10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________

FORM 10-Q

____________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-12718

____________________

HEALTH NET, INC.

(Exact name of registrant as specified in its charter)

____________________

Delaware	95-4288333
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
21650 Oxnard Street, Woodland Hills, CA	91367
(Address of principal executive offices)	(Zip Code)

(818) 676-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

____________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes   o No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):  

x Large accelerated filer o  Accelerated filer o  Non-accelerated filer o Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

The number of shares outstanding of the registrant’s Common Stock as of November 4, 2013 was 79,508,757 (excluding 70,698,207 shares held as treasury stock).

HEALTH NET, INC.

INDEX TO FORM 10-Q

	Page
Part I—FINANCIAL INFORMATION
Item 1—Financial Statements (Unaudited)	3
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012	3
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012	4
Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	5
Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2013 and 2012	6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012	7
Condensed Notes to Consolidated Financial Statements	8
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3—Quantitative and Qualitative Disclosures About Market Risk	61
Item 4—Controls and Procedures	61
Part II—OTHER INFORMATION
Item 1—Legal Proceedings	62
Item 1A—Risk Factors	62
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3—Defaults Upon Senior Securities	65
Item 4—Mine Safety Disclosures	65
Item 5—Other Information	65
Item 6—Exhibits	66
Signatures	67

2

PART I. FINANCIAL INFORMATION

Item  1. Financial Statements

HEALTH NET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

 (Unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2013		2012			2013		2012
Revenues
Health plan services premiums	$	2,606,754	$	2,578,689		$	7,817,697	$	7,818,565
Government contracts	149,342		169,811			423,796		527,421
Net investment income	11,276		16,355			57,970		63,356
Administrative services fees and other income	7,659		1,854			11,036		16,300
Divested operations and services revenue	—		12,863			—		25,668
Total revenues	2,775,031		2,779,572			8,310,499		8,451,310
Expenses
Health plan services (excluding depreciation and amortization)	2,196,561		2,281,388			6,657,215		6,983,502
Government contracts	125,334		151,815			378,209		467,531
General and administrative	267,683		222,425			804,355		688,457
Selling	59,498		61,053			175,828		181,004
Depreciation and amortization	9,402		7,907			28,355		22,722
Interest	7,973		8,021			24,626		24,895
Divested operations and services expenses	—		17,587			—		59,973
Total expenses	2,666,451		2,750,196			8,068,588		8,428,084
Income from continuing operations before income taxes	108,580		29,376			241,911		23,226
Income tax provision	41,740		8,898			91,538		5,712
Income from continuing operations	66,840		20,478			150,373		17,514
Discontinued operations:
Loss from discontinued operation, net of tax	—		—			—		(18,452		)
(Adjustment to) gain on sale of discontinued operation, net of tax	—		(2,450		)	—		116,990
(Loss) income on discontinued operation, net of tax	—		(2,450		)	—		98,538
Net income	$	66,840	$	18,028		$	150,373	$	116,052
Net income per share—basic:
Income from continuing operations	$	0.84	$	0.25		$	1.89	$	0.21
(Loss) income on discontinued operation, net of tax	$	—	$	(0.03	)	$	—	$	1.20
Net income per share—basic	$	0.84	$	0.22		$	1.89	$	1.41
Net income per share—diluted:
Income from continuing operations	$	0.83	$	0.25		$	1.87	$	0.21
(Loss) income on discontinued operation, net of tax	$	—	$	(0.03	)	$	—	$	1.18
Net income per share—diluted	$	0.83	$	0.22		$	1.87	$	1.39
Weighted average shares outstanding:
Basic	79,432		81,607			79,436		82,451
Diluted	80,441		82,039			80,339		83,447

See accompanying condensed notes to consolidated financial statements.

3

HEALTH NET, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net income	$	66,840		$	18,028		$	150,373		$	116,052
Other comprehensive income (loss) before tax:
Unrealized gains (losses) on investments available-for-sale:
Unrealized holding gains (losses) arising during the period	1,074			36,554			(73,779		)	64,126
Less: Reclassification adjustments for gains included in earnings	(370		)	(4,272		)	(23,306		)	(29,661		)
Unrealized gains (losses) on investments available-for-sale, net	704			32,282			(97,085		)	34,465
Defined benefit pension plans:
Prior service cost arising during the period	—			—			—			—
Net loss arising during the period	—			—			—			—
Less: Amortization of prior service cost and net loss included in net periodic pension cost	643			1,038			1,929			3,114
Defined benefit pension plans, net	643			1,038			1,929			3,114
Other comprehensive income (loss) before tax	1,347			33,320			(95,156		)	37,579
Income tax expense (benefit) related to components of other comprehensive income	433			13,065			(33,477		)	26,280
Other comprehensive income (loss), net of tax	914			20,255			(61,679		)	11,299
Comprehensive income	$	67,754		$	38,283		$	88,694		$	127,351

See accompanying condensed notes to consolidated financial statements.

4

HEALTH NET, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

(Unaudited)

	September 30,			December 31,
	2013			2012
ASSETS
Current Assets:
Cash and cash equivalents	$	686,139		$	340,110
Investments-available-for-sale (amortized cost: 2013-$1,611,091, 2012-$1,753,931)	1,580,032			1,812,512
Premiums receivable, net of allowance for doubtful accounts (2013-$763, 2012-$668)	343,502			373,269
Amounts receivable under government contracts	194,820			228,316
Other receivables	69,885			113,875
Deferred taxes	78,257			51,086
Other assets	103,685			130,796
Total current assets	3,056,320			3,049,964
Property and equipment, net	195,954			183,793
Goodwill	565,886			565,886
Other intangible assets, net	14,699			17,271
Deferred taxes	3,394			13,583
Investments-available-for-sale-noncurrent (amortized cost: 2013-$60,080, 2012-$0)	52,637			—
Other noncurrent assets	152,611			103,893
Total Assets	$	4,041,501		$	3,934,390
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Reserves for claims and other settlements	$	990,195		$	1,037,973
Health care and other costs payable under government contracts	55,532			75,649
Unearned premiums	129,081			151,048
Accounts payable and other liabilities	544,704			373,426
Total current liabilities	1,719,512			1,638,096
Senior notes payable	399,248			399,095
Borrowings under revolving credit facility	100,000			100,000
Deferred taxes	1,746			—
Other noncurrent liabilities	220,404			240,169
Total Liabilities	2,440,910			2,377,360
Commitments and contingencies
Stockholders’ Equity:
Preferred stock ($0.001 par value, 10,000 shares authorized, none issued and outstanding)	—			—
Common stock ($0.001 par value, 350,000 shares authorized; issued 2013-150,193 shares; 2012-148,727 shares )	150			149
Additional paid-in capital	1,370,744			1,329,000
Treasury common stock, at cost (2013-70,696 shares of common stock; 2012-67,426 shares of common stock)	(2,179,503		)	(2,092,625		)
Retained earnings	2,443,895			2,293,522
Accumulated other comprehensive income	(34,695		)	26,984
Total Stockholders’ Equity	1,600,591			1,557,030
Total Liabilities and Stockholders’ Equity	$	4,041,501		$	3,934,390

See accompanying condensed notes to consolidated financial statements.

5

HEALTH NET, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

	Common Stock			Additional Paid-In Capital			Common Stock Held in Treasury					Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount					Shares		Amount
Balance as of January 1, 2012	146,804	$	147	$	1,278,037		(64,847	)	$	(2,023,129	)	$	2,171,459	$	16,632		$	1,443,146
Net income												116,052					116,052
Other comprehensive income														11,299			11,299
Exercise of stock options and vesting of restricted stock units	1,885	2		16,587													16,589
Share-based compensation expense				23,413													23,413
Tax benefit related to equity compensation plans				5,113													5,113
Repurchases of common stock							(2,572	)	(69,330		)						(69,330		)
Balance as of September 30, 2012	148,689	$	149	$	1,323,150		(67,419	)	$	(2,092,459	)	$	2,287,511	$	27,931		$	1,546,282
Balance as of January 1, 2013	148,727	$	149	$	1,329,000		(67,426	)	$	(2,092,625	)	$	2,293,522	$	26,984		$	1,557,030
Net income												150,373					150,373
Other comprehensive loss														(61,679		)	(61,679		)
Exercise of stock options and vesting of restricted stock units	1,466	1		19,950													19,951
Share-based compensation expense				23,388													23,388
Tax detriment related to equity compensation plans				(1,594		)											(1,594		)
Repurchases of common stock							(3,270	)	(86,878		)						(86,878		)
Balance as of September 30, 2013	150,193	$	150	$	1,370,744		(70,696	)	$	(2,179,503	)	$	2,443,895	$	(34,695	)	$	1,600,591

See accompanying condensed notes to consolidated financial statements.

6

HEALTH NET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Nine months ended September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	150,373		$	116,052
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization and depreciation	28,355			22,722
Gain on sale of discontinued operation	—			(116,990		)
Share-based compensation expense	23,388			23,413
Deferred income taxes	18,321			24,883
Excess tax benefit on share-based compensation	(451		)	(6,059		)
Net realized (gain) loss on investments	(23,306		)	(29,661		)
Other changes	23,564			6,832
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Premiums receivable and unearned premiums	7,800			(173,387		)
Other current assets, receivables and noncurrent assets	25,953			(78,203		)
Amounts receivable/payable under government contracts	31,064			3,218
Reserves for claims and other settlements	(47,778		)	113,985
Accounts payable and other liabilities	(69,558		)	47,765
Net cash provided by (used in) operating activities	167,725			(45,430		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of investments	653,786			1,132,836
Maturities of investments	72,810			97,815
Purchases of investments	(652,044		)	(1,283,227		)
Purchases of property and equipment	(42,596		)	(55,030		)
Net cash received from sale of business	—			248,238
(Purchases) sales of restricted investments and other	(4,697		)	6,024
Net cash provided by investing activities	27,259			146,656
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and employee stock purchases	10,642			16,589
Excess tax benefit on share-based compensation	451			6,059
Repurchases of common stock	(77,569		)	(69,330		)
Borrowings under financing arrangements	323,000			110,000
Repayment of borrowings under financing arrangements	(323,000		)	(122,500		)
Net increase (decrease) in checks outstanding, net of deposits	(23,842		)	34
Customer funds administered	241,363			40,248
Net cash provided by (used in) financing activities	151,045			(18,900		)
Net increase in cash and cash equivalents	346,029			82,326
Cash and cash equivalents, beginning of period	340,110			230,253
Cash and cash equivalents, end of period	$	686,139		$	312,579
SUPPLEMENTAL CASH FLOWS DISCLOSURE:
Interest paid	$	16,741		$	16,990
Income taxes paid	46,031			5,058

See accompanying condensed notes to consolidated financial statements.

7

HEALTH NET, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Health Net, Inc. prepared the accompanying unaudited consolidated financial statements following the rules and regulations of the Securities and Exchange Commission ("SEC") for interim reporting. In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Company,” “Health Net,” “we,” “us,” and “our” refer to Health Net, Inc. and its subsidiaries. As permitted under those rules and regulations, certain notes or other financial information that are normally required by accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted if they substantially duplicate the disclosures contained in the annual audited financial statements. The accompanying unaudited consolidated financial statements should be read together with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012 ("Form 10-K").

We are responsible for the accompanying unaudited consolidated financial statements. These consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results in accordance with GAAP. In accordance with GAAP, we make certain estimates and assumptions that affect the reported amounts. Actual results could differ from those estimates and assumptions. In addition, revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for the full year.

Subsequent to the issuance of the Company’s 2012 quarterly financial statements for the three and nine months ended September 30, 2012, we determined that inter-governmental pass-through funds ("IGT") received during the three months ended September 30, 2012, were incorrectly classified as operating cash flows in the consolidated statements of cash flows. Generally, IGTs are funds that we receive as intermediaries from government entities, which we subsequently distribute to other third party government entities. As a result, the consolidated statement of cash flows has been restated from the amounts previously reported to reclassify $44.6 million of IGT funds received from operating activities in the consolidated statements of cash flows for the nine months ended September 30, 2012 to cash flows from financing activities. We believe the effects of the restatement are immaterial.

On April 1, 2012, we completed the sale of the business operations of our Medicare stand-alone Prescription Drug Plan business ("Medicare PDP business") to Pennsylvania Life Insurance Company, a subsidiary of CVS Caremark Corporation ("CVS Caremark"). As a result of the sale, the operating results of our Medicare PDP business have been classified as discontinued operations in our consolidated statements of operations for the nine months ended September 30, 2012. See Note 3 for more information on the sale of our Medicare PDP business.

2. SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with maturity of three months or less when purchased. We had no checks outstanding, net of deposits as of September 30, 2013 and $23.8 million as of December 31, 2012. Checks outstanding, net of deposits are classified as accounts payable and other liabilities in the consolidated balance sheets and the changes are reflected in the line item net increase (decrease) in checks outstanding, net of deposits within the cash flows from financing activities in the consolidated statements of cash flows.

Investments

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We analyze all debt investments that have unrealized losses for impairment consideration and assess the intent to sell such securities. If such intent exists, impaired securities are considered other-than-temporarily impaired. Management also assesses if we may be required to sell the debt investments prior to the recovery of amortized cost, which may also trigger an impairment charge. If securities are considered other-than-temporarily impaired based on intent or ability, we assess whether the amortized costs of the securities can be recovered. If management anticipates recovering an amount less than the amortized cost of the securities, an impairment charge is calculated based on the expected discounted cash flows of the securities. Any deficit

8

between the amortized cost and the expected cash flows is recorded through earnings as a charge. All other temporary impairment changes are recorded through other comprehensive income. During the three and nine months endedSeptember 30, 2013 and 2012, respectively, no losses were recognized from other-than-temporary impairments.

Fair Value of Financial Instruments

The estimated fair value amounts of cash equivalents, investments available-for-sale, premiums and other receivables, notes receivable and notes payable have been determined by using available market information and appropriate valuation methodologies. The carrying amounts of cash equivalents approximate fair value due to the short maturity of those instruments. Fair values for debt and equity securities are generally based upon quoted market prices. Where quoted market prices were not readily available, fair values were estimated using valuation methodologies based on available and observable market information. Such valuation methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly traded companies in a similar line of business, and reviewing the underlying financial performance including estimating discounted cash flows. The carrying value of premiums and other receivables, long-term notes receivable and nonmarketable securities approximates the fair value of such financial instruments. The fair value of notes payable is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt with the same remaining maturities. The fair value of our fixed-rate borrowings was $428.0 million and $424.0 million as of September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013 and December 31, 2012, the fair value of our variable-rate borrowings under our revolving credit facility was $100.0 million and $100.0 million, respectively. The fair value of our fixed-rate borrowings was determined using the quoted market price, which is a Level 1 input in the fair value hierarchy. The fair value of our variable-rate borrowings was estimated to equal the carrying value because the interest rates paid on these borrowings were based on prevailing market rates. Since the pricing inputs are other than quoted prices and fair value is determined using an income approach, our variable-rate borrowings are classified as a Level 2 in the fair value hierarchy. See Notes 7 and 8 for additional information regarding our financing arrangements and fair value measurements, respectively.

Health Plan Services Health Care Cost

The cost of health care services is recognized in the period in which services are provided and includes an estimate of the cost of services that have been incurred but not yet reported. Such costs include payments to primary care physicians, specialists, hospitals and outpatient care facilities, and the costs associated with managing the extent of such care.

Our health care cost can also include from time to time remediation of certain claims as a result of periodic reviews by various regulatory agencies. We estimate the amount of the provision for health care service costs incurred but not yet reported ("IBNR") in accordance with GAAP and using standard actuarial developmental methodologies based upon historical data including the period between the date services are rendered and the date claims are received and paid, denied claim activity, expected medical cost inflation, seasonality patterns and changes in membership, among other things.

Our IBNR best estimate also includes a provision for adverse deviation, which is an estimate for known environmental factors that are reasonably likely to affect the required level of IBNR reserves. This provision for adverse deviation is intended to capture the potential adverse development from known environmental factors such as our entry into new geographical markets, changes in our geographic or product mix, the introduction of new customer populations, variation in benefit utilization, disease outbreaks, changes in provider reimbursement, fluctuations in medical cost trend, variation in claim submission patterns and variation in claims processing speed and payment patterns, changes in technology that provide faster access to claims data or change the speed of adjudication and settlement of claims, variability in claim inventory levels, non-standard claim development, and/or exceptional situations that require judgmental adjustments in setting the reserves for claims.

We consistently apply our IBNR estimation methodology from period to period. Our IBNR best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known to us, we adjust our assumptions accordingly to change our estimate of IBNR. Therefore, if moderately adverse conditions do not occur, evidenced by more complete claims information in the following period, then our prior period estimates will be revised downward, resulting in favorable development. However, any favorable prior period reserve development would increase current period net income only to the extent that the current period provision for adverse deviation is less than the benefit recognized from the prior period favorable development. If moderately adverse conditions occur and are more acute than we estimated, then our prior period estimates will be revised upward, resulting in unfavorable development, which would decrease

9

current period net income. For the nine months ended September 30, 2013, we had $55.9 million in favorable reserve developments related to prior years. We believe this favorable development was primarily due to the absence of moderately adverse conditions. As part of our best estimate for IBNR, the provision for adverse deviation recorded as of September 30, 2013 was $52.9 million. The reserve developments related to prior years for the nine months ended September 30, 2013, when considered together with the provision for adverse deviation recorded as of September 30, 2013, did not have a material impact on our operating results or financial condition. For the nine months ended September 30, 2012, we had $32.8 million in unfavorable reserve developments related to prior years. We believe this unfavorable reserve development for the nine months ended September 30, 2012 was primarily due to significant delays in claims submissions for the fourth quarter of 2011 arising from issues related to a new billing format required by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") coupled with an unanticipated flattening of commercial trends.

The majority of the IBNR reserve balance held at each quarter-end is associated with the most recent months' incurred services because these are the services for which the fewest claims have been paid. The degree of uncertainty in the estimates of incurred claims is greater for the most recent months' incurred services. Revised estimates for prior periods are determined in each quarter based on the most recent updates of paid claims for prior periods. Estimates for service costs incurred but not yet reported are subject to the impact of changes in the regulatory environment, economic conditions, changes in claims trends, and numerous other factors. Given the inherent variability of such estimates, the actual liability could differ significantly from the amounts estimated.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investments and premiums receivable. All cash equivalents and investments are managed within established guidelines, which provide us diversity among issuers. Concentrations of credit risk with respect to premiums receivable are limited due to the large number of payers comprising our customer base. The federal government is the primary customer of our Government Contracts reportable segment with fees and premiums associated with this customer accounting for approximately95% of our Government Contracts revenue. In addition, the federal government is a significant customer of our Western Region Operations reportable segment as a result of our contract with Centers for Medicare & Medicaid Services ("CMS") for coverage of Medicare-eligible individuals. Furthermore, all of our Medicaid revenue is currently derived from our participation in the state Medicaid program in California ("Medi-Cal") through our relationship with the State of California Department of Health Care Services ("DHCS"). As a result, DHCS is a significant customer of our Western Region Operations reportable segment.

10

Comprehensive Income

Comprehensive income includes all changes in stockholders’ equity (except those arising from transactions with stockholders) and includes net income (loss), net unrealized appreciation (depreciation) after tax on investments available-for-sale and prior service cost and net loss related to our defined benefit pension plan.

Our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Unrealized Gains (Losses) on investments available-for-sale			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (loss)
Three Months Ended September 30:				(Dollars in millions)
Balance as of July 1, 2012	$	19.6		$	(11.9	)	$	7.7
Other comprehensive income before reclassifications	22.4			—			22.4
Amounts reclassified from accumulated other comprehensive income	(2.8		)	0.6			(2.2		)
Other comprehensive income for the three months ended September 30, 2012	19.6			0.6			20.2
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of July 1, 2013	$	(25.4	)	$	(10.2	)	$	(35.6	)
Other comprehensive income before reclassifications	0.7			—			0.7
Amounts reclassified from accumulated other comprehensive income	(0.2		)	0.4			0.2
Other comprehensive income for the three months ended September 30, 2013	0.5			0.4			0.9
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)
Nine Months Ended September 30:
Balance as of January 1, 2012	$	29.8		$	(13.2	)	$	16.6
Other comprehensive income before reclassifications	28.7			—			28.7
Amounts reclassified from accumulated other comprehensive income	(19.3		)	1.9			(17.4		)
Other comprehensive income for the nine months ended September 30, 2012	9.4			1.9			11.3
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of January 1, 2013	$	38.0		$	(11.0	)	$	27.0
Other comprehensive loss before reclassifications	(47.8		)	—			(47.8		)
Amounts reclassified from accumulated other comprehensive income	(15.1		)	1.2			(13.9		)
Other comprehensive (loss) income for the nine months ended September 30, 2013	(62.9		)	1.2			(61.7		)
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)

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The following table shows reclassifications out of accumulated other comprehensive income and the affected line items in the consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,						Nine months ended September 30,						Affected line item in the Consolidated Statements of Operations
	2013			2012			2013			2012
	(Dollars in millions)
Unrealized gains on investments available-for-sale	$	0.3		$	4.3		$	23.3		$	29.7		Net investment income
	0.3			4.3			23.3			29.7			Total before tax
	0.1			1.5			8.2			10.4			Tax expense
	0.2			2.8			15.1			19.3			Net of tax
Amortization of defined benefit pension items:
Prior-service cost	(0.1		)	—			(0.1		)	(0.1		)	(a)
Actuarial gains (losses)	(0.6		)	(1.0		)	(1.9		)	(3.0		)	(a)
	(0.7		)	(1.0		)	(2.0		)	(3.1		)	Total before tax
	(0.3		)	(0.4		)	(0.8		)	(1.2		)	Tax benefit
	(0.4		)	(0.6		)	(1.2		)	(1.9		)	Net of tax
Total reclassifications for the period	$	(0.2	)	$	2.2		$	13.9		$	17.4		Net of tax

_________

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

Earnings Per Share

Basic earnings per share excludes dilution and reflects net income divided by the weighted average shares of common stock outstanding during the periods presented. Diluted earnings per share is based upon the weighted average shares of common stock and dilutive common stock equivalents (this reflects the potential dilution that could occur if stock options were exercised and restricted stock units ("RSUs") and performance share units ("PSUs") were vested) outstanding during the periods presented.

The inclusion or exclusion of common stock equivalents arising from stock options, RSUs and PSUs in the computation of diluted earnings per share is determined using the treasury stock method. For the three and nine months endedSeptember 30, 2013, respectively, 1,009,000 shares and 903,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share. For the three and nine months endedSeptember 30, 2012, respectively, 432,000 shares and 996,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share.

For the three and nine months endedSeptember 30, 2013, respectively, an aggregate of 812,000 shares and 1,019,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. For the three and nine months endedSeptember 30, 2012, respectively, an aggregate of 4,342,000 shares and 1,819,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. Stock options expire at various times through February 2019.

