity of associates is wide-ranging. Every year, Health Net groups sponsor other charitable events during the holidays. To help us capture your kindness, please [email protected] as soon as you can–PRIOR to the event–to let us know how you are making a difference in the communities we serve.

More than a claims processor, we help members get the best care

Capturing Kindness at Health Net

Dealing with such situations is Health Net’s business.It’s not only our business–it’s what we want to be great at.Our goal is to excel at bringing members the right care, at the right time, in the right place, for the right cost.

That’s why we have made a conscious effort to link the care managed by Medical Management with the delivery networks designed and maintained by NetworkManagement. We know that collaboration between these two important areas of our business is key to establishing health care management as a central skill–a core competency–for Health Net.

We are making enormous strides and will be sharing more information with you in future communications.

In this issue, our spotlight shines on the NationalProvider Network Management group. This story exploresthe role National Provider Network Management plays in

Health Net’s efforts to contract and maintain a robust network of qualified providers–and how they support theregional provider network organizations that do the heavylifting of actually recruiting the doctors and negotiatingthe contracts.

The next issue of Connections will focus on our MedicalManagement team and how they are helping membersget the most appropriate, cost-effective care in the rightsetting–including the products and new technology, suchas UNITY, that are making it easier for associates to betterserve member needs.

Our business is about continuously improving healthcare access, choices and outcomes in an affordable way.Read on to learn how we’re working to achieve these fundamental goals that benefit our members, our localmarkets and Health Net’s overall performance.


So just what business isHealth Net in? Sounds likea simple enough question;

after all, we are a managedhealth care company–ergo –we’re in the managed healthcare business. True enough, butthat’s just a surface description.Dig deeper, and it becomes clear that we’re actually in thebusiness of delivering the rightcare, at the right time, in theright place, for the right cost.And it’s through achievement of this foursome that our company experiences growth.

Health Net’s National ProviderNetwork Management (PNM)team is a central member of theteam that drives companygrowth. “The National PNM teamcollaborates to support our 300PNM associates, located acrossthe country, who are negotiatingand maintaining our providercontracts for the continuum of services that our members need,” explains Scott Law, chief network officer, Health Net, Inc. and Health Net of California.

“While contracting and maintaining robust networks of qualified providers is a cornerstone of our business,the role of National PNM is to improve our core provider network management capabilities,” he says. Scottrecently has been asked to focus more intensely on building the PNM force in California. During this time,Douglas Cowieson, vice president for National PNM, is assisting Scott with National PNM efforts.

Working with regional PNM staff, National PNM provides services, tools, processes and hands-on assistance.“This support helps our PNM organization build more effective provider contracts,” says Scott, “in terms ofoverall cost and the ability to administer, ensuring we have full control over what and how we pay.”

Editor’s Note: At press time, a new organizational structure for Provider Network Management was being announced.

However, Scott Law and Douglas Cowieson remain as named in this article. For details, see HN Connect.

PERFORMANCE

Seeding growth with tools to deliver: right care, right cost, right time, right place

National Provider Network ManagementTHE ROOTS of Health Net

• Work that can be done more efficiently centrally, e.g., provider communications and training.

• Work that requires a critical mass that cannot be achieved optimallyby an individual region, e.g., coordination of benefits data capture.

• Work that should have a corporate oversight, e.g., some audit functions, such as contract review for conformity to required standards.

By putting these principles into practice on behalf of thePNM regional divisions, the National PNM management teamaccomplishes the following:• Develops processes and tools to better support associates, members

and providers.

• Designs and conducts training for both providers and the PNM associates who serve them.

• Will implement a contract management system designed to eventually track every provider contract– in total about 150,000 contracts.

• Provides the tools and mechanisms to analyze our own and ourcompetitors’ performance.

• Replaced regional provider surveys with a national survey to measure provider satisfaction and in response to results, helps conceive, execute and monitor improvement programs.

• Tracks the costs of health care services in an effort to help keep these costs in check. This extends to providing detailed information on the latest government reimbursement requirements and analysisof specific medical costs.

• Tracks and monitors the costs and charges associated with new technology and implantable devices.

• Centrally contracts with vendors to develop networks and fee schedules for areas of the country where we currently have no major business. Thus, traveling Health Net members can still receive timely and cost-effective care.

• Provides access to and analysis of coordination of benefits claims.

• Creates central purchasing reports and hospital analysis.


National PNM’s role:Central “trunk” for regional “branches”A few simple guiding principles apply to define the work National PNM spearheads:

PNM works with many

departments within the

organization to help achieve

goals and to support Health

Net’s growth and profitability.

Some good examples of this

multi-faceted and broad

work are outlined here.

Research shows that member satisfaction is directly influenced by howphysicians feel about Health Net. “One of our goals is to be recognized byproviders and their staffs as a responsive business partner with whom it’seasy to work,” says Scott.

National PNM centralized the regional survey process to better gaugeprovider satisfaction. This annual survey and its results are now a central,organization-wide tool that replaces regional survey efforts.

“Results from the first annual survey show that the vast majority of doctors see their relationship with Health Net continuing on a long-termbasis,” says Scott. “They believe that Health Net is committed to working in partnership with physicians to provide quality care–more so than otherplans–on a national level.”

“In response to the survey results, we are ensuring the creation of qualityimprovement plans throughout theregions,” says Douglas. “It’s a very excitingtime. We are able to target specific thingsassociates and the company can do

to increase provider satisfaction, which leads to greater member satisfaction and builds Health Net’s reputation and enrollment.”

National PNM identified and is addressing three drivers of provider satisfaction: 1) Timely and accurate payment–National PNM is continually upgrading

technology to ensure that associates have the tools to be efficient.

2) Ease of doing business–For our providers and their office staffs, as well as for PNM associates, Health Net purchased software to build a learning management system to provide training that will make it easier to do business with Health Net, mentioned above.

3) Relationships–PNM actively encourages open communication with providers, such as participation in fair contract negotiations, inclusiveness in decision-making processes and responsiveness to provider requests.

Detailed survey results are available on the HN Connect Provider Network Management page.

It is National PNM’s role to ensure that associates that work with providers have the information and tools needed to succeed in their jobs. Toward this end, National PNM is developing a comprehensive training program for PNM associates and providers. The training program, to be launched soon, will be ahighly usable, accessible and understandable tool designed to build specific skills.

National PNM additionally works to strengthen its connection with associatesby hosting meetings centering on topics chosen for their educational value. “In 2007, we’ll host a biannual review of our initiatives in January and August,”says Scott.

Tools to nourish all PNM associates

“In response to the survey

results, we are ensuring the

creation of quality improvement

plans throughout the regions…

it’s a very exciting time. We

are able to target specific things

associates and the company

can do to increase provider

satisfaction, which leads to

greater member satisfaction

and builds Health Net’s

reputation and enrollment.”Douglas Cowieson, vp, National PNM

Cultivating provider partnerships invigorates member satisfaction



Cutting costs for consumers and the companyAn exciting National PNM initiative under way is a project poised to produce significant financial savings for Health Net.Specifically, PNM’s vendor–Multiplan– is building an out-of-network (ONET) funnel that will be a dynamic single pointof transfer for claims that come in categorized as ONET. When this project is completed later this year, claims from non-participating providers can be routed through a funnel or hierarchy of leased networks.

Consider this example: A Health Net member visits a provider and then the provider bills us. Initially, the provider isdetermined to be out-of-network. By then tapping into the ONET funnel technology, we launch a search to uncover if a contract discount may be available through our leased network arrangements. Quite often, a relationship is uncoveredthat allows us to pay a negotiated rate, rather than paying full billed charges. The goal, wherever possible, is to payclaims at negotiated rates. “Given that our company-wide out-of-network expense is substantial, the savings opportunitythat this provides obviously makes this is a priority,” Scott notes.

Another PNM cost-saving initiative that is being developed ensures that we always take advantage of a directly contracted Health Net participating provider discount for services received outside the region where the member isenrolled.

Here’s how it works: PNM contractors add into agreements “affiliate language” indicating that the doctor or hospitalwill honor the same rates for a member affiliated with a Health Net plan from outside their region. For instance, aConnecticut member who visits a California Health Net provider would receive a participating provider discount, just as if they had received care from a participating provider in their home state.

The foundation of solid planning is competitive intelligence. Recognizingthis, National PNM created a program to gather competitive information andshare it with the regions and Health Net leadership.

“Providing competitive intelligenceenables us to be data-driven when developing strategies and continuousquality improvement measures,” saysKristina Rodriguez, director, NationalPNM. “With tools and information gathered through competitive intelligence, we are better able to pinpoint where we are effective, how we compare to others in the industry and how we can improve.”

For example, National PNM reviewed Health Net’sprovider Web portal and compared it to competitors.Kristina explains, “We found that providers really wantedthe ability to obtain prior authorization within our portal.As a result, we are now making this capability available.We learned of other areas where we can capitalize on our strengths and where we need to shore up weaknesseson the functionality of our Web site.”

Says Kristina, “Our ability to compare a competitor’snetwork to Health Net’s current provider network is vitalto allow us to be truly focused in our network growthand development efforts. Using a program through avendor, Strenuus, we are able to compare our networksto competitors at a detailed provider level. This valuableinformation enables our regional PNM associates to identifywhere our current and future members can benefit fromadditional network building and improve our networkaccess. This can be the deal clincher if we can show aprospective client that we can better serve their member-ship or identify where member care will transfer to if theclient chooses Health Net.”

Competitive Intelligence Harvesting information for fruitful planning

Sowing the seeds of affordable access

In 2007, the National PNM team will be configuring a new tool to permit us to store,amend, standardize and report on all providercontracts within the company. This new tool, i-Many Contract Management System, will give Health Net:• A potent disaster recovery program for all of

our contracts.

• A single repository for contracts accessibleanywhere in the country.

• Standard contract terms and approved variables from templates available online.

• Managed limits of authority to ensure contracts are negotiated and signed according to Health Net requirements.

• A single point of entry for contract terms and rates.

• Approvals and reviews sent via a single, trackable workflow process.

• Simple e-mail routing of edits, amendments,suggestions and attachments within HealthNet and externally to our providers.

• Role and security-based access to all aspects of our contracts.

The development of this new and importanttool will commence with Strategic Sourcing byyear-end, then moves into a pilot project in New Jersey PNM in early 2007, before unfolding company-wide. “To ensure we deliver the ideal product for all associates, I’m heading a steering committee to oversee the system’s direction and content,” says Bill Lamoreaux,chief operations officer, Health Net of the Northeast. “This efficient new system will improve our workflow, accuracy and service in a way that will make it easier for providers to do business with us, and easier for associatesto do their jobs.”

Contract Management Systemworking into the future

The power of PNMClearly, National PNM plays a pivotal role–one that extends far beyond contracting– in fueling

the engine that helps drive Health Net’s growth. From surveying providers to collecting competitive

intelligence and keeping company costs in check, National PNM is among the fundamental forces

that keep Health Net in the business of delivering the right care, at the righttime, in the right place, and for the right cost.


summer 2006 connections 12

As Bicycling magazine’s best city for cycling in North America, Portland, Ore., offerscountless occasions for cycling enthusiasts to enjoy the sport. The Rose City also is thehub of business for Health Net of Oregon (HNOR), headquartered just outside Portlandin Tigard. Working to be known as a leading local health plan, HNOR is tapping intothe community’s passions. The cycling scene is a natural fit.

For the past two years, HNOR has sponsored one of the city’s annual bike races,the Portland Twilight Criterium. As part of this effort, HNOR also sponsors TeamHealth Net, America’s top cycling team. For its part, Team Health Net makes ita priority to visit various Health Net offices and events around the nation.

“Oregonians are passionate about cycling and the healthy lifestyle that accompanies the sport. The Criterium is a great way to be part of an important community event and to reach active people,” says Matt Gougler, manager, HNOR Marketing.

On Aug. 11, 2006, thousands of spectators jammed the streets as several city blocks were transformed into a virtual velodrome as cyclists took to the pavement for two fast-paced, 60-minute sprints. Team Health Net’s Garrett Peltonen placed first in the race, with other Team Health Net cyclists right behind in second, third and fourth place.

GREAT PLACE TO WORK

We Live Here, TooHNOR Rides the Cycling Craze in Portland

For Health Net, sponsorship is more than banners and signage;it’s also an opportunity to involve associates and members in the action.

Free helmets for kids Children and parents rallied to receive free bicycle helmets as part of HNOR’s Heads Up! Bicycle

Safety Program. HNOR associate volunteers fit 175 children with the brightly colored helmets,complete with a Health Net reflective sticker. “We want Portland’s children to enjoy a safebicycle ride this summer,” said Camille Cadran, HNOR volunteer and Quality Improvementmanager. (Pictured right.)

Sweeping the Criterium: Team Health Net

rider Karl Menzies took 4th place after

teammates Garrett Peltonen (1st), Kyle

Gritters (2nd) and Greg Henderson (3rd).

Kyle

Grit

ters

Bird’s eye view for business partnersOn the day of the big race, HNOR’s business partners gathered

on the veranda of the Oregon Historical Society, one of the course’sprime viewing areas. HNOR treated local brokers, employer groupsand community contacts to a reception that included a visit byTeam Health Net.

The race offered a unique opportunity to build relationships with business contacts in a relaxed environment where Health Netwas prominently featured. “Oregon is an extremely competitivemarketplace and the Criterium was a way for us to raise HealthNet’s profile and show appreciation for our local partners,” saysCindy Fineran, vice president, HNOR Sales.

For more information: http://www.teamhealthnet.com/news/2006/HNCriterium.html

Janice Finley, manager,Finance, buckles a girl’s freeHealth Net bike helmet.


Camille Cadran, manager, QualityImprovement, fits an excited little boy with a free Health Net bike helmet.

GROWTH

While America is a nation of 50 united states, each member of this unionis unique from a market perspective. It only makes sense, then, that ourunion of health plans–Health Net of Arizona, Health Net of California,Health Net of the Northeast and Health Net of Oregon–must developstrategies and products designed to dovetail with the unique needs of theirlocal markets. As you will see on the pages that follow, each has done justthat; and while their approaches vary, each plan shares the common goal of increasing commercial growth.

Health Net also continues to focus on the growth of our other revenue-generating lines of business, such as Medicare, Medicaid, MHN, Pharmacy and Health Net Federal Services (HNFS). Look for upcoming coverage in subsequent issues of Connections.

Editor’s Note: Health Net’s HMO, POS, insured PPO and government contracts subsidiaries provide health benefits to more than 6 million individuals in 27 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. Health Net’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 Ramps Up to Attract Members

Total Premium Revenues$3,249,478

California$1,647,80651%

Oregon$145,8235%

Other: MHN, HNFS and

Senior Products$698,331

21%

Arizona$162,5245%

Northeast$594,99418%

Northeast776,83623%

Total Medical Membership3,384,719

Arizona154,8485%

Oregon

5%

California

68%

154,875

2,298,160

How the Regions Stack Up

PANE

OR

PANE

OR

PANE

OR

PANE

OR

Regional plans roll out innovative solutions

Premium Revenues (in thousands)(as of third quarter 2006)

Medical Membership(as of September 30, 2006)

includes Commercial/ASO, Medicare and Medicaid



HNOR is entering the second year of a successful two-yearstrategy to break into the Individual market. The primarytarget is young families in the Portland area (population1.7 million). Online shopping is popular with this crowd,generating 20 to 45 percent of HNOR’s monthly IFP applications.

HEALTH NET of OREGON (HNOR)

PANE

OR

Commercial Market StrategyHNOR is entering the second year of a two-year

strategy to break into the Individual market. The primary target is young families in the Portland area (population 1.7 million).

In addition, Individual and Family Plan (IFP) products willbe marketed statewide through a television campaign anddirect mail this winter targeting brokers, rural residentsand early retirees. Because online shopping is so popular inOregon, IFP products are sold through eHealth Insurance,which generates 20 to 45 percent of HNOR’s monthlyapplications–a unique situation in Health Net.

Beyond good service, to attract new business HNORrelies on a broad network and value-added options, suchas extensive wellness program offerings, Decision Power,Web tools, and a new dental and vision package.

SuccessesHNOR successfully expanded its commercial business statewide and into

Washington State in 2005. IFP is launching statewide in Oregon this winter.

HNOR in the marketHNOR provides group, individual and Medicare health plans, including PPO, HMO,

POS and traditional indemnity plans, as well as the region’s first Medicare AdvantagePPO. HNOR offers alternative care (chiropractic, acupuncture, naturopathic medicineand massage therapy) as a core benefit in group and IFP. HNOR also offers group prescription drug, vision and dental coverage.

C.

HNOR Premium Revenues

(in thousands) as of Q3 2006$145,823 = 5% ofHealth Net total

HNOR Medical Membership(as of September 30, 2006) includes

Commercial/ASO, Medicare and Medicaid154,875 = 5%

of Health Net total

Originally founded in 1938 as PACC Health Plans,HNOR is today among the Pacific Northwest’s leading health plans, with one of the region’sstrongest and most extensive health care networks.

New or enhanced releases: IFP Plans• Dental & Vision Plan Option–A unique combined $30 rider

members can easily add to their IFP. It’s in demand, andcompetitors offer one or the other, but not both.

• Gemstone Portfolio–Introduced in fall 2005 (Pearl 25 HMO,Diamond 15, Emerald 40, Garnet 50, Crystal HDHP). This IFPportfolio offers a wide range of HMO and PPO options and isaggressively priced to draw new IFP members and migrateexisting members.

• Topaz First Dollar–For fall 2006, this competitively pricedpackage features alternative care services and an immediatespending account of $250–before the deductible applies–for chiropractic, acupuncture, massage therapy, naturopathyand preventive care.

Commercial Plans• Rx Plus–Four pharmacy plans being introduced to groups of

51+. Rx Plus’ primary selling point is that its plans have a“lighter” or less stringent prior-authorization requirement,for which a 10 percent additional premium will be charged.

• PPO Fifty Plans–Targeted toward small groups, this is anemployer’s most affordable option. These plans offer a simple design coupled with an affordable price and feature 50 percent cost share on all eligible services, with no deductible for in- or out-of-network services. The plans pay 100 percent of catastrophic expenses after the out-of-pocket maximum is reached.

Sales Network: 622 appointed independent brokers

Major competitors: Blue Cross Blue Shield of Oregon,Kaiser, Providence Health Plans, LifeWise

Competitive Landscape: PPO is a very popular option inOregon, with 79 percent of HNOR’s membership in PPOplans. This market is extremely competitive, with eightcarriers fighting for commercial membership

H E A D Q U A R T E R SS A L E S E N V I R O N M E N T

Tigard, Ore.300 associates

E N R O L L M E N T

154,875 medical members in Oregon and Washington State as of September 30, 2006

L E A D E R S H I P

Stephen Lynch, president, Regional Health Plans Chris Ellertson, regional health plan officer

P H Y S I C I A N N E T W O R K

23,000 physicians

FA C I L I T I E S N E T W O R K

C U S TO M E R S E R V I C E S TAT S

On average, processes more than4,500 claims and responds to 1,500 calls per day

135 hospitals1,608 retail chain and independent pharmacies



Health Net’s largest health plan, HNCA is one of thelargest network-model health plans in California. HealthNet’s unique California model of organized care deliverydrives physician behavior and allows for coherent management of care, quality and resources.

