Health Net Issues 2013 Earnings Guidance

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.

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