In May 2011, our Board of Directors authorized a stock repurchase program for the repurchase of up to $300 million of our outstanding common stock (our "stock repurchase program"). On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program. As of December 31, 2012, the remaining authorization under our stock repurchase program was $350.0 million. The remaining authorization under our stock

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repurchase program as of September 30, 2013 was $280.0 million. See Note 6 for more information regarding our stock repurchase program.

Goodwill and Other Intangible Assets

We performed our annual impairment test on our goodwill and other intangible assets as of June 30, 2013 for our Western Region Operations reporting unit and also re-evaluated the useful lives of our other intangible assets. No goodwill impairment was identified. We also determined that the estimated useful lives of our other intangible assets properly reflected the current estimated useful lives.

The carrying amount of goodwill by reporting unit is as follows:

	Western Region Operations		Total
	(Dollars in millions)
Balance as of December 31, 2012	$	565.9	$	565.9
Balance as of September 30, 2013	$	565.9	$	565.9

Due to the many variables inherent in the estimation of a business’s fair value and the relative size of recorded goodwill, changes in assumptions may have a material effect on the results of our impairment test. The discounted cash flows and market participant valuations (and the resulting fair value estimates of the Western Region Operations reporting unit) are sensitive to changes in assumptions including, among others, certain valuation and market assumptions, the Company’s ability to adequately incorporate into its premium rates the future costs of premium-based assessments imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA"), and assumptions related to the achievement of certain administrative cost reductions and the profitable implementation of California's Coordinated Care Initiative, which includes the dual eligibles demonstration. Changes to any of these assumptions could cause the fair value of our Western Region Operations reporting unit to be below its carrying value. As of June 30, 2013 and June 30, 2012, the ratio of the fair value of our Western Region Operations reporting unit to its carrying value was approximately 149% and 115%, respectively.

The intangible assets that continue to be subject to amortization using the straight-line method over their estimated lives are as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Balance		Weighted Average Life (in years)
	(Dollars in millions)
As of September 30, 2013:
Provider networks	$	40.5	$	(35.4	)	$	5.1	19.4
Customer relationships and other	29.5		(19.9		)	9.6		11.1
	$	70.0	$	(55.3	)	$	14.7
As of December 31, 2012:
Provider networks	$	40.5	$	(34.6	)	$	5.9	19.4
Customer relationships and other	29.5		(18.1		)	11.4		11.1
	$	70.0	$	(52.7	)	$	17.3

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Estimated annual pretax amortization expense for other intangible assets for each of the next five years ending December 31 is as follows (dollars in millions):

Year	Amount
2013	$	3.4
2014	2.8
2015	2.6
2016	2.0
2017	2.0

Restricted Assets

We and our consolidated subsidiaries are required to set aside certain funds that may only be used for certain purposes pursuant to state regulatory requirements. We have discretion as to whether we invest such funds in cash and cash equivalents or other investments. As of September 30, 2013 and December 31, 2012, the restricted cash and cash equivalents balances totaled $1.7 million and $0.8 million, respectively, and are included in other noncurrent assets. Investment securities held by trustees or agencies were $26.6 million and $25.5 million as of September 30, 2013 and December 31, 2012, respectively, and are included in investments available-for-sale.

Divested Operations and Services

Divested operations and services revenues and expenses include any revenues and expenses related to the run-out of our business that was sold in connection with the Northeast Sale (as defined below) on December 11, 2009, including items related to our performance under related administrative services and/or claims servicing agreements, and transition-related revenues and expenses related to the sale of our Medicare PDP business on April 1, 2012. The "Northeast Sale" refers to the sale of all of the outstanding shares of capital stock of our health plan subsidiaries that were domiciled and/or had conducted businesses in Connecticut, New Jersey, New York and Bermuda to an affiliate of UnitedHealth Group Incorporated ("United"), and includes the acquisition by United of membership renewal rights for certain commercial health care business conducted by our subsidiary, Health Net Life Insurance Company ("HNL") in the states of Connecticut and New Jersey. As of December 31, 2012, we had substantially completed the administration and run-out of our divested businesses. See Note 3 for additional information regarding the sale of our Medicare PDP business.

Medicaid/Medi-Cal Rate Adjustment

Our revenue from the Medi-Cal program, including seniors and persons with disabilities ("SPD") programs, and other state-sponsored health programs are subject to certain retroactive rate adjustments based on expected and actual health care cost. For the three and nine months ended September 30, 2013, we recognized $32.1 million and $74.3 million, respectively, of premium revenues as a result of retroactive rate adjustments for our SPD and non-SPD members for periods prior to 2013. Retroactive rate adjustments for our SPD and non-SPD members were not material for the three and nine months endedSeptember 30, 2012.

Medi-Cal Rate Reduction

In October 2011, CMS approved certain elements of California's 2011-2012 budget proposals to reduce Medi-Cal provider reimbursement rates as authorized by California Assembly Bill 97 (“AB 97”). The elements approved by CMS include a 10 percent reduction in reimbursement rates for a number of providers. DHCS preliminarily indicated that the Medi-Cal managed care rate reductions could be effective retroactive to July 1, 2011. However, a series of preliminary injunctions arising from various legal challenges have prevented the implementation of AB 97, and no such reductions have been made as of September 30, 2013.

In December 2012, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) issued a decision that reversed the preliminary injunctions against the implementation of AB 97. The Ninth Circuit subsequently denied a motion by the plaintiffs for an en banc hearing and a petition to stay implementation of AB 97 pending appeal to the U.S. Supreme Court. Consequently, after the Ninth Circuit's ruling and as of September 30, 2013, there was no legal bar to the implementation of AB 97. As a result, the reimbursement rate reductions authorized by AB 97 are reflected in California's 2013-2014 budget proposal, which was recently passed by the legislature and signed into law by Governor Brown. The State has not formally determined the effective date for the implementation of AB 97, and the plaintiffs in the AB 97 legal actions may still file a petition to the U.S. Supreme Court to review the Ninth Circuit's ruling. In any case, even if the reductions are implemented as currently authorized, they would be applied to Medi-Cal

14

managed care plans only on a prospective basis, and the impact of such reductions could be limited since they would need to be reconciled with minimum payment rates for primary care physicians dictated by the ACA for 2013 and 2014. Due to these uncertainties, we cannot reasonably estimate the range of reductions in premiums and/or related health care cost recoveries, if any, that may result in connection with AB 97.

Medicaid Premium Taxes

On June 27, 2013, the State of California reinstated premium taxes retroactive to July 1, 2012 for plans participating in Medi-Cal. As a result of this reinstatement, we recorded $25.6 million in premium taxes, primarily related to 2013, as general and administrative expense for the three months ended September 30, 2013. For the nine months ended September 30, 2013, we recorded $68.4 million, including $18.8 million attributable to periods prior to 2013, as general and administrative expense. In addition, the State of California increased Medicaid premium revenues in an amount equal to the increase in the premium taxes. As a result, we recorded $25.6 million and $68.4 million in health plan services premiums for the three and nine months ended September 30, 2013, respectively. These Medicaid premium taxes are currently authorized by the State of California through July 1, 2016.

CMS Risk Factor Adjustments

We have an arrangement with CMS that relates to certain of our Medicare products and pursuant to which periodic changes in our risk factor adjustment scores for certain diagnostic codes result in changes to our health plan services premium revenues. We recognize such changes when the amounts become determinable and the collectability is reasonably assured. Because the recorded revenue is based on our best estimate at the time, the actual payment we receive from CMS for risk adjustment reimbursement settlements may be materially different than the amounts we have initially recognized on our financial statements. The change in our estimate for the risk adjustment revenue in each of the three and nine months ended September 30, 2013 and 2012 was not significant.

Recently Issued Accounting Pronouncement

Effective January 1, 2014, we will adopt new accounting guidance relating to the recognition and income statement reporting of any mandated fees to be paid to the federal government by health insurers, pursuant to the Accounting Standards Update ("ASU") No. 2011-06, issued by the Financial Accounting Standards Board ("FASB") in July 2011. This guidance will apply primarily to new fees enacted in the ACA. The mandated fees are expected to be material, and this new accounting guidance will result in the recognition of this expense on a straight-line basis beginning in 2014.

3. SALE OF MEDICARE PDP BUSINESS

On April 1, 2012, our subsidiary HNL sold substantially all of the assets, properties and rights of HNL used primarily or exclusively in our Medicare PDP business to CVS Caremark for a total purchase price of $248.2 million. In the nine months ended September 30, 2012 we recognized a $132.8 million pretax gain on the sale of our Medicare PDP business, $117.0 million net of tax, and this after tax gain is reported as gain on sale of discontinued operation, net of tax.

Our revenues related to our Medicare PDP business were $0 and $191.8 million for the three and nine months ended September 30, 2012, respectively. These revenues were excluded from our continuing operating results and included in loss from discontinued operation. Our Medicare PDP business had a pretax income (loss) of $0 and $(28.8) million for the three and nine months ended September 30, 2012, respectively. As of September 30, 2012 and September 30, 2013, we had no Medicare stand-alone prescription drug plan members. We had no revenues and no pretax income related to the Medicare PDP business for each of the three and nine months ended September 30, 2013.

4. SEGMENT INFORMATION

We operate within three reportable segments, Western Region Operations, Government Contracts and Divested Operations and Services. Our Western Region Operations reportable segment includes the operations of our commercial, Medicare and Medicaid health plans, our health and life insurance companies, and our behavioral health and pharmaceutical services subsidiaries. These operations are conducted primarily in California, Arizona, Oregon and Washington. As a result of the classification of our Medicare PDP business as discontinued operations, our Western Region Operations reportable segment excludes the operating results of our Medicare PDP business for the three and nine months ended September 30, 2012. Our Government Contracts reportable segment includes government-sponsored managed care and administrative services contracts through the TRICARE program, the Department of Defense sponsored Military and Family Life Counseling, formerly Military and Family Life Consultant, program, and certain

15

other health care-related government contracts. Our Divested Operations and Services reportable segment includes the operations of our businesses that provided administrative services to United in connection with the Northeast Sale and transition-related revenues and expenses related to the Medicare PDP business that was sold on April 1, 2012. As of December 31, 2012, we had substantially completed the administration and run-out of our divested businesses.

The financial results of our reportable segments are reviewed on a monthly basis by our chief operating decision maker ("CODM"). We continuously monitor our reportable segments to ensure that they reflect how our CODM manages our company.

We evaluate performance and allocate resources based on segment pretax income. Our assets are managed centrally and viewed by our CODM on a consolidated basis; therefore, they are not allocated to our segments and our segments are not evaluated for performance based on assets. The accounting policies of our reportable segments are the same as those described in Note 2 to the consolidated financial statements included in our Form 10-K, except that intersegment transactions are not eliminated.

We also have a Corporate/Other segment that is not a business operating segment. It is added to our reportable segments to provide a reconciliation to our consolidated results. The Corporate/Other segment includes costs that are excluded from the calculation of segment pretax income because they are not managed within the segments and are not directly identified with a particular operating segment. Accordingly, these costs are not included in the performance evaluation of our reportable segments by our CODM. In addition, certain charges, including but not limited to those related to our continuing efforts to address scale issues, as well as asset impairments, are reported as part of Corporate/Other.

