Health Net, Inc.

(818) 676-6000

21650 Oxnard Street

Woodland Hills, CA 91367
www.health.net

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Sales

$11.1 billion

Business Description
We are an integrated managed care organization that delivers managed health care services. We operate and conduct our businesses through subsidiaries of Health Net, Inc., which is among the nation’s largest publicly traded managed health care companies.  Our health plans and government contracts subsidiaries provide health benefits through our health maintenance organizations (“HMOs”), insured preferred provider organizations (“PPOs”) and point-of-service (“POS”) plans to approximately 5.3 million individuals in 14 states through group, individual, Medicare, Medicaid and TRICARE programs. We also offer managed health care products related to behavioral health and prescription drugs. In addition, we own health and life insurance companies licensed to sell exclusive provider organization (“EPO”), PPO, POS and indemnity products, as well as auxiliary non-health products such as life and accidental death and disability insurance, in 36 states and the District of Columbia. We currently operate within two reportable segments: Health Plan Services and Government Contracts.

Our Health Plan Services reportable segment includes the operations of our health plans in Arizona, California, Connecticut, New Jersey, New York and Oregon, the operations of our health and life insurance companies and our behavioral health and pharmaceutical services subsidiaries. We have approximately 3.7 million at-risk and 0.1 million administrative services only (“ASO”) members in our Health Plan Services reportable segment. Effective September 30, 2003, we withdrew our commercial health plan from the commercial market in the Commonwealth of Pennsylvania. See “Other Company Information and Recent and Other Developments – Withdrawal of Pennsylvania Health Plan” for additional information regarding our withdrawal from the Pennsylvania commercial market. On October 31, 2003, we consummated the sale of our dental and vision subsidiaries to SafeGuard Health Enterprises, Inc. (“SafeGuard”). Prior to the sale, our dental and vision subsidiaries were included in our Health Plan Services Segment. See “Segment Information – Health Plan Services Segment – Other Specialty Services and Products – Dental and Vision” for additional information regarding the sale of our dental and vision subsidiaries.


Our Government Contracts reportable segment includes government-sponsored managed care plans through the TRICARE programs and other government contracts. The Government Contracts reportable segment administers large, multi-year managed health care government contracts. Certain components of these contracts are subcontracted to unrelated third parties. We administer health care programs covering approximately 1.5 million eligible individuals under TRICARE and currently have three TRICARE contracts that cover Alaska, Arkansas, California, Hawaii, Oklahoma, Oregon, Washington and parts of Arizona, Idaho, Louisiana and Texas. These contracts expire in 2004. In August 2003, we were awarded a new five year contract for the TRICARE North Region that supports nearly 2.8 million Military Health System (“MHS”) eligible participants, including the provision of health care and administrative services for 1.7 million TRICARE eligibles and the provision of administrative services only for 1.1 million other MHS-eligible beneficiaries (active duty personnel and TRICARE/Medicare dual eligible beneficiaries). 

Segment Information

We currently operate within two reportable segments, Health Plan Services and Government Contracts, each of which are described below. For additional financial information regarding our reportable segments, see Note 15 in the Notes to Consolidated Financial Statements included as part of this Annual Report on Form 10-K.

Health Plan Services Segment

Managed Health Care Operations.

We offer a full spectrum of managed health care products. Our strategy is to offer to employers and individuals a wide range of managed health care products and services that, among other things, provide comprehensive coverage and contain health care costs increases. As of December 31, 2003, approximately 50% of our members were covered by conventional HMO products. We are continuing to expand our other product lines, thereby enabling us to offer flexibility to employer groups and individual insureds.

Our health plans offer members a wide range of health care services that are designed to contain costs and provide comprehensive coverage, including ambulatory and outpatient physician care, hospital care, pharmacy services, behavioral health and ancillary diagnostic and therapeutic services. Our health plans include a matrix package which allows members to select their desired coverage from alternatives that have features such as interchangeable outpatient and inpatient co-payment levels; POS programs which offer a multi-tier design that provides both conventional HMO and indemnity-like (in-network and out-of-network) tiers; a PPO traditional product which allows members to self-refer to the network physician of their choice; and a managed indemnity plan which is provided for employees who reside outside of their HMO service areas. For information regarding the marketing and sale of our health plans, see “Additional Information Concerning our Business – Marketing and Sales.”