After several years of commercial membership losses,HNCA has seen a return to growth in Small Group, Mid-Market and Individual and Family Plans (IFP),since the end of 2005, both organically and due to the Universal Care acquisition.

HEALTH NET of CALIFORNIA (HNCA)

PANE

OR

Commercial Market StrategyAttracting smaller businesses (2-250 employees) is a top

goal, along with building the PPO network and increasing the number of PPO members. HNCA is focused on:• Retaining membership in organized care delivery.

• Developing products emphasizing patient choice: HealthSavings Accounts (HSA) banking arrangements and consumer directed/organized care.

• Building broker relationships.

• Continuing targeted advertising.

SuccessesAfter several years of commercial membership losses, HNCA

has seen a return to growth in Small Group, Mid-Market andIndividual and Family Plans (IFP), since the end of 2005, bothorganically and due to the Universal Care acquisition. • IFP is up 14 percent to nearly 92,000 members.

• Small Business Group is up 12 percent to nearly 320,000.

• Mid-Market is up 9 percent to just over 404,000 members.

• Commercial, POS and Medicare lines of business received NCQA “Excellent” accreditation status.

C.

HNCA Premium Revenues

(in thousands) as of Q3 2006$1,647,806 = 51% of

Health Net total

HNCA Medical Membership(as of September 30, 2006) includes

Commercial/ASO, Medicare and Medicaid2,298,160 = 68% of

Health Net total

HNCA in the marketHNCA offers coverage for vision, dental, life insurance*,

chiropractic and alternative medicine; HMO, POS, PPO, Medicare, Healthy Families and Medi-Cal plans in the individualand family, senior, small (2-50), mid-market (51+ distributed by brokers) and large group (those groups represented by consultants, including Labor & Trust) markets.

New or enhanced releases:• Small Business Group (SBG)–In May 2006, launched four

new benefit plans - HMO 10, HMO 30, PPO 25 and PPO 35–resulting in 7,750 new members for SBG–an increase of 2.3 percent.

• EZAccess HSA–Introduced in July, connects an HSA plan witha Wells Fargo HSA account via a debit card. Allows membersto take control of their health care purchases with a savingsaccount they own and control. Builds on existing HSA planmembership, which has grown 183 percent since the begin-ning of the year, and now totals more than 9,000 members.

• HMO Silver Network–In 2005, created a select network of cost-efficient providers. Enables employers to reduce premiums by 8 to 15 percent. Concept continues to build sales momentum, as membership has grown to nearly 11,000, a 108 percent increase since the beginning of 2006.

* Offered by HN Life Insurance Company and administered by

Health Net of California.

Sales Network: 10,000 appointed independent brokersand agents; 8,500 have business placed with HNCA

Major competitors: Blue Cross of California, Kaiser, Blue Shield of California, PacifiCare/United Health Care,Aetna, Cigna

Competitive Landscape: While the majority ofCalifornia businesses are small (2-250 employees), asignificant number of people are employed by mid-sizedand large companies. Both HMO and PPO health carecosts in California are significantly lower than in mostother parts of the country. This attracts employers as agood value, even with the state’s higher housing costs.HNCA is the state’s fourth largest health plan

S A L E S E N V I R O N M E N T H E A D Q U A R T E R S

Woodland Hills, Calif.More than 2,700 associatesin 17 locations throughoutCalifornia

E N R O L L M E N T

2,298,160 medical members as of September 30, 2006

L E A D E R S H I P


51,000 physicians



On average, processes 20,000claims and responds to 25,000calls each day

300 PPO hospitals 260 HMO hospitals 5,000 retail chain and independent pharmacies

Stephen Lynch, president, RegionalHealth PlansPatricia Clarey, chief operating officer, HNCA



HNAZ is in the second year of an effective three-year period of recovery, organized around a strategy dubbed “Raising Arizona.” With more than 95 percent of desired business controlled by the brokerage community, the focus is on capturing this audience as a means to gaining membership.

Celebrating 26 years of meeting Arizonans’ health plan needs, HNAZ has been ranked the No. 1 HMO for two years running by RankingArizona magazine.

HEALTH NET of ARIZONA (HNAZ)

PANE

OR

Commercial Market StrategyOvercoming a lack of name recognition and other market

challenges, HNAZ is in the second year of an effective three-year period of recovery, organized around a strategy dubbed“Raising Arizona.” Committed to being innovative and offeringa comprehensive product menu, HNAZ recognizes that maintaining a stable cost and pricing position is critical.

To support growth, HNAZ is: • Making a significant investment in targeted marketing and

advertising.

• Keeping expenses in check.

• Meeting membership goals.

• Improving contracting and network medical management,products and services.

• Segmenting the group market to identify areas that offerthe greatest opportunity for growth.

• Focusing sales and marketing efforts on the brokerage community as it controls more than 95 percent of targeted business.

SuccessesHNAZ has:• Undertaken significant community outreach efforts that are effectively building brand

recognition.

• Attained price stability and offers a portfolio of products that meet consumer needs.

• Been rewarded with recaptured business due to discipline and operational improvementsover the past two years, such as claims payment accuracy and timeliness.

• Implemented UNITY, a software program that tracks Medical Management results.

• Achieved an “Excellent” accreditation rating from NCQA.

C.

HNAZ PremiumRevenues

(in thousands) as of Q3 2006$162,524 = 5%

Health Net total

HNAZ Medical Membership(as of September 30, 2006) includes


Health Net total

HNAZ in the marketHNAZ offers coverage for vision, dental, life insurance*,

chiropractic and alternative medicine; Individual and Family(HMO and PPO); Employer-sponsored Plans (HMO, PPO, POS Plus and Indemnity); Medicare Advantage HMO; MedicareSupplements; Multiple Option and National Provider Networkaccess for PPO and POS Plus products.

New or enhanced releases:• Empowerment for a Healthier Life Style HMO and PPO plans:

Includes Decision PowerSM to help members be informed and confident in their medical care decisions; and It’s Your Life to help members deal with personal or family challenges.

• High-Deductible Health Savings Account-compatible PPO:With lower premiums, tax benefits and control over healthcare dollars, this product is designed to appeal to a variety ofhealth care consumers.