Our segment information for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Western Region Operations		Government Contracts		Divested Operationsand Services			Corporate/Other/ Eliminations			Total
	(Dollars in millions)
Three months ended September 30, 2013
Revenues from external sources	$	2,625.7	$	149.3	$	—		$	—		$	2,775.0
Intersegment revenues	2.7		—		—			(2.7		)	—
Segment pretax income (loss)	85.2		23.5		—			(0.1		)	108.6
Three months ended September 30, 2012
Revenues from external sources	$	2,596.9	$	169.8	$	12.9		$	—		$	2,779.6
Intersegment revenues	2.7		—		—			(2.7		)	—
Segment pretax income (loss)	20.2		21.1		(4.7		)	(7.2		)	29.4
Nine months ended September 30, 2013
Revenues from external sources	$	7,886.7	$	423.8	$	—		$	—		$	8,310.5
Intersegment revenues	8.4		—		—			(8.4		)	—
Segment pretax income (loss)	204.3		50.6		—			(13.0		)	241.9
Nine months ended September 30, 2012
Revenues from external sources	$	7,898.2	$	527.4	$	25.7		$	—		$	8,451.3
Intersegment revenues	8.3		—		—			(8.3		)	—
Segment pretax income (loss)	12.6		66.6		(34.4		)	(21.6		)	23.2

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Our health plan services premium revenue by line of business is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
	(Dollars in millions)
Commercial premium revenue	$	1,279.8	$	1,420.4	$	3,903.8	$	4,310.0
Medicare premium revenue	685.4		682.9		2,080.3		2,089.4
Medicaid premium revenue	641.6		475.4		1,833.6		1,419.2
Total health plan services premiums	$	2,606.8	$	2,578.7	$	7,817.7	$	7,818.6

5. INVESTMENTS

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method, and realized gains and losses are included in net investment income. We periodically assess our investments available-for-sale for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss, which is recorded through earnings, if related to credit losses.

During the three and nine months ended September 30, 2013 and 2012, we recognized no losses from other-than-temporary impairments of our cash equivalents and available-for-sale investments.

We classified $52.6 million as investments available-for-sale-noncurrent as of September 30, 2013 because we did not intend to sell and we believed it may take longer than a year for such impaired securities to recover. This classification does not affect the marketability or the valuation of the investments, which are reflected at their market value as of September 30, 2013. We had no investments available-for-sale-noncurrent as of December 31, 2012.

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As of September 30, 2013 and December 31, 2012, the amortized cost, gross unrealized holding gains and losses, and fair value of our current investments available-for-sale and our investments available-for-sale-noncurrent, after giving effect to other-than-temporary impairments, were as follows:

	September 30, 2013
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Carrying Value
	(Dollars in millions)
Current:
Asset-backed securities	$	410.1	$	3.9	$	(6.6	)	$	407.4
U.S. government and agencies	26.5		—		—			26.5
Obligations of states and other political subdivisions	741.1		6.4		(28.3		)	719.2
Corporate debt securities	433.4		3.3		(9.8		)	426.9
	$	1,611.1	$	13.6	$	(44.7	)	$	1,580.0
Noncurrent:
Asset-backed securities	$	0.8	$	—	$	(0.1	)	$	0.7
Obligations of states and other political subdivisions	48.9		—		(6.0		)	42.9
Corporate debt securities	10.4		—		(1.4		)	9.0
	$	60.1	$	—	$	(7.5	)	$	52.6

	December 31, 2012
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Carrying Value
	(Dollars in millions)
Current:
Asset-backed securities	$	499.7	$	19.6	$	(0.2	)	$	519.1
U.S. government and agencies	25.9		—		—			25.9
Obligations of states and other political subdivisions	819.9		24.2		(2.0		)	842.1
Corporate debt securities	408.4		17.5		(0.5		)	425.4
	$	1,753.9	$	61.3	$	(2.7	)	$	1,812.5

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As of September 30, 2013, the contractual maturities of our current investments available-for-sale and our investments available-for-sale-noncurrent were as follows:

	Amortized Cost		Estimated Fair Value
Current:	(Dollars in millions)
Due in one year or less	$	42.5	$	42.8
Due after one year through five years	281.6		284.1
Due after five years through ten years	442.8		434.9
Due after ten years	434.1		410.8
Asset-backed securities	410.1		407.4
Total current investments available-for-sale	$	1,611.1	$	1,580.0
	Amortized Cost		Estimated Fair Value
Noncurrent:	(Dollars in millions)
Due after one year through five years	$	1.0	$	0.8
Due after five years through ten years	9.5		8.3
Due after ten years	48.8		42.8
Asset-backed securities	0.8		0.7
Total noncurrent investments available-for-sale	$	60.1	$	52.6

Proceeds from sales of investments available-for-sale during the three and nine months ended September 30, 2013 were $80.4 million and $653.8 million, respectively. Gross realized gains and losses totaled $1.0 million and $0.7 million, respectively, for the three months ended September 30, 2013, and $25.5 million and $2.2 million, respectively, for the nine months ended September 30, 2013. Proceeds from sales of investments available-for-sale during the three and nine months ended September 30, 2012 were $117.6 million and $1,132.8 million, respectively. Gross realized gains and losses totaled $4.3 million and $36,000, respectively, for the three months ended September 30, 2012, and $30.1 million and $0.4 million, respectively, for the nine months ended September 30, 2012.

The following tables show our investments’ fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013 and December 31, 2012. These investments are interest-yielding debt securities of varying maturities. We have determined that the unrealized loss position for these securities is primarily due to market volatility. Generally, in a rising interest rate environment, the estimated fair value of fixed income securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of fixed income securities would be expected to increase. These securities may also be negatively impacted by illiquidity in the market.

The following table shows our current investments' fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	232.8	$	(6.2	)	$	9.1	$	(0.4	)	$	241.9	$	(6.6	)
Obligations of states and other political subdivisions	542.4		(28.3		)	0.2		—			542.6		(28.3		)
Corporate debt securities	253.3		(9.6		)	2.5		(0.2		)	255.8		(9.8		)
	$	1,028.5	$	(44.1	)	$	11.8	$	(0.6	)	$	1,040.3	$	(44.7	)

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The following table shows our noncurrent investments' fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	—	$	—		$	0.7	$	(0.1	)	$	0.7	$	(0.1	)
Obligations of states and other political subdivisions	42.9		(6.0		)	—		—			42.9		(6.0		)
Corporate debt securities	9.0		(1.4		)	—		—			9.0		(1.4		)
	$	51.9	$	(7.4	)	$	0.7	$	(0.1	)	$	52.6	$	(7.5	)

The following table shows the number of our individual securities-current that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months	12 Months or More	Total
Asset-backed securities	101	7	108
Obligations of states and other political subdivisions	237	1	238
Corporate debt securities	213	3	216
	551	11	562

The following table shows the number of our individual securities-noncurrent that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months	12 Months or More	Total
Asset-backed securities	—	1	1
Obligations of states and other political subdivisions	18	—	18
Corporate debt securities	9	—	9
	27	1	28

The following table shows our current investments’ fair values and gross unrealized losses for individual securities that have been in a continuous loss position through December 31, 2012:

	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	54.9	$	(0.2	)	$	0.1	$	—	$	55.0	$	(0.2	)
U.S. government and agencies	10.1		—			—		—		10.1		—
Obligations of states and other political subdivisions	192.1		(2.0		)	0.2		—		192.3		(2.0		)
Corporate debt securities	45.9		(0.5		)	—		—		45.9		(0.5		)
	$	303.0	$	(2.7	)	$	0.3	$	—	$	303.3	$	(2.7	)

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6. STOCK REPURCHASE PROGRAM

On May 2, 2011, our Board of Directors authorized our stock repurchase program pursuant to which a total of $300.0 million of our outstanding common stock could be repurchased. On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program.

Subject to the approval of our Board of Directors, we may repurchase our common stock under our stock repurchase program from time to time in privately negotiated transactions, through accelerated stock repurchase programs or open market transactions, including pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended. The timing of any repurchases and the actual number of shares of stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the Company’s debt obligations, and other market and economic conditions. Our stock repurchase program may be suspended or discontinued at any time.

During the three and nine months ended September 30, 2012, we repurchased approximately 1.5 million and 2.1 million shares, respectively, of our common stock for aggregate consideration of $36.1 million and $50.0 million, respectively, under our stock repurchase program. As of December 31, 2012, the remaining authorization under our stock repurchase program was $350.0 million. During the three months ended September 30, 2013, we made no share repurchases and during the nine months ended September 30, 2013, we repurchased approximately 2.7 million shares of our common stock for aggregate consideration of $70.0 million under our stock repurchase program. The remaining authorization under our stock repurchase program as of September 30, 2013 was $280.0 million.

7. FINANCING ARRANGEMENTS

Revolving Credit Facility

In October 2011, we entered into a $600 million unsecured revolving credit facility due in October 2016, which includes a $400 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swing line loans (which sublimits may be increased in connection with any increase in the credit facility described below). In addition, we have the ability from time to time to increase the credit facility by up to an additional $200 million in the aggregate, subject to the receipt of additional commitments. As of September 30, 2013, $100.0 million was outstanding under our revolving credit facility and the maximum amount available for borrowing under the revolving credit facility was $491.3 million (see "—Letters of Credit" below).

Amounts outstanding under our revolving credit facility bear interest, at the Company’s option, at either (a) the base rate (which is a rate per annum equal to the greatest of (i) the federal funds rate plus one-half of one percent, (ii) Bank of America, N.A.’s “prime rate” and (iii) the Eurodollar Rate (as such term is defined in the credit facility) for a one-month interest period plus one percent) plus an applicable margin ranging from 45 to 105 basis points or (b) the Eurodollar Rate plus an applicable margin ranging from 145 to 205 basis points. The applicable margins are based on our consolidated leverage ratio, as specified in the credit facility, and are subject to adjustment following the Company’s delivery of a compliance certificate for each fiscal quarter.

Our revolving credit facility includes, among other customary terms and conditions, limitations (subject to specified exclusions) on our and our subsidiaries’ ability to incur debt; create liens; engage in certain mergers, consolidations and acquisitions; sell or transfer assets; enter into agreements that restrict the ability to pay dividends or make or repay loans or advances; make investments, loans, and advances; engage in transactions with affiliates; and make dividends. In addition, we are required to be in compliance at the end of each fiscal quarter with a specified consolidated leverage ratio and consolidated fixed charge coverage ratio. As of September 30, 2013, we were in compliance with all covenants under the revolving credit facility.

Our revolving credit facility contains customary events of default, including nonpayment of principal or other amounts when due; breach of covenants; inaccuracy of representations and warranties; cross-default and/or cross-acceleration to other indebtedness of the Company or our subsidiaries in excess of $50 million; certain ERISA-related events; noncompliance by the Company or any of our subsidiaries with any material term or provision of the HMO Regulations or Insurance Regulations (as each such term is defined in the credit facility) in a manner that could reasonably be expected to result in a material adverse effect; certain voluntary and involuntary bankruptcy events; inability to pay debts; undischarged, uninsured judgments greater than $50 million against us and/or our subsidiaries that are not stayed within 60 days; actual or asserted invalidity of any loan document; and a change of control. If an event of default occurs and is continuing under the revolving credit facility, the lenders thereunder may, among other things, terminate their obligations under the facility and require us to repay all amounts owed thereunder.

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Letters of Credit

Pursuant to the terms of our revolving credit facility, we can obtain letters of credit in an aggregate amount of $400 million and the maximum amount available for borrowing is reduced by the dollar amount of any outstanding letters of credit. As of September 30, 2013 and December 31, 2012, we had outstanding letters of credit of $8.7 million and $59.4 million, respectively, resulting in a maximum amount available for borrowing of $491.3 million and $440.6 million, respectively. As of September 30, 2013 and December 31, 2012, no amounts had been drawn on any of these letters of credit.

Senior Notes

In 2007 we issued $400 million in aggregate principal amount of 6.375% Senior Notes due 2017 ("Senior Notes"). The indenture governing the Senior Notes limits our ability to incur certain liens, or consolidate, merge or sell all or substantially all of our assets. In the event of the occurrence of both (1) a change of control of Health Net, Inc. and (2) a below investment grade rating by any two of Fitch, Inc., Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services within a specified period, we will be required to make an offer to purchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes plus accrued and unpaid interest to the date of repurchase. As of September 30, 2013, no default or event of default had occurred under the indenture governing the Senior Notes.

The Senior Notes may be redeemed in whole at any time or in part from time to time, prior to maturity at our option, at a redemption price equal to the greater of:

• 100% of the principal amount of the Senior Notes then outstanding to be redeemed; or

• the sum of the present values of the remaining scheduled payments of principal and interest on the Senior Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve30-day months) at the applicable treasury rate plus 30 basis points

plus, in each case, accrued and unpaid interest on the principal amount being redeemed to the redemption date.

Each of the following will be an Event of Default under the indenture governing the Senior Notes:

• failure to pay interest for 30 days after the date payment is due and payable; provided that an extension of an interest payment period by us in accordance with the terms of the Senior Notes shall not constitute a failure to pay interest;

• failure to pay principal or premium, if any, on any note when due, either at maturity, upon any redemption, by declaration or otherwise;

• failure to perform any other covenant or agreement in the notes or indenture for a period of 60 days after notice that performance was required;

• (A) our failure or the failure of any of our subsidiaries to pay indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, at the later of final maturity and the expiration of any related applicable grace period and such defaulted payment shall not have been made, waived or extended within 30 days after notice or (B) acceleration of the maturity of indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, if that acceleration results from a default under the instrument giving rise to or securing such indebtedness for money borrowed and such indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days after notice; or

• events in bankruptcy, insolvency or reorganization of our Company.

Our Senior Notes payable balances were $399.2 million as of September 30, 2013 and $399.1 million as of December 31, 2012.

8. FAIR VALUE MEASUREMENTS

We record certain assets and liabilities at fair value in the consolidated balance sheets and categorize them based upon the level of judgment associated with the inputs used to measure their fair value and the level of market price observability. We also estimate fair value when the volume and level of activity for the asset or liability have significantly decreased or in those circumstances that indicate when a transaction is not orderly.

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Investments measured and reported at fair value using Level inputs are classified and disclosed in one of the following categories:

Level 1—Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments included in Level 1 include U.S. Treasury securities and listed equities. We do not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.

Level 2—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models and/or other valuation methodologies that are based on an income approach. Examples include, but are not limited to, multidimensional relational model, option adjusted spread model, and various matrices. Specific pricing inputs include quoted prices for similar securities in both active and non-active markets, other observable inputs such as interest rates, yield curve volatilities, default rates, and inputs that are derived principally from or corroborated by other observable market data. Investments that are generally included in this category include asset-backed securities, corporate bonds and loans, and state and municipal bonds.

Level 3—Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation using assumptions that market participants would use, including assumptions for risk. Level 3 includes an embedded contractual derivative asset and liability held by the Company estimated at fair value. Significant inputs used in the derivative valuation model include the estimated growth in Health Net health care expenditures and estimated growth in national health care expenditures. The growth in these expenditures was modeled using a Monte Carlo simulation approach. Level 3 also includes a state-sponsored health plans settlement account deficit asset estimated at fair value based on the income approach. See Note 10 for additional information on our state-sponsored health plans rate settlement agreement.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

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The following tables present information about our assets and liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):

	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of September 30, 2013:
Assets:
Cash and cash equivalents	$	686.1	$	—	$	—	$	—	$	686.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	208.6	$	—	$	—	$	208.6
Commercial mortgage-backed securities	—		156.8		0.7		—		157.5
Other asset-backed securities	—		42.0		—		—		42.0
U.S. government and agencies:
U.S. Treasury securities	26.5		—		—		—		26.5
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		719.2		42.9		—		762.1
Corporate debt securities	—		426.9		9.0		—		435.9
Total investments at fair value	$	26.5	$	1,553.5	$	52.6	$	—	$	1,632.6
Embedded contractual derivative	—		—		—		12.7		12.7
State-sponsored health plans settlement account deficit	—		—		—		51.7		51.7
Total assets at fair value	$	712.6	$	1,553.5	$	52.6	$	64.4	$	2,383.1

	Level 3
As of September 30, 2013:
Liability:
Embedded contractual derivative	$	0.7
Total liability at fair value	$	0.7

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	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of December 31, 2012:
Assets:
Cash and cash equivalents	$	340.1	$	—	$	—	$	—	$	340.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	272.4	$	—	$	—	$	272.4
Commercial mortgage-backed securities	—		223.1		—		—		223.1
Other asset-backed securities	—		23.6		—		—		23.6
U.S. government and agencies:
U.S. Treasury securities	25.9		—		—		—		25.9
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		841.9		—		0.2		842.1
Corporate debt securities	—		425.4		—		—		425.4
Total investments at fair value	$	25.9	$	1,786.4	$	—	$	0.2	$	1,812.5
Embedded contractual derivative	—		—		—		11.2		11.2
Total assets at fair value	$	366.0	$	1,786.4	$	—	$	11.4	$	2,163.8

	Level 3
As of December 31, 2012:
Liability:
Embedded contractual derivative	$	3.2
Total liability at fair value	$	3.2

We had no transfers between Levels 1 and 2 of financial assets or liabilities that are fair valued on a recurring basis during the three and nine months ended September 30, 2013 and 2012. In determining when transfers between levels are recognized, our accounting policy is to recognize the transfers based on the actual date of the event or change in circumstances that caused the transfer.

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The changes in the balances of Level 3 financial assets for the three months ended September 30, 2013 and 2012 were as follows (dollars in millions):

	Three months ended September 30,
	2013								2012
	Available-For-Sale Investments		Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total		Available-For-Sale Investments		Embedded Contractual Derivative			Total
Opening balance	$	—	$	10.8	$	35.4	$	46.2	$	0.2	$	15.0		$	15.2
Transfers into Level 3	—		—		—		—		—		—			—
Transfers out of Level 3	—		—		—		—		—		—			—
Total gains or losses for the period:
Realized in net income	—		1.9		16.3		18.2		—		(7.8		)	(7.8		)
Unrealized in accumulated other comprehensive income	—		—		—		—		—		—			—
Purchases, issues, sales and settlements:
Purchases/additions	—		—		—		—		—		—			—
Issues	—		—		—		—		—		—			—
Sales	—		—		—		—		—		—			—
Settlements			—		—		—		—		—			—
Closing balance	$	—	$	12.7	$	51.7	$	64.4	$	0.2	$	7.2		$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—	$	—	$	—	$	—	$	—	$	—		$	—

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The changes in the balances of Level 3 financial assets for the nine months ended September 30, 2013 and 2012 were as follows (dollars in millions):

	Nine months ended September 30,
	2013										2012
	Available-For-Sale Investments			Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total			Available-For-Sale Investments		Embedded Contractual Derivative		Total
Opening balance	$	0.2		$	11.2	$	—	$	11.4		$	0.2	$	5.3	$	5.5
Transfers into Level 3	—			—		—		—			—		—		—
Transfers out of Level 3	—			—		—		—			—		—		—
Total gains or losses for the period:
Realized in net income	—			1.5		51.7		53.2			—		1.9		1.9
Unrealized in accumulated other comprehensive income	—			—		—		—			—		—		—
Purchases, issues, sales and settlements:
Purchases/additions	—			—		—		—			—		—		—
Issues	—			—		—		—			—		—		—
Sales	(0.2		)	—		—		(0.2		)	—		—		—
Settlements	—			—		—		—			—		—		—
Closing balance	$	—		$	12.7	$	51.7	$	64.4		$	0.2	$	7.2	$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—		$	—	$	—	$	—		$	—	$	—	$	—

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The changes in the balance of the Level 3 financial liability for the three and nine months ended September, 2013 were as follows (dollars in millions):

	Three months ended September 30, 2013			Nine months ended September 30, 2013
	Embedded Contractual Derivative
Opening balance, July 1 and January 1	$	4.8		$	3.2
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total gains or losses for the period:
Realized in net income	(4.1		)	(2.5		)
Unrealized in accumulated other comprehensive income	—			—
Purchases, issues, sales and settlements:
Purchases	—			—
Issues	—			—
Sales	—			—
Settlements	—			—
Closing balance	$	0.7		$	0.7

We had no financial liabilities fair valued on a recurring basis during the three and nine months ended September 30, 2012.

The following table presents information about financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):

As of December 31, 2012	Level 1		Level 2		Level 3		Total
Lease impairment obligation	$	—	$	—	$	7.4	$	7.4

We had no assets or liabilities fair valued on a non-recurring basis during the three and nine months ended September 30, 2013.

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The following tables present quantitative information about Level 3 Fair Value Measurements as of September 30, 2013 and December 31, 2012 (dollars in millions):

	Fair Value as of September 30, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	12.7	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-5.34	%	—	7.91%	(0.69%)
				National Health Care Expenditures	-0.55	%	—	7.04%	(3.35%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	2.59	%	—	6.10%	(4.26%)
	$	0.7		National Health Care Expenditures	-1.80	%	—	8.85%	(4.00%)
State-sponsored health plans settlement account deficit	$	51.7	Income Approach	Discount Rate	1.135	%	—	1.135%	(1.135%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	10.0	%	—	10.0%	(10.0%)

	Fair Value as of December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	11.2	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-1.7	%	—	0.8%	-(0.4%)
				National Health Care Expenditures	3.7	%	—	3.7%	(3.7%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-0.3	%	—	10.1%	(4.9%)
	$	3.2		National Health Care Expenditures	-0.1	%	—	7.3%	(3.3%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	9.0	%	—	9.0%	(9.0%)
Lease impairment obligation	$	7.4	Income Approach	Discount Rate	3.26	%	—	3.26%	(3.26%)

Valuation policies and procedures are managed by our finance group, which regularly monitors fair value measurements. Fair value measurements, including those categorized within Level 3, are prepared and reviewed on a quarterly basis and any third-party valuations are reviewed for reasonableness and compliance with the Fair Value Measurement Topic of the Accounting Standards Codification. Specifically, we compare prices received from our pricing service to prices reported by the custodian or third-party investment advisors and we perform a review of the inputs, validating that they are reasonable and observable in the marketplace, if applicable. For our embedded contractual derivative asset and liability, we use internal historical and projected health care expenditure data and the national health care expenditures as reflected in the National External Trend Standards, which is published by CMS, to estimate the unobservable inputs. The growth rates in each of these health care expenditures are modeled using the Monte Carlo simulation approach and the resulting value is discounted to the valuation date. We estimate our recurring Level 3 state-sponsored health plans settlement account deficit asset using the income approach based on discounted cash flows. We estimate our non-recurring Level 3 asset and liability, goodwill for our Western Region Operations reporting unit and the lease impairment obligation using the income approach based on discounted cash flows.

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The significant unobservable inputs used in the fair value measurement of our embedded contractual derivative are the estimated growth in Health Net health care expenditures and the estimated growth in national health care expenditures. Significant increases (decreases) in the estimated growth in Health Net health care expenditures or decreases (increases) in the estimated growth in national health expenditures would result in a significantly lower (higher) fair value measurement. The significant unobservable input used in the fair value measurement of our state-sponsored health plans settlement account deficit asset is our discount rate. Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.

