AP News

Health Net climbs on California settlement


NEW YORK (AP) — Shares of Health Net Inc. climbed Monday after the health insurer said it had resolved Medicaid disputes with the state of California and received several contract extensions.

Health Net provides commercial health insurance and administers Medicaid and Medicare coverage, and it does most of its business in California. Health Net said it is ending litigation against the state's Department of Health Care Services regarding cuts to Medicaid reimbursement rates, and its four existing Medi-Cal contracts were each extended by five years.

The Woodland Hills, Calif., said the agreement includes a new process that uses the state's actuarial targets to help stabilize Health Net's results. The parties are also discussing new ways to resolve payment-rate disputes.

The settlement ends a dispute over the way Health Net is paid to administer California's Medicaid program, programs for seniors and disabled people, and a pilot program for people who are eligible for both Medicare and Medicaid. It also covers any future Medicaid expansions by the federal government, Health Net said.

Shares of Health Net jumped $3.20, or 14.1 percent, to $25.88 in afternoon trading.

California had approved 10 percent cuts in a number of Medicare and Medicaid reimbursement rates, and Health Net said the reductions might have been effective retroactive to July 2011. Health Net's new contract extensions cover seven counties where the company does business. The new deals will expire between 2018 and 2022.

Health Net also reported its third-quarter results on Monday. The company said its net income fell to $18 million, or 22 cents per share, from $124.6 million, or $1.48 per share. Net income from its government and Western U.S. businesses totaled 38 cents per share. Revenue grew 3 percent, to $2.78 billion from $2.69 billion.

Analysts were expecting net income of 36 cents per share in net income and $2.8 billion in revenue, according to FactSet.

The company's quarterly income was weighed down by $7.2 million in charges related to cost reductions and a $4.7 million loss from divested operations. Health Net sold its Medicare prescription drug plan business to CVS Caremark Corp. on April 1.


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