The pricing of our products is designed to provide incentives to both employers and employees to select and enroll in the products with greater managed health care and cost containment elements. In general, our HMOs provide comprehensive health care coverage for a fixed fee or premium that does not vary with the extent or frequency of medical services actually received by the member. PPO enrollees choose their medical care from among the various contracting providers or choose a non-contracting provider and are reimbursed on a traditional indemnity plan basis after reaching an annual deductible. POS enrollees choose, each time they receive care, from conventional HMO or indemnity-like (in-network and out-of-network) coverage, with payments and/or reimbursement depending on the coverage chosen. We assume both underwriting and administrative expense risk in return for the premium revenue we receive from our HMO, POS and PPO products. We have contractual relationships with health care providers for the delivery of health care to our enrollees.

During 2003, our Health Plan Services segment had health plan operations in Arizona, California, Oregon, Connecticut, New Jersey, New York and Pennsylvania. On September 30, 2003, we withdrew our commercial health plan from the commercial market in the Commonwealth of Pennsylvania. See “Other Company Information and Recent and Other Developments – Withdrawal of Pennsylvania Health Plan” for additional information regarding our withdrawal from the Pennsylvania market.

Arizona. In Arizona, we believe that our commercial managed care operations rank us seventh largest as measured by total membership and fourth largest as measured by size of provider network. Our commercial membership in Arizona was 119,110 as of December 31, 2003, which represented an increase of approximately 0.5% during 2003. This increase was primarily due to increased sales of our PPO products in the small group and individual market. Our Medicare membership in Arizona was 36,414 as of December 31, 2003, which represented a decrease of approximately 6% during 2003. We did not have any Medicaid members in Arizona as of December 31, 2003 or 2002.
 

California. We believe that Health Net of California, Inc., our California HMO (“HN California”), is the third largest HMO in California in terms of membership and second largest in terms of size of provider network. Our commercial membership in California as of December 31, 2003 was 1,670,917, which represented a decrease of approximately 5% during 2003. The decrease in commercial membership was solely due to enrollment decreases within the large group market as a result of the loss of the CalPERS members effective January 1, 2003. Our commercial membership in the small group and individual market in California was 559,255 as of December 31, 2003, which represented an increase of approximately 13% during 2003. Our Medicare membership in California as of December 31, 2003 was 99,403, which represented a decrease of approximately 2% during 2003. Our Medicaid membership in California as of December 31, 2003 was 701,994 members, which represented a decrease of approximately 3% during 2003. The decrease in Medicaid membership in California was primarily due to the State changing eligibility requirements for the Medicaid program.

Oregon. We believe that our Oregon operations make us the seventh largest managed care provider in Oregon in terms of membership and the largest HMO in Oregon in terms of size of provider network. Our commercial membership in Oregon was 120,200 as of December 31, 2003, which represented an increase of approximately 51% during 2003. Of these members, approximately 11,000 reside in Washington. Our Medicare membership in Oregon as of December 31, 2003 was 392. We did not have any Medicare members in Oregon as of December 31, 2002. We did not have any Medicaid members in Oregon as of December 31, 2003 or 2002.

Northeast. Our Northeast operations are conducted in Connecticut, New Jersey and New York. For our large employer group business, we directly market commercial HMO, PPO and POS products in Connecticut, commercial HMO and POS products in New Jersey and commercial HMO, PPO and POS products in New York. For small employer group business in Connecticut, New Jersey and New York, we offer HMO, PPO and POS products through a marketing agreement with The Guardian in which we are doing business under the brand name “Healthcare Solutions.” Under the agreement, we generally share the profits of Healthcare Solutions equally with The Guardian, subject to certain terms of the marketing agreement related to expenses. The Guardian is a mutual insurer (owned by its policy owners) which offers financial products and services, including individual life and disability income insurance, employee benefits, pensions and 401(k) products. The Guardian is headquartered in New York and has approximately 2,400 financial representatives in over 100 general agencies.

We believe our Connecticut operations make us the second largest managed care provider in terms of membership and the largest in terms of size of provider network in Connecticut. Our commercial membership in Connecticut was 253,502 as of December 31, 2003 (including 45,489 members under The Guardian arrangement), a decrease of approximately 17% since the end of 2002. This decrease was primarily due to planned attrition in the large group segment. Our Medicare membership in Connecticut was 27,357 as of December 31, 2003, which represented a decrease of approximately 5% during 2003, and our Medicaid membership in Connecticut was 98,486 as of December 31, 2003, which represented a decrease of approximately 6% during 2003.
 
