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Health Net’s earnings: 3 takeaways

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Another publicly traded health insurer, Health Net Inc., has given investors a peek at how the new health insurance world is working as it releases third-quarter earnings.

Health Net (NYSE:HNT) has bad news for agents and brokers hoping for the Patient Protection and Affordable Care Act (PPACA) public exchange system to just go away: Executives at the company have not given many details about their exchange qualified health plan (QHP) business, but they sounded happy with it as they talked about it today during a conference call they held with securities analysts.

The company recorded a net loss for the quarter as a result of $106 million in charges related to a big, seven-year outsourcing agreement. It would have reported $97 million in net income if not for the charges related to the outsourcing deal.

Here are some takeaways from the company’s earnings announcement for the quarter and from the analyst call.


1. Business looks fine, overall.

Health Net is reporting an $8.9 million net loss for the quarter on $3.8 billion in revenue, compared with $67 million in net income on $2.8 billion in revenue for the third quarter of 2013.

The company ended the quarter providing or administrating health coverage for 5.9 million people, up from 5.3 million people a year earlier. The number of people with individual health insurance increased to 370,000, from 122,000.

Jay Gellert, Health Net’s chief executive officer, said the company now covers about 306,000 people through the state-based Covered California exchange in California and federally run exchange in Arizona.

The exchange plan lapse rate has been comparable to the lapse rates Health Net before the exchange system came to life, Gellert said.

Health Net hopes to add about 100,000 net new exchange plan enrollees in 2015.


2.  Medical costs in Health Net’s markets remain subdued, both at exchange plans and at other plans.

In Health Net’s main region, the Western region, commercial health care costs per member per month fell to $323 in the third quarter, from $326 in the third quarter of 2013.

“There has been no unanticipated increase in utilization in any line of business,” Gellert said.

The company noted that growth in individual enrollment and shrinkage in large-group enrollment helped control health care spending. 

At the commercial health insurance operation, which includes the exchange plan enrollees, the overall medical care ratio fell to 83.9 percent, from 84.2 percent.

See also: Medicare Part D plans cover fewer drugs


3. PPACA is increasing the emphasis on efficiency.

Health Net is hiring a unit of Cognizant Technology Solutions Corp. to handle its contact centers, claim management, information technology, appeals and grievance procedures, and medical management support.

Health Net is hoping the deal will help it save $150 million to $200 million per year by 2015.

Cognizant has about 150,000 employees around the world, including about 100,000 in India.

See also:

PPACA creeps into state and local courts: 5 early cases


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