9. LEGAL PROCEEDINGS

Overview

We record reserves and accrue costs for certain legal proceedings and regulatory matters to the extent that we determine an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect our best estimate of the probable loss for such matters, our recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to that they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings, each with a wide range of potential outcomes; or result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding in the event damages are awarded or a fine or penalty is assessed. As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material. However, it is possible that in a particular quarter or annual period our financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings, including those described below in this Note 9 under the heading “Litigation and Investigations Related to Unaccounted-for Server Drives,” depending, in part, upon our financial condition, results of operations, cash flow or liquidity in such period, and our reputation may be adversely affected. Except for the regulatory and legal proceedings discussed in this Note 9 under the heading “Litigation and Investigations Related to Unaccounted-for Server Drives,” management believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against us should not have a material adverse effect on our financial condition, results of operations, cash flow and liquidity.

Litigation and Investigations Related to Unaccounted-for Server Drives

We are a defendant in three related litigation matters pending in California state and federal courts relating to information security issues. On January 21, 2011, International Business Machines Corp. ("IBM"), which handles our data center operations, notified us that it could not locate several hard disk drives that had been used in our data center located in Rancho Cordova, California. We have since determined that personal information of approximately two million former and current Health Net members, employees and health care providers is on the drives. Commencing on March 14, 2011, we provided written notification to the individuals whose information is on the drives. To help protect the personal information of affected individuals, we offered them two years of free credit monitoring services, in addition to identity theft insurance and fraud resolution and restoration of credit files services, if needed.

On March 18, 2011, a putative class action relating to this incident was filed against us in the U.S. District Court for the Central District of California (the "Central District of California"), and similar actions were later filed against us in other federal and state courts in California. A number of those actions were transferred to and consolidated in the U.S. District Court for the Eastern District of California (the "Eastern District of California"), and the two remaining actions are currently pending in the Superior Court of California, County of San Francisco ("San Francisco County Superior Court") and the Superior Court of California, County of Sacramento ("Sacramento County Superior Court"). The consolidated amended complaint in the federal action pending in the Eastern District of California was filed on behalf of a putative class of over 800,000 of our current or former members who received the written notification, and also named IBM as a defendant. It sought to state claims for violation of the California Confidentiality of Medical Information Act and the California Customer Records Act, and sought statutory damages of up to $1,000 for each class member, as well as injunctive and declaratory relief, attorneys’ fees and other relief. On August 29, 2011, we filed a motion to dismiss the consolidated complaint. On January 20, 2012, the district court issued an order dismissing the consolidated complaint on the grounds that the plaintiffs lacked standing to bring their action in federal court. On April 20, 2012, an amended complaint with a new plaintiff was filed against us, but no longer asserted claims against

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IBM. The amended complaint asserted the same causes of action and sought the same relief as the earlier complaint. On June 18, 2012, we filed a motion to dismiss the amended complaint, which is currently pending.

The San Francisco County Superior Court proceeding was instituted on March 28, 2011 and is brought on behalf of a putative class of California residents who received the written notification, and seeks to state similar claims against us, as well as claims for violation of California's Unfair Competition Law, and seeks similar relief. We moved to compel arbitration of the two named plaintiffs’ claims. The court granted our motion as to one of the named plaintiffs and denied it as to the other. We have appealed the latter ruling, but subsequently dismissed the appeal. Thereafter, the plaintiff as to whom our motion to compel arbitration was granted filed a petition for a writ of mandate with the California Court of Appeal seeking review of that ruling. On July 9, 2012, the Court of Appeal issued a peremptory writ of mandate directing the Superior Court to vacate its order granting the motion to compel arbitration and to enter an order denying the motion to compel.

The Sacramento County Superior Court proceeding was instituted on April 3, 2012 and is brought on behalf of a putative class of California members whose information was contained on the unaccounted for drives. The action contains the same claims and seeks the same relief as the case pending in the Eastern District of California. On June 18, 2012, we filed a demurrer seeking dismissal of this complaint, which is currently pending.

In July 2013, we entered into a settlement agreement (the “Settlement Agreement”) with the plaintiffs in the three putative class actions described above. On October 23, 2013, counsel for the named plaintiffs filed a motion for preliminary approval of the Settlement Agreement with the Sacramento County Superior Court. The hearing on this motion is currently scheduled for November 12, 2013. If the Court grants preliminary approval, it will set a date for a final approval hearing, and notice will be sent to all settlement class members advising them of the Settlement Agreement and their right to object to or opt out of the Settlement Agreement. In the event the Settlement Agreement receives final approval, each of the three putative class actions described above will be dismissed with prejudice, and all class members who do not opt out will release all claims they may have related to or arising from the unaccounted-for server drives. Under the terms of the Settlement Agreement, which would cover all individuals whose personal information was identified as being on the unaccounted-for server drives, class members who did not previously accept our offer of the credit monitoring and related services described above would be eligible to receive such credit monitoring and related services for a period of two years at no cost to them. Class members who previously accepted our original offer would be eligible to receive one additional year of such services. In addition, under the Settlement Agreement, class members would be eligible to receive reimbursement for certain unreimbursed losses arising from identity theft during a specified time period, up to a cap of $50,000 per class member, and $2 million in the aggregate. The Settlement Agreement also provides that we will continue our ongoing activities to enhance our information security measures, including the encryption of data at rest on our servers and storage area networks. We will also be responsible for the payment of any award of fees and expenses to plaintiffs' counsel for each of the three class actions described above as determined by the Sacramento County Superior Court. Finally, we will be responsible for the costs of administering the Settlement Agreement. In the event that the Sacramento County Superior Court does not grant final approval of the Settlement Agreement, and the parties are unable to negotiate a revised settlement agreement that is finally approved by the Court, the pending litigation described above will continue. In the event the Settlement Agreement described above receives final approval, we do not believe that the terms of the Settlement Agreement would have a material impact on our consolidated financial statements.

We have also been informed that a number of regulatory agencies are investigating the incident, including the California Department of Managed Health Care ("DMHC"), the California Department of Insurance, the California Attorney General, the Massachusetts Office of Consumer Affairs and Business Regulation and the Office of Civil Rights of the U.S. Department of Health and Human Services.

Miscellaneous Proceedings

In the ordinary course of our business operations, we are subject to periodic reviews, investigations and audits by various federal and state regulatory agencies, including, without limitation, CMS, DMHC, the Office of Civil Rights of the U.S. Department of Health and Human Services and state departments of insurance, with respect to our compliance with a wide variety of rules and regulations applicable to our business, including, without limitation, HIPAA, rules relating to pre-authorization penalties, payment of out-of-network claims, timely review of grievances and appeals, and timely and accurate payment of claims, any one of which may result in remediation of certain claims, contract termination, the loss of licensure or the right to participate in certain programs, and the assessment of regulatory fines or penalties, which could be substantial. From time to time, we receive subpoenas and other requests for information from, and are subject to investigations by, such regulatory agencies, as well as from state attorneys general. There also continues to be heightened review by regulatory authorities of, and increased litigation regarding, the health care

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industry’s business practices, including, without limitation, information privacy, premium rate increases, utilization management, appeal and grievance processing, rescission of insurance coverage and claims payment practices.

In addition, in the ordinary course of our business operations, we are party to various other legal proceedings, including, without limitation, litigation arising out of our general business activities, such as contract disputes, employment litigation, wage and hour claims, including, without limitation, cases involving allegations of misclassification of employees and/or failure to pay for off-the-clock work, real estate and intellectual property claims, claims brought by members or providers seeking coverage or additional reimbursement for services allegedly rendered to our members, but which allegedly were denied, underpaid, not timely paid or not paid, and claims arising out of the acquisition or divestiture of various business units or other assets. We are also subject to claims relating to the performance of contractual obligations to providers, members, employer groups and others, including the alleged failure to properly pay claims and challenges to the manner in which we process claims, and claims alleging that we have engaged in unfair business practices. In addition, we are subject to claims relating to information security incidents and breaches, reinsurance agreements, rescission of coverage and other types of insurance coverage obligations and claims relating to the insurance industry in general. We are, and may be in the future, subject to class action lawsuits brought against various managed care organizations and other class action lawsuits.

We intend to vigorously defend ourselves against the miscellaneous legal and regulatory proceedings to which we are currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending against us, substantial non-economic or punitive damages are being sought.

Potential Settlements

We regularly evaluate legal proceedings and regulatory matters pending against us, including those described above in this Note 9, to determine if settlement of such matters would be in the best interests of the Company and its stockholders. The costs associated with any settlement of the various legal proceedings and regulatory matters to which we are or may be subject from time to time, including those described above in this Note 9, could be substantial and, in certain cases, could result in a significant earnings charge or impact on our cash flow in any particular quarter in which we enter into a settlement agreement and could have a material adverse effect on our financial condition, results of operations, cash flow and/or liquidity and may affect our reputation.

10.     STATE-SPONSORED HEALTH PLANS RATE SETTLEMENT AGREEMENT

On November 2, 2012, our wholly owned subsidiaries, Health Net of California, Inc. and Health Net Community Solutions, Inc., entered into a settlement agreement (the "Agreement") with DHCS to settle historical rate disputes with respect to our participation in the Medi-Cal program, for rate years prior to the 2011–2012 rate year. As part of the Agreement, DHCS agreed, among other things, to (1) an extension of all of our Medi-Cal managed care contracts existing as of the date of the Agreement for an additional five years from their then existing expiration dates; (2) retrospective premium adjustments on all of our state-sponsored health care programs, including Medi-Cal, Healthy Families, SPDs, our proposed participation in the dual eligibles demonstration portion of the California Coordinated Care Initiative that is expected to begin in 2014 and any potential future Medi-Cal expansion populations (our “state-sponsored health care programs”), which will be tracked in a settlement account as discussed in more detail below; and (3) compensate us should DHCS terminate any of our state-sponsored health care programs contracts early.

Effective January 1, 2013, the settlement account (the "Account") was established with an initial balance of zero. The balance in the Account is adjusted annually to reflect retrospective premium adjustments for each calendar year (referenced in the Agreement as a deficit or surplus). A deficit or surplus will result to the extent our actual pretax margin (as defined in the Agreement) on our state-sponsored health care programs is below or above a predetermined pretax margin target. The amount of any deficit or surplus is calculated as described in the Agreement. Cash settlement of the Account will occur on December 31, 2019, except that under certain circumstances the DHCS may extend the final settlement for up to three additional one-year periods (as may be extended, the "Term"). In addition, the DHCS will make an interim partial settlement payment to us if it terminates any of our state-sponsored health care programs contracts early. Upon expiration of the Term, if the Account is in a surplus position, then no monies are owed to either party. If the Account is in a deficit position, then DHCS shall pay the amount of the deficit to us. In no event, however, shall the amount paid by DHCS to us under the Agreement exceed $264 million or be less than an alternative minimum amount as defined in the Agreement.

We estimate and recognize the retrospective adjustments to premium revenue based upon experience to date under our state-sponsored health care programs contracts. As of September 30, 2013, we had calculated and recorded a deficit of $51.7 million, net of a valuation discount in the amount of $3.7 million (see Note 8), reflecting our estimated retrospective premium adjustment to the Account based on our actual pretax margin for the nine months ended

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September 30, 2013. The retrospective premium adjustment is recorded as an adjustment to premium revenue and other noncurrent assets.

Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY STATEMENTS

The following discussion and other portions of this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”) and Section 27A of the Securities Act of 1933 regarding our business, financial condition and results of operations. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor provisions. These forward-looking statements involve a number of risks and uncertainties. All statements other than statements of historical information provided or incorporated by reference herein may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend,” “feels,” “will,” “projects” and other similar expressions are intended to identify forward-looking statements. Managed health care companies operate in a highly competitive, constantly changing environment that is significantly influenced by, among other things, aggressive marketing and pricing practices of competitors and regulatory oversight. Factors that could cause our actual results to differ materially from those reflected in forward-looking statements include, but are not limited to, the factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 ("Form 10-K") and the risks discussed in this Quarterly Report on Form 10-Q and our other filings from time to time with the Securities and Exchange Commission ("SEC").

