This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Health Net's CEO Discusses Q2 2012 Results - Earnings Call Transcript

I will now turn the call over to Jay Gellert, Health Net’s CEO.

Jay M. Gellert

Thank you, Angie, and good morning. I want to answer three basic questions this morning. One, how did this happen, two, how do you know we’ve gotten it all and three, can we give you confidence, we can fix this for 2013.

So first, how did this happen? Two factors had the greatest influence on second quarter results, commercial large group full network products and SPD experience particularly outside Los Angeles County. Let me talk first about commercial. Our lower than expected, second quarter was largely driven by factors arising from a select number of our largest groups, mostly multi-stage using our full network products.

In total, these accounts are running MCRs above a 100%. They include about a 100,000 members and were the primary factor driving a 150 basis point change in commercial spread guidance. The deterioration is largely driven by adverse risk selection. As we’ve noted in the past, price competition has been particularly intense in these large groups and the move to ASO continues to grow. ASO offerings tend to have lower benefits and/or higher out-of-pocket costs.

As a result, the traditional full network HMO products tends to retain a disproportionate number of high cost members, when offered by side-by-side with these ASO plans in Kaiser in slice accounts. This trend has exacerbated in recent years. The key in these specific groups is pricing to the risk profile without regard to retention. We will not sell or renew groups below cost in 2013.

We are taking other steps as well. We’ve modified provider network configurations and intensified medical management. We’re also offering our Tailored Network Products, as an alternative. These products have done remarkably well in small and mid market accounts and in the few large groups where they’ve been adopted. Because of these steps, we could lose up to 50,000 members among these largest groups next year. In the rest of our commercial book, mid markets and small groups as well as Tailored Network Products in large group, we believe we’re doing well.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,172.68 -107.06 -0.62%
S&P 500 1,994.29 -16.11 -0.80%
NASDAQ 4,527.6890 -52.10 -1.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs