Health Net Issues 2013 Earnings Guidance
LOS ANGELES -- December 18, 2012
Health Net, Inc. (NYSE:HNT) today announced its 2013 annual guidance of $2.00
to $2.10 for GAAP earnings per diluted share.
Health Net expects its consolidated revenues for the combined Western Region
Operations (Western Region) and Government Contracts segments in 2013 will be
between approximately $10.7 billion and $11.2 billion.
Compared with year-end 2012 enrollment, the company expects the following with
regard to year-end 2013 enrollment for the Western Region:
*Total health plan membership will decline by 1 to 2 percent;
*Commercial enrollment will decline by 8 to 9 percent;
*Medicare Advantage enrollment will increase by 1 to 2 percent; and
*Medicaid enrollment will increase by 4 to 6 percent.
Western Region commercial premium yields per member per month (PMPM) in 2013
are expected to increase by approximately 3.6 percent compared with 2012.
The year-over-year change in commercial premium yields PMPM is anticipated to
be affected by ongoing product and geographic mix shifts. In 2013, the company
expects commercial enrollment to be more heavily weighted to smaller accounts
and tailored network products that have lower than company-average premiums
PMPM when compared with 2012.
Western Region commercial health care costs PMPM in 2013 are expected to
increase by approximately 350 basis points less than the 2013 increase in
commercial premium yields PMPM.
The company expects the year-over-year change in commercial health care costs
PMPM to be driven by several factors. The company anticipates no recurrence of
adverse prior period development in 2013, which accounts for approximately 200
basis points of the change noted above. The continuing mix shift from larger
to smaller groups, from higher cost to lower cost geographies, and from full
network products to more efficient products with lower medical care ratios, is
expected to account for approximately 90 basis points of the difference.
Lastly, approximately 60 basis points of the difference are expected to result
from repricing actions in the company’s largest accounts.
The pretax contribution from the Government Contracts segment is expected to
be approximately $75 million to $84 million in 2013.
The company’s general and administrative (G&A) expense ratio for the Western
Region is expected to be approximately 9.0 to 9.4percent in 2013.
The company’s guidance at this time excludes any impact on membership,
revenues, costs or earnings from its participation in the state of
California’s dual eligible demonstration pilot programs.
Following is a table with specific 2013 guidance metrics.
Metric 2013 Guidance
Commercial: -8% to -9%
Medicaid: +4% to +6%
Medicare Advantage: +1% to +2%
Total health plan membership: -1%
Consolidated revenues^(b) ~$10.7 billion to $11.2 billion
Commercial premium yields PMPM^(a)(c) ~ +3.6%
Commercial health care costs PMPM^(a)(c) ~350 basis points < premium
Selling cost ratio^(a) ~2.3% to 2.4%
G&A expense ratio^(a) ~9.0% to 9.4%
Tax rate^(b) 38.0% to 39.0%
diluted shares outstanding
GAAP EPS $2.00 to $2.10
(a) For the company’s Western Region Operations segment
(b) For the combined Western Region Operations and Government Contracts
(c) These estimates are in comparison to expected 2012 amounts.
About Health Net
Health Net, Inc. is a publicly traded managed care organization that delivers
managed health care services through health plans and government-sponsored
managed care plans. Its mission is to help people be healthy, secure and
comfortable. Health Net, through its subsidiaries, provides and administers
health benefits to approximately 5.4million individuals across the country
through group, individual, Medicare (including the Medicare prescription drug
benefit commonly referred to as “Part D”), Medicaid, U.S.Department of
Defense, including TRICARE, and Veterans Affairs programs. Health Net’s
behavioral health services subsidiary, Managed Health Network, Inc., provides
behavioral health, substance abuse and employee assistance programs to
approximately 4.9million individuals, including Health Net’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.
For more information on Health Net, Inc., please visit Health Net’s website at
Health Net, Inc. and its representatives may from time to time make written
and oral forward-looking statements within the meaning of the Private
Securities Litigation Reform Act (“PSLRA”) of 1995, including statements in
this and other press releases, in presentations, filings with the Securities
and Exchange Commission (“SEC”), reports to stockholders and in meetings with
investors and analysts. All statements in this press release, other than
statements of historical information provided herein, including the guidance
for future periods and the assumptions underlying such projections, may be
deemed to be forward-looking statements and as such are intended to be covered
by the safe harbor for “forward-looking statements” provided by PSLRA. These
statements are based on management’s analysis, judgment, belief and
expectation only as of the date hereof, and are subject to changes in
circumstances and a number of risks and uncertainties. Without limiting the
foregoing, the guidance as to expected future period results and statements
including the words “believes,” “anticipates,” “plans,” “expects,” “may,”
“should,” “could,” “estimate,” “intend,” “feels,” “will,” “projects” and other
similar expressions are intended to identify forward-looking statements.
Actual results could differ materially from those expressed in, or implied or
projected by the forward-looking information and statements due to, among
other things, health care reform and other increased government participation
in and regulation of health benefits and managed care operations, including
the ultimate impact of the Affordable Care Act, which could materially
adversely affect Health Net’s financial condition, results of operations and
cash flows through, among other things, reduced revenues, new taxes, expanded
liability, and increased costs (including medical, administrative, technology
or other costs), or require changes to the ways in which HealthNet does
business; rising health care costs; continued slow economic growth or a
further decline in the economy; negative prior period claims reserve
developments; trends in medical care ratios; membership declines; unexpected
utilization patterns or unexpectedly severe or widespread illnesses; rate cuts
and other risks and uncertainties affecting Health Net’s Medicare or Medicaid
businesses; Health Net’s ability to successfully participate in the
dual-eligibles pilot programs; litigation costs; regulatory issues with
federal and state agencies including, but not limited to, the California
Department of Managed Health Care, the Centers for Medicare & Medicaid
Services, the Office of Civil Rights of the U.S. Department of Health and
Human Services and state departments of insurance; operational issues; failure
to effectively oversee our third-party vendors; noncompliance by Health Net or
Health Net’s business associates with any privacy laws or any security breach
involving the misappropriation, loss or other unauthorized use or disclosure
of confidential information; liabilities incurred in connection with Health
Net’s divested operations; impairment of Health Net’s goodwill or other
intangible assets; investment portfolio impairment charges; volatility in the
financial markets; and general business and market conditions. Additional
factors that could cause actual results to differ materially from those
reflected in the forward-looking statements include, but are not limited to,
the risks discussed in the “Risk Factors” section included within Health Net’s
most recent Annual Report on Form 10-K and subsequent Quarterly Reports on
Form 10-Q filed with the SEC, and the other risks discussed in Health Net’s
filings with the SEC. Readers are cautioned not to place undue reliance on
these forward-looking statements. Except as may be required by law, Health Net
undertakes no obligation to address or publicly update any of its guidance,
the assessment of the underlying assumptions or forward-looking statements to
reflect events or circumstances that arise after the date of this release.
Health Net, Inc.
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