We believe our New Jersey operations make us the third largest managed care provider in terms of membership and the fourth largest in terms of size of provider network in New Jersey. Our HMO membership in New Jersey was 294,360 as of December 31, 2003 (including 153,681 members under The Guardian arrangement), which represented a decrease of approximately 2% during 2003. Our Medicaid membership in New Jersey was 45,046 as of December 31, 2003, which represented a decrease of approximately 7% during 2003. We did not have any Medicare members in New Jersey as of December 31, 2003 or 2002.

We believe our New York HMO and PPO operations make us the tenth largest HMO managed care provider in terms of membership and the sixth largest in terms of size of provider network in New York. In New York, we had 271,498 commercial members as of December 31, 2003, which represented an increase of approximately 9% during 2003. Such membership included 115,986 members under The Guardian arrangement. Our Medicare membership in New York was 5,673 as of December 31, 2003, which represented a decrease of 14% during 2003. We did not have any Medicaid members in New York as of December 31, 2003 or 2002.

Medicare Products.

Our Medicare+Choice plans had a combined membership of approximately 169,239 as of December 31, 2003, compared to 176,160 as of December 31, 2002. On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law. As a result of this legislation, Medicare private market plans will change their name from Medicare+Choice to Medicare Advantage. The name change will be transitioned in 2004 and 2005 and become fully effective in 2006. See “Government Regulation – Federal Legislation and Regulation – Medicare Legislation” and “Risk Factors – Our businesses are highly regulated” for additional information regarding the Medicare legislation.

We offer our Medicare+Choice products directly to individuals and through employer groups. To enroll in one of our Medicare+Choice plans, covered persons must be eligible for Medicare. We provide or arrange health care services normally covered by Medicare plus a broad range of health care services not covered by traditional Medicare programs. The federal Centers for Medicare & Medicaid Services (“CMS”) pays us a monthly amount for each enrolled member based, in part, upon the “Adjusted Average Per Capita Cost,” as determined by CMS’ analysis of fee-for-service costs related to beneficiary demographics and other factors. Depending on plan design, we may charge a monthly premium. We also provide Medicare supplemental coverage to approximately 36,821 members through either individual Medicare supplement policies or employer group sponsored coverage.

Our California Medicare+Choice product, Seniority Plus, operated by our California health plan, was licensed and certified to operate in 15 California counties as of December 31, 2003. Our other health plan subsidiaries are licensed and certified to offer Medicare+Choice plans in three counties in Connecticut, four counties in Arizona and four boroughs in the City of New York. We offer a Medicare preferred provider organization product (“Medicare PPO”) under a CMS demonstration product in seven counties in Arizona, 13 counties in Oregon and one county in Washington. We began enrolling members in the Medicare PPO effective January 1, 2003.

Medicaid Products

As of December 31, 2003, we had an aggregate of approximately 845,526 Medicaid members (including approximately 99,633 members in our Healthy Families program described below) compared to 874,154 members as of December 31, 2002, principally in California. We also had Medicaid members and operations in Connecticut and New Jersey. To enroll in our Medicaid products, an individual must be eligible for Medicaid benefits under the appropriate state regulatory requirements. Our HMO products include, in addition to standard Medicaid coverage, certain additional services including dental and vision benefits. The applicable state agency pays our HMOs a monthly fee.

Our California HMO, HN California, participates in the State Children’s Health Insurance Program (“SCHIP”), which, in California, is known as the Healthy Families program. SCHIP was designed as a federal/state partnership, similar to Medicaid, with the goal of expanding health insurance to children whose families earn too much money to be eligible for Medicaid, but not enough money to purchase private insurance. Member premiums, which range from $4 to $9 per child, per month, are subsidized by the State of California. California receives two-thirds of the funding for the program from the federal government.

Administrative Services Only Business

We provide ASO products to large employer groups in California, Connecticut, New Jersey and New York. Under these arrangements, we provide claims processing, customer service, medical management and other administrative services without assuming the risk for medical costs. We are generally compensated for these services on a fixed per member per month basis. As of December 31, 2003, we had 87,767 members through our ASO business.

Indemnity Insurance Products

We offer insured PPO, POS, EPO and indemnity products as “stand-alone” products and as part of multiple option products in various markets. These products are offered by our health and life insurance subsidiaries which are licensed to sell insurance in 36 states and the District of Columbia. Through these subsidiaries, we also offer HMO members auxiliary non-health products such as group life and accidental death and disability insurance. Our health and life insurance products are provided throughout most of our service areas.

Other Specialty Services and Products

We offer pharmacy benefits, behavioral health, dental and vision products and services (through strategic relationships with third parties) as well as managed care products related to cost containment for hospitals, health plans and other entities as part of our Health Plan Services segment.

Pharmacy Benefit Management. Pharmacy benefits are managed through a variety of clinical, technological and contractual tools. We seek to provide safe, effective medications that are affordable to our members. We outsource certain capital and labor intensive functions of pharmacy benefit management, such as claims processing. However, we continue to actively utilize all other pharmacy management tools available. Some of the tools used are as follows:

• Pharmacy benefit design – we have designed and sell multi-tier pharmacy products that allow consumer choice with variable member financial participation

• Clinical programs that improve safety, efficacy and member compliance with prescribed medical treatment

• Retail and mail order pharmacy network and manufacturer contracting that lower the net cost

• Technological tools that efficiently automate claim adjudication and payment to lower administrative costs

• Technology that plays a key role in preventing members from receiving drugs that may harmfully interact with other medications they are taking.

Behavioral Health. We provide behavioral health services through our wholly-owned subsidiary, Managed Health Network, Inc., and subsidiaries of Managed Health Network, Inc. (collectively “MHN”). MHN holds a license in California under the Knox-Keene Health Care Service Plan Act of 1975 (the “Knox-Keene Act”) as a Specialized Health Care Service Plan. MHN offers behavioral health, substance abuse and employee assistance programs (“EAPs”) on an insured and self-funded basis to employers, governmental entities and other payers in various states.

Employers participating in MHN’s programs range in size from Fortune 100 companies to mid-sized companies with under 100 employees. MHN’s strategy is to extend its market share in the Fortune 500 and health plan markets, through a combination of direct, consultant/broker and affiliate sales. MHN intends to achieve additional market share by broadening its employer products, including using the Internet as a distribution channel and by continuing carve-out product sales, funded on either a risk or self-funded basis.

MHN’s products and services were being provided to over 7.1 million individuals as of December 31, 2003, with approximately 2.6 million individuals under risk-based programs, approximately 2.1 million individuals under self-funded programs and approximately 2.4 million individuals under EAP. MHN is serving approximately 803 employer groups on a stand-alone basis plus approximately 49,487 groups through other affiliates of MHN, primarily in California and the Northeast.

In 2003, MHN’s total revenues were $223 million. Of that amount, $133 million represented revenues from business with MHN affiliates and $90 million represented revenues from non-affiliate business.

Headquartered in Point Richmond, California, MHN has nationwide operations with full-service clinical intake offices in New York, Dallas, Milwaukee, Las Vegas, San Rafael and Huntington Beach, California.

Dental and Vision. On October 31, 2003, we consummated the sale of our dental and vision subsidiaries, Health Net Dental, Inc. (“Health Net Dental”) and Health Net Vision, Inc. (“Health Net Vision”) to SafeGuard. In addition, we entered into an assumption reinsurance agreement to transfer full responsibility for the stand alone dental and vision policies of Health Net Life Insurance Company to SafeHealth Life Insurance Company (“SafeHealth Life”). As a result of the sale, we no longer underwrite or administer stand alone dental and vision products. We continue to make available to our current and prospective members private label dental products through a strategic relationship with SafeGuard and private label vision products through a strategic relationship with EyeMed Vision Care LLC (“EyeMed”). The stand alone dental products are underwritten and administered by SafeGuard companies and the stand alone vision products are underwritten by Fidelity Security Life Insurance Company and administered by EyeMed. In connection with these sales, we received approximately $14.8 million in cash. We also transferred $2.1 million in cash and $2.1 million in liabilities to SafeHealth Life under the assumption reinsurance agreement.

As of October 31, 2003, Health Net Dental had approximately 418,500 members, of which 61,700 members were beneficiaries under the Medicaid dental programs. As of October 31, 2003, Health Net Vision provided services to approximately 159,600 members. Of those covered lives, 99,100 members were enrolled in full-risk products and 60,500 lives were covered under administrative services contracts. As of October 31, 2003, Health Net Life Insurance Company had approximately 49,400 dental PPO and indemnity members and 53,600 vision PPO and indemnity members.

Our dental and vision subsidiaries had $47.4 million of revenues and $1.9 million of income before income taxes for the ten months ended October 31, 2003. As of October 31, 2003, our dental and vision subsidiaries had a combined total of $4.3 million in net equity, which we recovered through the sales proceeds. Health Net Life Insurance Company had $15.9 million of stand alone dental and vision product revenues and related income before income taxes of $0.7 million for the ten months ended October 31, 2003. Prior to being sold, our dental and vision subsidiaries and the stand alone dental and vision product business of Health Net Life Insurance Company were reported as part of our Health Plan Services reportable segment.

Government Contracts Segment

Our Government Contracts reportable segment includes government-sponsored managed care plans through the TRICARE programs and other government contracts.

TRICARE.

Our wholly-owned subsidiary, Health Net Federal Services, Inc. (“HNFS”), administers large, multi-year managed care federal contracts with the U.S. Department of Defense (the “Department of Defense”).

HNFS currently administers health care contracts for the Department of Defense’s TRICARE program covering approximately 1.5 million eligible individuals under TRICARE. Through TRICARE, HNFS provides eligible beneficiaries with improved access to care, lower costs and improved quality.

HNFS currently administers three TRICARE contracts for five regions:

• Region 11, covering Washington, Oregon and part of Idaho

• Region 6, covering Arkansas, Oklahoma, most of Texas and most of Louisiana

• Regions 9, 10 and 12, covering California, Hawaii, Alaska and part of Arizona

Eligible beneficiaries in the TRICARE program are able to choose from a variety of program options. They can choose to enroll in TRICARE Prime, which is similar to a conventional HMO plan, or they can select, on a case-by-case basis, to utilize TRICARE Extra, which is similar to a conventional PPO plan, or TRICARE Standard, which is similar to a conventional indemnity plan.

Under TRICARE Prime, enrollees pay an enrollment fee (which is zero for active duty participants and their dependents) and select a primary care physician from a designated provider panel. The primary care physicians are responsible for making referrals to specialists and hospitals. Except for active duty family members who have no co-payment charges, TRICARE Prime enrollees pay co-payments each time they receive medical services from a civilian provider. TRICARE Prime enrollees may opt, on a case-by-case basis, for a point-of-service option in which they are allowed to self-refer but incur a deductible and a co-payment.

Under TRICARE Extra, eligible beneficiaries may utilize a TRICARE network provider but incur a deductible and co-payment which is greater than the TRICARE Prime co-payment. Under TRICARE Standard, eligible beneficiaries may utilize a TRICARE authorized provider who is not a network provider but pay a higher co-payment than under TRICARE Prime or TRICARE Extra.

During 2003, enrollment of TRICARE beneficiaries in TRICARE Prime for the Region 11 contract increased by 4.4% to 150,004, while the total estimated number of eligible beneficiaries, based on data from the Department of Defense, increased by 4.5% to 248,078. During 2003, enrollment of TRICARE beneficiaries in TRICARE Prime for the Region 6 contract increased by 1.2% to 388,658, while the total estimated number of eligible beneficiaries, based on data from the Department of Defense, increased by 5.6% to 646,836. During 2003, enrollment of TRICARE beneficiaries in TRICARE Prime for the Regions 9, 10 and 12 contract increased by 4% to 383,829 while the total estimated number of eligible beneficiaries, based on data from the Department of Defense and excluding Alaska, decreased by 2.5% to 596,361. Department of Defense estimated numbers of eligible beneficiaries are subject to revision when actual numbers become available. TRICARE beneficiaries do not “enroll” in either TRICARE Extra or TRICARE Prime, rather, they select, on a case-by-case basis, to utilize either, both or neither of these options during any given year. As such, there is no enrollment data available for the TRICARE Extra and TRICARE Standard options.

On August 21, 2003, the Department of Defense announced the award to us of a new TRICARE contract for the North Region, one of three regional contracts. The North Region contract supports nearly 2.8 million participants, including 1.7 million TRICARE eligibles for which we provide health care and administrative services and 1.1 million MHS-eligible beneficiaries (active duty personnel and TRICARE/Medicare dual eligible beneficiaries) for which we provide administrative services only. This contract covers Connecticut, Delaware, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, Wisconsin and the District of Columbia. In addition, the contract covers a small portion of Tennessee, Missouri and Iowa.

We will end the delivery of health care under our existing Region 11 contract on May 31, 2004, our existing Region 9, 10 and 12 contract on June 30, 2004, and our existing Region 6 contract on October 31, 2004. Health care delivery will begin on the new North Region contract on July 1, 2004 for the area that was previously Regions 2 and 5 and September 1, 2004 for the area that was previously Region 1.

There are certain differences in the economic structure of the new TRICARE contract for the North Region as compared to our expiring TRICARE contracts. The expiring contracts included a fixed price for health care costs for the term of the contracts, subject to adjustment based primarily on the number of TRICARE eligibles and utilization of services within military hospitals and clinics, with underruns and overruns of our fixed price provision borne 70% by the government and 30% by us. The new contract includes a target price for the cost reimbursed health care costs which is negotiated annually during the term of the contract, with underruns and overruns of our target price provision borne 80% by the government and 20% by us. Under our expiring contracts, the administrative price is fixed, whereas under the new contract certain components of the administrative price are subject to volume-based adjustments.

With respect to cash flow, under the expiring contracts we are paid monthly based on incurred claims with an annual reconciliation of the risk sharing provision. Under the new contract, we will be paid within five days for each claims run based on paid claims with an annual reconciliation of the risk sharing provision. Under the expiring contracts, we are responsible for providing pharmaceutical benefits, claims processing for TRICARE and Medicare dual eligibles and certain marketing and education services that we will not provide under the new contract. Under the expiring contracts and the new contract, the administrative price is paid on a monthly basis, one month in arrears.

We believe that the changes in the economic structure of the new contract, when compared to our expiring contracts, should reduce our risk related to the ability to accurately project our profitability over the term of the new contract.

Veterans Affairs

During 2003, HNFS administered 15 contracts with the U.S. Department of Veterans Affairs to manage community based outpatient clinics in 12 states. HNFS also managed 20 other contracts with the U.S. Department of Veterans Affairs in 135 locations and one contract with the U.S. Marshals Service for claims re-pricing services.

Competition

We operate in a highly competitive environment in an industry currently subject to significant changes from business consolidations, new entrants in the marketplace, new strategic alliances, legislative reform and market pressures brought about by a better informed and better organized customer base. Our HMOs face substantial competition from for-profit and nonprofit HMOs, PPOs, self-funded plans (including self-insured employers and union trust funds), Blue Cross/Blue Shield plans, and traditional indemnity insurance carriers, some of which have substantially larger enrollments and greater financial resources than we do. The development and growth of companies offering Internet-based connections between health care professionals, employers and members, along with a variety of services, could also create additional competitors. We believe that the principal competitive features affecting our ability to retain and increase membership include the range and prices of benefit plans offered, size and quality of provider network, quality of service, responsiveness to user demands, financial stability, comprehensiveness of coverage, diversity of product offerings, and market presence and reputation. The relative importance of each of these factors and the identity of our key competitors varies by market. Over the past several years, a health plan’s ability to interact with employers, members and other third parties (including health care professionals) via the Internet has become a more important competitive factor. To that end, we have made technology investments to enhance our electronic interactions with third parties. We believe that we compete effectively against other health care industry participants.

Our key competitors in California are four large health plans: Kaiser Permanente, Blue Cross of California, PacifiCare Health Systems and Blue Shield of California. Kaiser is the largest HMO in California and Blue Cross of California is the largest PPO provider in California. All together, these four plans and Health Net account for a majority of the insured market in California. There are also a number of small, regional-based health plans that compete with Health Net primarily in the small business group market segment. The combined membership for these regional plans constitutes approximately 16% of the insured market in the state.

Our largest competitor in Arizona is Blue Cross/Blue Shield. Our Arizona HMO also competes with United Healthcare, CIGNA, PacifiCare, Aetna and Humana. Our Oregon HMO competes primarily against other HMOs including Kaiser, PacifiCare of Oregon, Providence, Regence Blue Cross Blue Shield and Lifewise, and with various PPOs.

Our HMO in Connecticut competes for business with commercial insurance carriers, Anthem Connecticut, Aetna, Connecticare, CIGNA and eight other HMOs. Our main competitors in New York and New Jersey are Aetna, Empire Blue Cross, Oxford Health Plans, United Healthcare and Horizon Blue Cross.
 

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