Health Net ends Medicaid rate dispute as income drops 71%

As Health Net reported its meager third-quarter results, CEO Jay Gellert said the California-based insurer is working to turn itself around, in part by extending its contracts to manage certain health programs.

Health Net's net income plummeted 71 percent to $18 million, down from $61.8 million last year. Although its revenue rose just more than 3 percent to $2.8 billion, the company couldn't compensate for rising costs, the sale of its Medicare prescription drug plan earlier this year or lower enrollment in commercial plans, Market Watch reported.

But Gellert also announced Monday that Health Net reached a "ground-breaking agreement" with the California Department of Health Care Services regarding its administration of state health programs. The deal resolves Health Net's outstanding litigation about its Medi-Cal rate disputes, reported the Associated Press.

"We believe that our new agreement with California's Department of Health Care Services sets the stage for steadier performance in our state health plans going forward," Gellert said in a statement.

The agreement also extends each of Health Net's four existing Medi-Cal contracts by five years and will use actuarial targets to help stabilize Health Net's results. California also will provide extra payments if Health Net incurs larger-than-expected losses next year, according to the Los Angeles Times.

What's more, Health Net and California officials agreed for the insurer to participate in a new pilot program next year that attempts to improve care and lower costs for dual-eligible patients. "The early stages of these programs can produce volatile and unpredictable financial results," Gellert said on a conference call with analysts and investors. "We are poised for Medicaid growth with downside protection" under the new agreement with the state.

To learn more:
- here's the Health Net statement
- read the Associated Press article
- see the Los Angeles Times article
- check out the Market Watch article

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