Any or all forward-looking statements in this Quarterly Report on Form 10-Q and in any other public filings or statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many of the factors discussed in our filings with the SEC may impact future results. These factors should be considered in conjunction with any discussion of operations or results by us or our representatives, including any forward-looking discussion, as well as information contained in press releases, presentations to securities analysts or investors or other communications by us or our representatives. You should not place undue reliance on any forward-looking statements, which reflect management’s analysis, judgment, belief or expectation only as of the date thereof and are subject to changes in circumstances and a number of risks and uncertainties. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that arise after the date such statement was made.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, together with the consolidated financial statements included elsewhere in this report, should be read in their entirety since they contain detailed information that is important to understanding Health Net, Inc. and its subsidiaries’ results of operations and financial condition.

OVERVIEW

General

We are a publicly traded managed care organization that delivers managed health care services through health plans and government-sponsored managed care plans. Our mission is to help people be healthy, secure and comfortable. We provide and administer health benefits to approximately 5.3 million individuals across the country through group, individual, Medicare, Medicaid, U.S. Department of Defense (“Department of Defense” or “DoD”), including TRICARE, and Veterans Affairs programs. Through our subsidiaries, we also offer behavioral health, substance abuse and employee assistance programs, managed health care products related to prescription drugs, managed health care product coordination for multi-region employers, and administrative services for medical groups and self-funded benefits programs.

How We Report Our Results

We operate within three reportable segments, Western Region Operations, Government Contracts and Divested Operations and Services, each of which is described below. See Note 4 to our consolidated financial statements for more information regarding our reportable segments.

Our health plan services are provided under our Western Region Operations reportable segment, which includes the operations primarily conducted in California, Arizona, Oregon and Washington for our commercial, Medicare and

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Medicaid health plans, our health and life insurance companies, our pharmaceutical services subsidiary and certain operations of our behavioral health subsidiaries in several states including Arizona, California and Oregon. As of September 30, 2013, we had approximately 2.5 million medical members in our Western Region Operations reportable segment. On April 1, 2012, we completed the sale of our Medicare stand-alone prescription drug plan business ("Medicare PDP business") to Pennsylvania Life Insurance Company, a subsidiary of CVS Caremark Corporation ("CVS Caremark"). As a result, the operating results related to our Medicare PDP business have been excluded from continuing operations results and are classified in this Quarterly Report on Form 10-Q as discontinued operations for the nine months ended September 30, 2012. For additional information regarding the sale of our Medicare PDP business, see Note 3 to our consolidated financial statements.

Our Government Contracts segment includes our government-sponsored managed care contract with the DoD under the TRICARE program in the North Region and other health care related government contracts. Under the Managed Care Support Contract for the TRICARE North Region ("T-3 contract"), we provide administrative services to approximately 2.9 million Military Health System (“MHS”) eligible beneficiaries. In addition, we also provide behavioral health services to military families under the Department of Defense sponsored Military and Family Life Counseling, formerly Military and Family Life Consultant (“MFLC”) contract, which is also included in our Government Contracts segment. For additional information on our T-3 and MFLC contracts, see "— Results of Operations—Government Contracts Reportable Segment."

Our Divested Operations and Services reportable segment includes the operations of our businesses that provide administrative and run-out support services to an affiliate of UnitedHealth Group Incorporated ("United") and its affiliates under claims servicing agreements in connection with the Northeast Sale (as defined below), as well as the transition-related revenues and expenses of our divested Medicare PDP business. The "Northeast Sale" refers to the sale of all of the outstanding shares of capital stock of our health plan subsidiaries that were domiciled and/or had conducted businesses in Connecticut, New Jersey, New York and Bermuda to United, and includes the acquisition by United of membership renewal rights for certain commercial health care business conducted by our subsidiary, Health Net Life Insurance Company in the states of Connecticut and New Jersey. As of December 31, 2012, we had substantially completed the administration and run-out of our divested businesses. See Notes 2, 3 and 4 to our consolidated financial statements for additional information regarding our reportable segments and the sale of our Medicare PDP business.

How We Measure Our Profitability

Our profitability depends in large part on our ability to, among other things, effectively price our health care products; manage health care and pharmacy costs; contract with health care providers; attract and retain members; and manage our general and administrative (“G&A”) and selling expenses. In addition, factors such as state and federal health care reform legislation and regulation, competition and general economic conditions affect our operations and profitability. The effect of escalating health care costs, as well as any changes in our ability to negotiate competitive rates with our providers, may impose further risks to our ability to profitably underwrite our business. Each of these factors may have a material impact on our business, financial condition or results of operations.

We measure our Western Region Operations reportable segment profitability based on medical care ratio (“MCR”) and pretax income. The MCR is calculated as health plan services expense divided by health plan services premiums. The pretax income is calculated as health plan services premiums and administrative services fees and other income less health plan services expense and G&A and other net expenses. See “—Results of Operations—Western Region Operations Reportable Segment—Western Region Operations Segment Results” for a calculation of MCR and pretax income.

Health plan services premiums generally include health maintenance organization (“HMO”), point of service (“POS”) and preferred provider organization (“PPO”) premiums from employer groups and individuals and from Medicare recipients who have purchased supplemental benefit coverage (which premiums are based on a predetermined prepaid fee), Medicaid revenues based on multi-year contracts to provide care to Medicaid recipients, and revenue under Medicare risk contracts to provide care to enrolled Medicare recipients. Medicare revenues can also include amounts for risk factor adjustments and additional premiums that we charge in some places to members who purchase our Medicare risk plans. The amount of premiums we earn in a given period is driven by the rates we charge and enrollment levels. Administrative services fees and other income primarily includes revenue for administrative services such as claims processing, customer service, medical management, provider network access and other administrative services. Health plan services expense generally includes medical and related costs for health services provided to our members, including physician services, hospital and related professional services, outpatient care, and pharmacy benefit costs. These expenses are impacted by unit costs and utilization rates. Unit costs represent the health care cost per visit, and the utilization rates represent the volume of health care consumption by our members.

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G&A expenses include those costs related to employees and benefits, consulting and professional fees, marketing, business expansion initiatives, premium taxes and assessments, occupancy costs and litigation and regulatory-related costs. Such costs are driven by membership levels, introduction of new products or provision of new services, system consolidations, outsourcing activities and compliance requirements for changing regulations, among other things. These expenses also include expenses associated with corporate shared services and other costs to reflect the fact that such expenses are incurred primarily to support health plan services. Selling expenses consist of external broker commission expenses and generally vary with premium volume.

We measure our Government Contracts segment profitability based on pretax income, which is calculated as Government Contracts revenue less Government Contracts cost. See “—Results of Operations—Government Contracts Reportable Segment—Government Contracts Segment Results” for a calculation of the government contracts pretax income.

Under the T-3 contract for the TRICARE North Region, we provide various types of administrative services including provider network management, referral management, medical management, disease management, enrollment, customer service, clinical support service, and claims processing. These services are structured as cost reimbursement arrangements for health care costs plus administrative fees earned in the form of fixed prices, fixed unit prices, and contingent fees and payments based on various incentives and penalties. We recognize revenue related to administrative services on a straight-line basis over the option period, when the fees become fixed and determinable. The TRICARE North Region members are served by our network and out-of-network providers in accordance with the T-3 contract. We pay health care costs related to these services to the providers and are later reimbursed by the DoD for such payments. Under the terms of the T-3 contract, we are not the primary obligor for health care services and accordingly, we do not include health care costs and related reimbursements in our consolidated statements of operations. The T-3 contract also includes various performance-based incentives and penalties. For each of the incentives or penalties, we adjust revenue accordingly based on the amount that we have earned or incurred at each interim date and are legally entitled to in the event of a contract termination.

We measure our Divested Operations and Services segment profitability based on pretax income. This pretax income is calculated as Divested Operations and Services segment total revenues less Divested Operations and Services segment total expenses. See “—Results of Operations—Divested Operations and Services Reportable Segment Results” for a calculation of our Divested Operations and Services pretax income.

Health Care Reform Legislation and Implementation

During the first quarter of 2010, President Obama signed into law both the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), which is causing and will continue to cause significant changes to the U.S. health care system and alter the dynamics of the health care insurance industry. As further described below, the breadth and scope of these changes present us with a number of strategic and operational challenges.

The ACA includes provisions which, among other things, will impose a significant non-deductible tax (technically called a “fee”) on health insurers, effective for calendar years beginning after December 31, 2013. This “health insurer fee” will be assessed at a total of $8 billion in 2014, will increase thereafter and will be allocated pro rata amongst industry participants based on net premiums written during the previous calendar year, subject to certain exceptions. Payment of the health insurer fee will not be due until 2014; however, it has started to impact us since our premium rates are set a year in advance, and the tax amounts for 2014 depend on net premiums written in 2013. Additionally, proposed regulations relating to the health insurer fee have not been finalized by the Internal Revenue Service (“IRS”), making related payment procedures, timing and financial reporting requirements uncertain. If we are not able to adequately incorporate the costs of our pro rata portion of the health insurer fee when we set our premium rates, or if we are unable to otherwise adjust our business to address this additional new cost, our financial condition and results of operations may be materially adversely affected. We may also experience significant volatility in our cash flow relative to our results of operations in a given period because the health insurer fee will be payable in a single lump sum based on prior year premiums. In addition, while certain types of entities and benefits are exempt from the calculation of the health insurer fee, including, among others, government entities, certain non-profit insurers and self-funded plans, we are unable to take advantage of any significant exemptions due to our current mix of business. Consequently, the health insurer fee will represent a higher percentage of our premium revenues than those of our competitors who are able to exempt all or a portion of their premium revenues from the health insurer fee allocation. Moreover, some of our competitors may have greater economies of scale or a different mix of business, which, among other things, may lead to lower expense ratios and higher profit margins than we have. Since the health insurer fee is not tax deductible and is based on net premiums written, rather than profits, it will generally represent a higher

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percentage of our profits as compared to those competitors. As a result, the health insurer fee will likely impact us to a greater degree than certain of our larger competitors and those of our competitors who may exempt significant portions of their premium base from the health insurer fee allocation, for example. We may not be able to match our competitors’ ability to support reduced premiums by virtue of any full or partial exemptions from the health insurer fee, or by virtue of making changes to distribution arrangements, decreasing spending on non-medical product features and services, or otherwise adjusting operating costs and reducing general and administrative expenses, which may have an adverse effect on our ability to compete effectively with these competitors. Though we are preparing for the scheduled 2014 implementation of the health insurer fee, on October 29, 2013, a bipartisan bill was introduced in the House of Representatives, which, if enacted as currently proposed, would delay the implementation of the health insurer fee until 2016.

The ACA also requires the establishment of state-run or federally facilitated “exchanges” where individuals and small groups may purchase health coverage. California, Oregon and Washington have received approval by the U.S. Department of Health and Human Services (“HHS”) to operate state-run exchanges, and HHS will operate the exchange in Arizona. We applied for and were selected to participate as Qualified Health Plans (“QHPs”) in the exchanges in California, Oregon and Arizona. Continued participation in these exchanges and future participation in any other exchanges in the states in which we operate may be conditioned on the approval of the applicable state or federal government regulator, which could result in the exclusion of some carriers from the exchanges. Certain factors to be considered for continued participation in the exchanges may be subject to change.

