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4th Annual Investor Conference

4th Annual Investor Conference. HEALTH PLANS DIVISION Cora Tellez President. May 16, 2001. Positioned for Profitable Growth. Solid Operating Performance in 2000 and Entering 2001 New Products Introduced in 2000 and More Planned for 2001

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4th Annual Investor Conference

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  1. 4th Annual Investor Conference HEALTH PLANS DIVISION Cora Tellez President May 16, 2001

  2. Positioned for Profitable Growth • Solid Operating Performance in 2000 and Entering 2001 • New Products Introduced in 2000 and More Planned for 2001 • Medicare Strategy That Focuses on Profitable Performance

  3. Positioned for Profitable Growth • Solid Operating Performance in 2000 and Entering 2001 • New Products Introduced in 2000 and More Planned for 2001 • Medicare Strategy That Focuses on Profitable Performance

  4. Health Plan Membership Health Plan Membership By State

  5. Health Plan Membership Health Plan Membership By Line of Business

  6. Health Plan Revenue Health Plan Premium Revenue By Line of Business

  7. 2000-2001 Operating Performance Health Plans Division

  8. Drivers of Membership Growth • Diversify the Product Portfolio • Diversify Market Segments • Pursue Niche Products • Provide Flexible Benefit Designs to Meet Consumers at the Price They Want to Pay • Expand Choice and Access • Price Ahead of Cost Trends

  9. Membership Results By Line of Business Membership* Growth Between Q1 2000 and Q1 2001 * Excludes Florida, Washington and Colorado Medicare Supp is in Medicare

  10. Membership Results By Product Commercial Membership* Growth Between Q1 2000 and Q1 2001 * Excludes Florida, Washington and Colorado Medicare Supp is in Medicare

  11. Membership Results By Market Segment Commercial Membership* Growth Between Q1 2000 and Q1 2001 * Excludes Florida, Washington and Colorado Medicare Supp is in Medicare

  12. Gradual and Planned Shift in Risk Health Net of California HMO Membership By Risk Type

  13. Inpatient Utilization Under Control As Risk Shifts

  14. Inpatient Utilization Under Control As Risk Shifts

  15. Successfully Managing the Shift in Risk • Pricing Ahead of Medical Cost Trends • Claims Processing Under Control • Claims Volume Increased 25% from 1999 to 2000 and is Projected to Increase 27% in 2001 • Successfully Managing Inventory - “Work on Hand” Consistently Under Five Days • Increased Staff 25% Over Past 12 Months • Expanded Outsourced Adjudication Capabilities • Implemented Technology Enhancements - EDI, Auto Adjudication

  16. Positioned for Profitable Growth • Solid Operating Performance in 2000 and Entering 2001 • New Products Introduced in 2000 and More Planned for 2001 • Medicare Strategy That Focuses on Profitable Performance

  17. Market Position: A Platform For Growth HMO Market Position in Largest Markets

  18. Consistently Profitable Medicaid Program • Strong Growth Between Q1 2000 and Q1 2001 • California: 100,000 Members (21% Growth) • Northeast: 12,000 Members (12% Growth) • Stable Performance • Consistent Profitability • Demographic Profile

  19. Maintaining Affordability: California Copay Strategy • New Copays & Copay Increases Across All Services • $250-$350 Inpatient and Outpatient Surgery Copay • $75 Emergency Room Copay and Option to Increase Physician Visit Copay • Maintains Product Affordability Through Cost Sharing • Will Mitigate Premium Increases • Should Stem Shift to Self-Insurance

  20. Maintaining Affordability: Northeast Copay Strategy • Introduced “Split Copay” Product - Differentiates Primary and Specialty Physician Copay • Will Mitigate Premium Increases • Well Received by the Market • Three-Tier Pharmacy Plans Offered on Every Renewal in 2000 • About 47% of Eligible Members Converted to 3-Tier in Q1 2001 • Will Mitigate Premium Increases

  21. Positioned for Profitable Growth • Solid Operating Performance in 2000 and Entering 2001 • New Products Introduced in 2000 and More Planned for 2001 • Medicare Strategy That Focuses on Profitable Performance

  22. Medicare Product Line & Strategy • Medicare Profitability is Improving • Diligently Track Performance - Judicious in Evaluating Market Exits • Medicare Strategy: • High AAPCC Counties • Cost Effective Networks • Medicare Supplemental Plans

  23. Medicare - West • 24 Counties in the West • 20 Counties in California • 4 Counties in Arizona • Exited Five Counties: Fresno, Sonoma, Cochise, Gila and So. Pinal Impacting 11,000 Members • Benefit Reductions in 16 Out of 22 Counties • Copay Increases • Generics Only • Lower Pharmacy Caps • MCR Improvement Seen in Q1 2001

  24. Medicare - Northeast • 12 Counties in the Northeast • Exited Four Counties: Litchfield, Middlesex, Nassau and Suffolk Impacting 4,800 Members • Benefit Reductions in Connecticut • Generics Only • MCR Improvement Seen in Q1 2001

  25. Health Net, Inc. Health Plans - Well Positioned For Growth • Solid Products • Strong Financial Base • Benefit Flexibility • Management Depth • Focus and Discipline Around Our “Vital Few” • Investment in Branding

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