• Broker tool kit: Created as part of an initiative to strengthenbroker communications and to make doing business withHealth Net easier, this kit includes a CD loaded with forms,collateral, streamlined underwriting guidelines and other useful tools, including a handy palm-sized tool kit that brokers can keep in their glove boxes.

• eHealth online search tool: In an effort to increase its opportunity for selection, HNAZ contracted with eHealth to obtain priority placement in search results for Individualand Family Plan shoppers.

*Offered by Health Net Life Insurance Company and administered by

Health Net of Arizona.

H E A D Q U A R T E R S

E N R O L L M E N T

154,848 medical members as of September 30, 2006

L E A D E R S H I P


5,673 physicians



On average, processes 5,000-6,000 claims per day andresponds to more than 2,000 calls each day

57 hospitals1,000 retail chain and independent pharmacies

Tempe, Ariz.300 associates in Tempe and Tucson.Operations (claims, membership,member and provider calls, etc.) are handled out of the Shelton, Conn., office by 250 associates

Stephen Lynch, president,Regional Health PlansMark El Tawil, president, HNAZ

Sales Network: 3,000 appointed independent brokers

Major competitors: Blue Cross Blue Shield of Arizona,Humana, LifeWise, Aetna, Cigna, United

Competitive Landscape: Arizona, with two major metropolitan centers–Phoenix and Tucson–is America’ssecond fastest growing state. It is home to a large,underserved population, as fully one-third of Arizona’sresidents are either uninsured or on Medicaid. HNAZ isthe state’s fourth largest health plan

S A L E S E N V I R O N M E N T



For the past 30 years, HNNE–one of thelargest health plans in the Northeast–has offered a wide array of full-servicehealth plans in the tri-state area.

Commercial Market StrategyFacing intense competition, HNNE’s goal is to become a

leading local health plan with an overall emphasis to execute a “customer solutions” strategy.

HNNE returned to profitability and renewed growth in 2005and 2006 through brand investment, an updated product portfolio,accurate pricing and leaner plan designs with lower price pointsand by focusing on fruitful geographies.

Small and mid-size businesses remain the primary commercialtargets in all three states, along with Medicare in Connecticut and New York. In New York, the focus is to build on momentum and return to growth. In New Jersey, the task is to achieve a competitive cost structure and return to growth.

To grow enrollment, HNNE is introducing an array of new, highly competitive products and providing enhanced benefits to members. Consumer-driven health plans also are in the mix,along with enhancing self-insured product capabilities.

Winning PrioritiesHNNE is successfully executing a multiple-year improvement plan by employing

five winning priorities: 1. Achieve profitable growth through execution of superior “customer solutions” strategies.

2. Deliver excellent service to customers, providers, regulators and to each other.

3. Achieve competitive health costs.

4. Deliver the analytics that drive insightful business decisions.

5. Establish HNNE as a great place to work.

Successes• Re-establishing gross margins in the business, a basis for stability and long-term growth.

• Retaining customers, a sign of improved enrollment stability.

• Recontracting with all hospitals and improving health care costs versus the competition.

• Launching new products such as the integrated Health Savings Account (HSA) with Wells Fargo.

• Growing membership in target segments.

• Achieved an “Excellent” accreditation rating from NCQA and was awarded “Quality PlusDistinction” in NCQA’s Member Connections rating category for effectively engaging members in their own care, especially via the Web.

PANE

OR

HEALTH NET of the NORTHEAST (HNNE)

C.

HNNE PremiumRevenues

(in thousands) as of Q3 2006$594,994 = 18%Health Net total

HNNE Medical Membership(as of September 30, 2006) includes


Health Net total

HNNE in the marketThe Northeast health plans offer HMO, POS, PPO and self-

insured options to local and multi-region employers with small,mid-sized and large businesses, and Medicare and Medicaid forindividuals, families and seniors.

New or enhanced releases: • Outlook - Portfolio of preferred plans characterized by higher

member cost sharing, stringent underwriting guidelines andcompetitive pricing that provide solid, basic coverage atextremely attractive price points. Launched EPO and POS plans for small group in New York and will add for re-entry into New Jersey and update of products in Connecticut.

• HSA - Implemented for small group in Connecticut and NewYork. Expanded portfolio of consumer-directed plans and offerslow-cost alternative for employers. An HSA debit card also wasinstituted across the tri-state middle-market segment.

• Health Reimbursement Arrangement (HRA) - Integrated HRAproduct in the tri-state region that will allow HNNE to better compete with major market players. To be launched first quarter of 2007.

HNNE returned to profitability and renewed growthin 2005 and 2006 through brand investment, anupdated product portfolio, accurate pricing andleaner plan designs with lower price points and by focusing on fruitful geographies.

Sales Network: 3,400 appointed independent brokersand agents and 1,600 agencies

Major competitors: Connecticut: WellPoint (Anthem);Oxford/UnitedHealthcare; ConnectiCareNew Jersey: Oxford/UnitedHealthcare; Aetna; HorizonBlue Cross Blue Shield of New JerseyNew York: Oxford/UnitedHealthcare; Aetna; WellPoint(Empire Blue Cross Blue Shield of New York)

Competitive Landscape: In the New York market,HNNE’s focus is on small businesses. In New Jersey,both small- and mid-size businesses are prevalent. In Connecticut, mid-size businesses have been the primary target, but now attention is being turned tothe small-business market as well

S A L E S E N V I R O N M E N T H E A D Q U A R T E R S

E N R O L L M E N T

776,836 medical members as of September 30, 2006

Connecticut 368,900New York 239,547New Jersey 168,389

L E A D E R S H I P


80,000 physician and professionalproviders representing more than150,000 office locations



On average, processes 40,000claims per day; responds to10,000 phone calls per day

250 hospitals 5,500 retail chain and independent pharmacies

Steve Nelson, president, HNNEBill Lamoreaux, chief operationsofficer, HNNE

Shelton, Conn., for business conducted in Connecticut, New Jersey and New York.Approximately 1,800 associates in five locations in Connecticut,New Jersey, and New York



Health Insurance Company ProfitsHealth Insurance Company Profits

Debunking the myth ofDebunking the myth ofDebunking the myth of

Health Insurance Company ProfitsPeople perceive health care profits to be 51 percent of skyrocketing costs. Fact is, profits are only 3 percent.

Physicians

Drugs

G & A(cost of running the company)

Selling costsProfit

Ancillary Services

Hospital38¢ 33¢ 4¢10¢ 10¢

85¢

Member health care costs SG & A costs

12¢ 3¢

Profit

3¢2

Where Does 1 Dollar of a Health Net Member’s Premium Go? The answer is, Health Net* spends 85 cents of each premium dollar on patient medical care. Only 3 cents is company profit.

A ccording to a recent study conducted by Public Opinion Strategies, consumers believe the profits of health insurance and pharmaceutical companies are a main factor driving increases in health care costs. A survey of

800 adults revealed that Americans estimated typical health insurance company profits at a whopping 51 percent of health care spending–a gross misperception.

The truth, as illustrated below, is that health insurance industry profit is only 3 percent; that’s 3 cents on the dollar.Health Net is working to bust the 51 percent myth by partnering with America’s Health Insurance Plans (AHIP) toeducate decision makers and the public about the realities of rising health care costs, and by doing our part to stemthe tide of rising costs with innovative solutions.

* Health Net is in line with benchmarks in the industry based on a PricewaterhouseCoopers’ analysis for AHIP, Factors Fueling Rising Healthcare Costs 2006.

PERFORMANCE

Trying not to panic her two preschoolers, theyoung mother hurriedly loaded her mini-van withbare essentials–clothes, blankets, water, a family

photo album. It was Aug. 29th of last year, and HurricaneKatrina was barreling toward the Biloxi home that sheand her husband–a petty officer in the U.S. Navy–hadpurchased just weeks before he shipped out to Iraq.

When the young mom returned days later, she discovered that Katrina had devoured their home.

She wasn’t alone. In fact, hundreds of Navy familieshad to simultaneously contend with the uncertainty that looms when a loved one is at war coupled with the overwhelming devastation brought to the southernU.S. by three hurricanes, Katrina (August), Rita (September)and Wilma (October). Fortunately, they had somewhereto turn: Health Net’s Managed Health NetworkGovernment Services (MHNGS).

Navy turns to MHNGSThe Navy, which has installations throughout the hard

hit Gulf Coast region, quickly realized that its internalresource–called Fleet and Family Service Centers–couldn’t alone respond to the massive need left inKatrina’s wake. The Navy turned to MHNGS.

And MHNGS, which operates under a Department ofDefense subcontract, readily responded. In short order,MHNGS initially dispatched 25 clinicians and financialcounselors to installations throughout the Gulf Coast,Florida and Tennessee (many hurricane victims wereevacuated to the latter).

“This team of associates is still working with the Navyin the Gulf Coast, and will continue to do so through the end of the year,” explains Elaine Shelub, manager,MHNGS. These associates’ hard work hasn’t gone unnoticed. “Directors of the Fleet and Family ServiceCenters have repeatedly commented what an outstandingjob our people have done, particularly in relation tooutreach and being a great source for referrals.”

Clients can take comfortWhile it will likely take years for the battered Gulf

Coast to completely rebound, at least those hurricanevictims who are MHNGS clients can take comfort inknowing that caring clinicians and counselors standready to serve.

After the killer storm struck America’s Gulf Coast,the U.S. Navy relied on the ready resources ofHealth Net’s behavioral health division, MHN

See HN Connect for an update on the Health Net associate who livedthrough the storm, Karen Williams, MHNGS victim advocate inGulfport, Miss., and more MHNGS case stories from the recovery zone.

A Year After KatrinaMHN Still Aiding Recovery Efforts

mhn still aiding recovery efforts

• Just months after losing his house to Katrina, thisMHNGS client lost his wife to a terminal illness. Addingfurther stress was the fact that his wife passed awayout of town, but was buried locally. Tracking down herdeath certificate– which the man urgently needed forher life insurance policy and to apply for financial aid torebuild his house–thus became a significant challengethat only added to the man’s psychological and financial stress. Although it wasn’t part of her job, an MHNGS case manager ran interference and quicklysolved the problem. She also referred the man to a grief counselor and continues to monitor his progress.

• For this MHNGS client–a 26-year-old marine–Katrinaleft him with both an aching heart and a bulgingwaistline. His heart ache stemmed from separation. The storm shredded the house he shared with his wife; until they could rebuild, he had to live on base,and she with her parents some distance away. The combined stress of Katrina’s devastation and his wife’s absence led the marine to munch more thanusual. In fact, he packed on enough pounds to threatenhis continued enlistment. A skilled MHNGS clinician armed the young man with an arsenal of stress-reduction techniques that enabled him to cope while simultaneously cutting calories.

Actual MHNGS casesRecently MHNGS’ Gulf Coast team shared some actualcases they encountered post-Katrina. Here are just two of their many stories:



Our continuing strategy is ‘Simplicity is the pathway to trust’... meaning, if we can makeit simple for seniors where no one else can, we will build their trust in us and encouragethem to consider Health Net. We are taking the consultative approach–let us help youunderstand what you have today, how our plans compare, and let us do it in a way that best meets your needs– at a group seminar, over the phone, or we’ll even come to yourhouse if you’d like, in our core markets.

For 2007 and beyond, Health Net will expand its markets and, based on our success in Arizona, plans to develop more retail storefronts in California, Oregon, New York andConnecticut. We’ve enhanced and streamlined our products with revised and improved collateral that is color-coded and easy to understand. We’re introducing new fall advertisingto boost name recognition and generate qualified leads that will drive sales.

GROWTH

Rolling Out an Array of Senior Products:New plans, new geographies, new advertising

Available in all 50 states andthe District of ColumbiaOrange - Stand-alone Prescription Drug Plan features generic and brand-name drugs. There are three plans tochoose from; two of the plans offeredcome without a deductible so thatmembers are covered from their veryfirst prescription, and one plan offersgeneric drug coverage with no “doughnuthole” gap.

Arizona, California,OregonBrown - Medical CoverageMedicare Supplement Plan with a slightly higher premium than other plans in exchange for the convenience of not having to paycharges when you visit the doctorand the freedom to see any doctorwho accepts Medicare.

Oregon, Washington StateAqua - Medical-only Plan that givesmembers the freedom to see any doctornationwide who accepts Medicare.

Arizona, California,Connecticut, New YorkAmber - Medical and DrugCoverage Plan for Medicare/Medicaiddual-eligible individuals who qualify under the government’sfinancial guidelines; features coststhat may be greatly reduced or eveneliminated.

A perspective from Sam Srivastava, chief senior products officer

Color-coded plans make it simple

Arizona, California,Connecticut, New YorkGreen - Comprehensive HMO MedicalPlan with a $0 monthly plan premiumand minimal copayments for doctorvisits and other services.

ConnecticutNavy - Medical and Prescription DrugPlan with affordable copayments forin-network services; for a higher cost,allows subscribers to see physiciansoutside Health Net’s network whoaccept Medicare.

California, Connecticut,Hawaii, New Mexico, NewYork, Texas, Washington StatePearl - Our newest offering, a PrivateFee-for-Service Medical Plan that givesmembers the freedom to see any doctor who accepts Medicare. OnlyConnecticut has an option that alsoincludes drugs for a higher premium.

Arizona, California,Connecticut, New YorkRuby - HMO with combined medical and drug coverage.

Arizona, California,Oregon, Washington StateViolet - Combines medical and drug coverage with simple copayments for doctor and hospital visits, no matter which doctor you see.

ArizonaSage - Medical and Drug Plan with automatic enrollment into our disease management programfor members with coronary arterydisease or high cholesterol, at noextra cost.

“We makeunderstandingour plans easy.”

“We show you what your costs maybe before yousign up.”

“We strive forthe highestquality carepossible.”

“We give youDecision Power SM.”

Why nearly half-a-million people already have chosen Health Net Medicare plans.

“We tailorour services to Medicare beneficiarieslike you.”

— Excerpted from the new Medicare Collateral


Thanks to you, Health Net is building a better company.Our solid performance and budding growth prove it.

Now, we’ve set our sights even higher. Jay Gellert, president and chief executive officer, stated as much with the launch of this year’s associate survey, saying,“Becoming better is important. Becoming great is ourgoal.” We want to become a great company–and a Great Place to Work.

“These two goals are very interconnected,” says KarinMayhew, senior vice president, Organization Effectivenessfor Health Net. The proof: “The companies that earn a placeon Fortune magazine’s ‘100 Best Companies to Work forin America’ consistently outperform their competitors.” 1

Research aside, it seems obvious that the way peopleare treated makes a difference in how they perform. It’snot surprising then, that studies have shown that overtime, companies appearing on the “100 Best Places toWork” have competitive advantages.

What are these competitive advantages?Besides being a place employees look forward to going

every day, being a Great Place to Work has a host of up sides: • more qualified people want to work there

• lower turnover

• higher levels of customer satisfaction and customer loyalty

• greater innovation, creativity and risk taking

• higher productivity, and

• reduced health care costs

What makes a Great Place to Work?“At the heart of it is creating a work environment

where associates trust the people they work for, havepride in what they do and enjoy the people they workwith,” explains Karin.

The common theme: quality relationships ... relationshipsbetween associates and management … between associatesand their jobs … and among associates themselves.

How are we making Health Net a Great Place to Work?

“It begins with our attitude–we must be willing toexchange ideas, and not be afraid to ‘show our work’ and share honest evaluations of what we are striving to accomplish,” says Karin. “We need to be willing to examine and identify where we are now–and see how it matches up to where we need to go.”

“Remember,” notes Jay, “becoming great is a journeythat all of us at Health Net are undertaking to achievethe goal we’ve agreed upon: to be a great company thatsupports associates and serves customers well. We’vebegun, but we aren’t there yet. My personal goal is thatwe won’t have to ask ‘are we there yet?’ for long–theresults will speak for themselves.”

Here are just a few examples of what HealthNet is doing to build a Great Place to Work.

Focus on people: We pay for performance, and we single out examples of outstanding associates and praise their good work. • Examples: The Heart & Soul Recognition Awards

program; SPOT Awards; HNFS STAR Program; Associate Place features on HN Connect; ServiceAnniversary Awards; and numerous other departmentand business unit recognition programs that let associates know they are valued and appreciated.

12006 Great Place to Work® Institute, Inc.

The Making of a

Great Place to WorkBeginning our journey –

and why it’s important.


Focus on tools and processes: Health Net is improvingits tools to manage our work and support our people.Many initiatives are facilitating greater performanceand growth, as well as improving associate engagement.• Examples: ITG’s Workstation Refresh Program; the

new Macess.EXP electronic document management system; UNITY case management system; theTALEO applicant tracking system; Connectionsmagazine and video capability on HN Connect.

Look for more examples from the regions in future issues.

Next: COMPASS, our Talent ManagementSystem

Having the right people … making sure we supportone another and our performance goals … developingour skills … paying for performance … planning andbuilding for future talent needs–these are the components of Talent Management.

“Associates are our talent, and we need to be ableto make the most of what you offer and your development potential,” says Andy Ortiz, vice president, Talent Management and LeadershipDevelopment. “To help us do that, this fall we’reintroducing Compass, a comprehensive, integratedTalent Management System. It will be rolled out inphases–we’ll all begin using Compass for our 2007goal-setting process.”

Right now, Health Net has separate tools, separateprocesses for managing our people. Some processesare paper-based, such as goal setting and perform-

ance reviews, while others are online like the TALEOstaffing system. COMPASS will link all of this togetherelectronically. Health Net will have a centralized,easy-to-use, desktop resource that lets us evaluatethe strengths of our people, provide developmentopportunities to grow their careers–and enable us to see what other talents need to be honed to makeus great. There will be tools for managers, and toolsfor all associates.

“Setting our 2007 goals using COMPASS is a key step,”Andy explains. “It will allow Health Net to capture,compare and share what we’re doing individually,within business units and across the enterprise–to‘align our goals’–so that we’re all rowing in the samedirection and not duplicating effort.”

Ultimately, this will help us make the best use of ourassociates’ talents and achieve our performance goals.

Being able to identify and integrate associate goals and clarify accountability is somethingassociates have consistently mentioned in HealthNet’s Annual Associate Survey. Addressing this concern also directly responds to recommendationsfrom the work teams from last year’s LeadershipSummit.

This is another reason for associates to participatein the annual survey process–to make sure you share your perspective and ideas about how to make Health Net a Great Place to Work.Look for more about COMPASS, the new TalentManagement System, on HN Connect.


Defining what we stand for

Walking the TalkHealth Net is demonstrating the value we place

on the lives of our associates, our customers and our communities.

Associates: We provide a wide range of benefits to meet associates’ diverse needs, including medical,dental, life and disability insurance, PTO, a brand-new online discount program to support work-lifebalance, educational reimbursement, health clubreimbursement, referral bonuses, as well as a 401(k)Savings Plan with match and new investmentoptions. Enhancements to several of these programswill be announced in 2007.

Customers: iBilling for Individual and Family Plan customers on www.healthnet.com is just the latestexample of our “customer solutions” strategy– tobecome the health care company that uniquelyunderstands and serves its customers with the solutions they need.

Community: Health Net and our associates careabout the communities they serve … How? Katrinarelief support, contributions to the Pentagon MemorialFund, sponsorship of Celebration of Children, Kick ItWith Health Net in California, Habitat for Humanityin the Northeast, United Way in Arizona, and manymore. See page 8, We Live Here, Too, and CapturingKindness at Health Net on page 2.

Health Net is determined tobe a company with lastingperformance in the industry,and companies that achievethis pay attention to thosewho make it happen–theiremployees. Health Net is committed to doing just that.

“The company takes care of the people, and the people in turn take care of the profits.” “Personal and professional opportunities aremany. The company is always striving to improveitself and at the same time giving individuals themotivation and encouragement to achieve theirdesires.” “Every morning I wake up excited to get to workand do the best I can for a company that reallyappreciates it.” “I always strive for the best results, but I am notafraid to make mistakes, which allows me to be arisk taker. I am able to explore my ideas at thiscompany.”

“Management truly encourages and expects individuals to care for themselves outside of work. They understand that quality personal lives contribute to doing a good job.” “This is a great place to work because people care about each other. It doesn’t seem so muchlike work when you are surrounded by people who care about you as an individual.” “I feel I make a difference. My job allows me latitude to make decisions and implement themin order to get the job done. At the end of the day, I can look back and see what I have been able to accomplish with a great feeling of satisfaction.”

Imagine… here’s the associate experience we aspire to create by improvingour work climate and building our reputation as a Great Place to Work …


PERFORMANCE

Every three months, Health Net issues a quarterly earnings news release and hosts a conference call and webcast to discuss the company’s quarterlyresults. And every three months, numerous associates can be seen scratchingtheir heads. The reason? While these reports are chock-full of vital informationabout our company’s financial health, they also are full of technical financialterms that are unfamiliar to many. But that can change; simply take thefollowing quiz and watch your earnings lingo IQ soar.

Want to Up Your Earnings Lingo IQ?Here’s the perfect quiz for you

Circle the letter of the correct answer.

1. Earnings Per Share (EPS)a. Just as your mother taught you, earnings –

like toys–should always be shared.

b. A calculation of a company’s net income divided by its shares of outstanding stock. (For example, a company that earned $2 million in one year, and had 2 million shares of stock outstanding, would have an EPS of $1 per share.)

c. An EPS can be used to locate a misplaced GPS.

2. Medical Care Ratio (MCR)a. MCR is a music group popular among medical

students.

b. MCR is a new hybrid car from Honda.

c. A calculation representing the percent of premium dollars spent on medical care.

3. Net Incomea. Total revenues minus total expenses and taxes.

b. Income generated by selling junk from your closet on eBay.

c. Annual profits of the fishing industry.

4. Reserves for Claimsa. Database collection of “strange but true” UFO stories.

b. Contacting an insurance agent to report an auto accident that will occur in the future.

c. Money that is set aside to pay for known and unknown future medical expenses.

5. Per Member Per Month (PMPM)a. PMPM is the newest over-the-counter sleep aid.

b. PMPM can be considered a health care company’s unit price or unit cost. It is a measurement that can be used to describe revenues, health care costs,and general and administrative costs by dividing the total amount by the number of members for a given month or other calendar period.

c. PMPM is the way teens today say good night.

6. Days Claims Payable (DCP)a. A phrase that is extremely difficult to say quickly,

10 times in a row.

b. One measure used by Wall Street analysts to describe the “quality of earnings” and reserve position of a company.

c. DCP is sold next to STP at fine automotive retailers nationwide.

7. General and Administrative Expenses (G&A)a. The cost to run the company like salaries, rent,

travel, advertising, etc.

b. A polite way of saying, “Man, do we really need to spend that much money?!”

c. The next time your spouse asks, “Why isn’t there any money in our checking account?” simply reply, “G & A.”

Answers: 1. b 2. c 3. a 4. c 5. b 6. b 7. a

…To be continued online @ HN Connect > Find It Fast > Newsletters > Connections



Serving Those WhoServe Our Country

• Under the TRICARE North contract, HNFS provideshealth care services to 2.9 million TRICARE eligibleactive and retired military, veterans and their families in the North Region (23 states and theDistrict of Columbia).

• The HNFS Network supports the military’s DirectCare System of 51 Military Treatment Facilities with more than 96,000 civilian network providersacross the TRICARE North Region.

• Veterans Affairs (VA) –HNFS provides cost-effective health care programs to the VA nationwide. HNFS VA programs include thePreferred Pricing Program, DRG Audit and Recovery, and 18 Community Based OutpatientClinics.

“Did you know: HNFS” continues online on theConnections site: HN Connect > Find It Fast >Newsletters > Connections > Links noted in this issue.

For in-depth information about HNFS, see their site on HN Connect > Business Units > HNFS.

Health Net Federal Services (HNFS) is the GovernmentOperations Division of Health Net, Inc., led by SteveTough, president. The corporate office is located inRancho Cordova, Calif. HNFS employs nearly 1,700 associates in 76 locations across the nation.

Health Net, through HNFS, became the first U.S. company to develop comprehensive managed care programs for military families.• HNFS has supported military families through the

delivery of both CHAMPUS/TRICARE and VeteransAffairs programs for 18+ years.

HN Connect is your resource for the latest Health Net news and information. Check out the home page and yourbusiness unit or department page for the most up-to-dateinformation on what’s happening in our company.

For an online copy of this magazine, live links to related stories, to submit ideas

and feedback: go to HN Connect > Find It Fast > Newsletters > Connections.

Your Online Resource for Breaking News and Updates

HNConnect

Associate ResourcesAssociate Service Center:

1-877-HR-HELPS (1-877-474-3577) or 818-676-5029, Fax 818-676-5048

Employee Assistance Program is confidential and toll free 24/7:

• California associates outside Sacramento, Calif.: 800-243-8899

• All other associates: 800-977-7964

• TDD callers: 800-327-0801

Computer Help Desk: 877-589-4357

?

ConnecTV is Health Net’s video magazinethat showcases enterprise initiatives, cross-plan collaboration and important localactivities that support our Performance,Growth and Great Place to Work themesand contribute to Health Net’s success.

Look for the latest video-zine coming soon to a screen near you.

Did you Know

health net connections internal brand print magazine #1

Health & Medicine

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health net associates

connections magazine

companywhile connections

connections purpose

health care industry

access hn

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