From an operations standpoint, the initial open enrollment period for federal and state exchanges began on October 1, 2013 and will continue through March 31, 2014. While we have started the process of enrolling members in our QHPs, the exchanges have experienced certain implementation difficulties, and the timing and ultimate resolution of these issues remains uncertain. For example, there have been reports of technical problems impeding individuals and small business from applying through both the state and federal exchanges. As the enrollment process has advanced, state and federal regulators and exchange participants have engaged in discussions to troubleshoot various operational issues that have arisen with exchange rollout and implementation. There has also been government discussion around the potential for changing open enrollment periods and amending the deadlines by which individuals must enroll in coverage before incurring penalties associated with the individual mandate (as defined below). Any significant delays in deadlines for mandatory enrollment or continued operational difficulties during the enrollment period could adversely affect our ability to enroll members in our QHPs, which may have an adverse affect on our revenues and results of operations.

In some cases, states and the federal government are continuing to finalize regulations, procedures, and guidance related to the operation of the exchanges, including, without limitation, procedures for enrollment and premium payment by individuals and small groups (particularly with regard to the role that insurers may play in facilitating enrollment), procedures for ensuring the accuracy of data displayed on the exchange websites, procedures for confirming the eligibility of individuals to participate in the exchanges or qualify for federal subsidies (as described in further detail below), procedures for agent, broker and “assister” participation in the exchanges, procedures for the timing and payment of federal subsidies for premiums and cost-sharing reductions, the determination of standards for privacy and security of data held by the exchanges and related entities, the operation of reinsurance, risk corridors and risk adjustment mechanisms and the rules and regulations that apply to insurers that continue to offer coverage to individuals and small group employers outside the exchanges. The developing operational structure for the exchanges will shape the marketplace for individual and small group health plans both within and outside the exchanges, and these changes are requiring and will continue to require us to modify our strategies and operations in response. For example, the exchanges are introducing direct-to-consumer distribution channels that are requiring us to adjust our product offerings through, among other things, a more standardized benefit design with price-focused differentiation. We are also adjusting our marketing and sales practices to adapt to these changes, including developing new tools and strategies to navigate new distribution channels opened by the exchanges. In response to these changes in the health care market over time, our competitors could modify their product features or benefits, change their pricing relative to others in the market and adjust their mix of business within or outside the exchanges, or, as some of our larger competitors have done, exit segments of the market. New competitors seeking to gain a foothold in the changing market may also introduce product offerings or pricing that we may not be able to match, which may adversely affect our ability to compete effectively. Finally, as state and federal regulators collect data and gather feedback on the exchanges’ operational experience, they may seek to amend relevant regulations or issue further interpretive guidance in response. If we fail to effectively adapt our business strategy and operations to these evolving markets, including with respect to shifts in consumer interface, product offerings and the competitive and regulatory landscape, our financial condition and results of operations may be adversely affected.

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The ACA also contains risk adjustment provisions applicable to the individual and small group markets that take effect in 2014 and will shape the economics of health care coverage both within and outside the exchanges. These risk adjustment provisions will effectively transfer funds from health plans with relatively lower risk enrollees to plans with relatively higher risk enrollees to help protect against adverse selection. The individual and small group markets represent a significant portion of our commercial business and the relevant amounts transferred may be substantial. To adapt to this new economic framework, we have dedicated significant resources and incurred significant costs to implement numerous strategic and operational initiatives both within and outside the exchanges that, among other things, require us to focus on and manage different populations of potential members than we have in the past. The success of these initiatives depends in large part on our ability to accurately assess our health plan’s risk and incorporate that into the risk adjustment calculus. This calculation relies primarily on encounter data to define a health plan’s average actuarial risk. The process of accurately collecting this data presents disadvantages to more heavily capitated health plans such as ours because providers receiving fixed fees from health insurers may not have the same incentive to provide accurate and complete encounter data with respect to services rendered when compared to providers under fee for service arrangements. This incentive problem may be particularly acute for health plans operating under the delegated HMO model, which is prevalent in our California health plans. Under this model, third party intermediaries assume responsibility for certain utilization management and care coordination responsibilities, including the collection of encounter data. We have been refining our health plan infrastructure and provider network to help ensure that we are accurately capturing this data, and if we are unable to successfully execute this strategy, our revenues and results of operations may be adversely affected. In addition, assuming we accurately capture complete encounter data, there is continued uncertainty about how HHS will validate this risk adjustment data, and some of the technical details about the “distributed data collection” approach that HHS will apply when operating risk adjustment are still being finalized. We also face some lingering uncertainty regarding the types of penalties that will be imposed and the criteria for imposing those penalties where an insurer fails to provide sufficient data to HHS for risk adjustment purposes.

In addition to these permanent risk adjustment provisions, the ACA implements temporary reinsurance and risk corridors programs, which seek to ease the transition into the exchanges by helping to stabilize rates and protect against rate uncertainty in the initial years of the exchanges. We have made and are continuing to make significant efforts to design and implement a cohesive strategy with respect to the exchanges and the risk adjustment, reinsurance and risk corridors programs. However, as described above, the relevant regulatory framework for the ACA remains subject to change and interpretation over time, and if we are not able to successfully adapt to any future changes in certain of our markets, our financial condition, cash flows and results of operations may be materially adversely affected.

Other provisions of the ACA include, among other things:

• providing funds to expand Medicaid eligibility to all individuals with incomes up to 133 percent of the federal poverty level, commonly referred to as “Medicaid expansion” (as discussed below, this provision was made optional for states under the Supreme Court's ruling on the ACA in June 2012);

• imposing an excise tax on high premium insurance policies;

• requiring premium rate reviews in certain market segments;

• stipulating a minimum medical loss ratio (as adopted by the Secretary of HHS);

• limiting Medicare Advantage payment rates;

• increasing mandated “essential health benefits” in some market segments;

• specifying certain actuarial value and cost-sharing requirements;

• eliminating medical underwriting for medical insurance coverage decisions, including “guaranteed availability” with respect to individual and group coverage;

• limiting the ability of health plans to vary premiums based on assessments of underlying risk in the individual and small group markets;

• increasing restrictions on rescinding coverage;

• prohibiting some annual and all lifetime limits on amounts paid on behalf of or to our members;

• limiting the tax-deductible amount of compensation paid to health insurance executives;

• requiring that most individuals obtain health care coverage or pay a penalty, commonly referred to as the “individual mandate”;

• imposing a sales tax on medical device manufacturers; and

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• increasing fees on pharmaceutical manufacturers.

The schedule for implementation of the provisions of the ACA generally varies from as early as enactment to as late as 2018. A number of potentially significant provisions of the ACA will become effective beginning in 2014, including, but not limited to, the health insurer fee, the operation of QHPs purchased through the exchanges, the risk adjustment, reinsurance, and risk corridors programs described above, the guaranteed availability requirement, and the individual mandate. Other provisions, such as the excise tax on certain high-premium insurance policies, will not take effect until a later date. However, some of these provisions have had an earlier impact on our operations, including in connection with the setting of our premium rates as discussed above.

In addition to the specific provisions described above, various other aspects of the ACA are transforming and will continue to transform the operating and regulatory landscape in the markets in which we operate, and could have an adverse impact on the cost of operating our business, and our revenues, enrollment and premium growth in certain products and market segments. For example, among other things, the ACA requires premium rate review in certain market segments and requires that premium rebates be paid to policyholders in the event certain specified minimum medical loss ratios are not met. We were not required to pay a material amount in rebates with respect to our 2012 business. However, we cannot be certain that we will not be required to pay material amounts in rebates in the future. In addition, certain insurers may be excluded from continuing participation in the exchanges if the rate review process determines that the insurer has demonstrated a pattern or practice of excessive or unjustified premium rate increases. The ACA may also make it more difficult for us to attract and retain members, and will increase the amount of certain taxes and fees we pay, the latter of which is expected to increase our effective tax rate in future periods. Due in large part to the impact of the health insurer fee, our effective tax rate for 2014 may exceed 50%. However, we are unable to reliably estimate the amount of these fees and taxes or the increase in our effective tax rate because material information and guidance regarding the calculations of these fees and taxes has not been finalized. The sales tax on medical device manufacturers and increase in the amount of fees pharmaceutical manufacturers pay imposed by the ACA, could, in turn, also increase our medical costs. Further, regulators in California and Oregon have opined that health insurers may not increase individual family plan and small group employer premiums in 2013 to cover increased costs associated with the health insurer fee payable in 2014. It is not yet clear how state regulators will respond to rate filings in other market segments that include requests to increase premiums to cover increased costs resulting from the health insurer fee or any other portion of the ACA, particularly in light of recent heightened regulatory scrutiny of premium rates. In the event regulators take further positions preventing or delaying health insurers from increasing premiums to reflect ACA-related costs, similar to the above referenced examples, or if consumers forego coverage as a result of such premium increases, our financial condition, results of operations and cash flows may be adversely affected.

We also face additional competition as new competitors enter the marketplace and existing competitors seize on opportunities to expand their business as a result of the ACA, including as discussed above with respect to the exchanges. For example, among other things, ACA provisions related to accountable care organizations, or “ACOs”, which are intended to create incentives for health care participants to work together to treat an individual across different care settings, may create opportunities for provider organizations to compete with us by assuming care management and other administrative responsibilities as part of a more integrated delivery system. However, there remains considerable uncertainty about the impact of the ACA on the health insurance market as a whole and what actions our competitors or potential competitors will take in response to the legislation.

There are numerous steps required to implement the ACA, and although many significant regulations have been finalized, further amendments to these regulations, additional clarifying regulations and other guidance are expected over several years. We are still awaiting further final regulations or guidance on a number of key provisions. These provisions include certain aspects of the calculation of the health insurer fee as noted above and the limitation on deductibility of executive compensation, among others. Final regulations relating to the Medicare Shared Savings Program reflecting the use of ACOs have been issued, but as noted above, the impact of these new regulations on the health care market and the role to be played by health plans in the operation of ACOs remains to be determined. Moreover, even in cases where the federal government has issued final regulations, we and other health insurers continue to face uncertainty because these final regulations are sometimes unclear or incomplete, subject to further change or rely on sub-regulatory guidance. In addition to ongoing regulatory questions, many of the operational components of health care reform are still being developed, including, as referenced above, how market participants ultimately interact and adapt to the new requirements within and outside state-run and federal exchanges. As a result, and as illustrated by the specific provisions described above, many of the impacts of health care reform will not be evident until the ultimate requirements of the ACA have been definitively determined, the various related programs have been fully implemented and both insurers and regulators are able to make necessary adjustments.

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In addition, certain legal and legislative challenges to the ACA remain despite the U.S. Supreme Court’s June 2012 decision in NFIB v. Sebelius and the November 2012 Presidential and Congressional elections. In Sebelius, the Supreme Court upheld the ACA’s individual mandate as valid under Congress' taxing power. The Sebelius decision also permits states to opt out of the elements of the ACA that require expansion of Medicaid coverage in January 2014 without losing their existing federal Medicaid funding. Currently, Arizona and California plan to extend coverage to the uninsured through Medicaid expansions; however, the law in Arizona authorizing the expansion may be subject to litigation or referendum, and may not be resolved until 2014.

Notwithstanding Sebelius, other legal challenges to the ACA have been threatened or are still pending at lower court levels, which could result in portions of the ACA being struck down. These threatened and pending challenges include disputing the IRS’s official position that premium tax credits are available to low-income individuals who purchase insurance through federally facilitated exchanges. On October 22, 2013, a federal district court judge allowed one such challenge to move forward, ruling that the plaintiffs had standing to bring the case. At least one other case making the same argument is also being brought in lower courts. A successful challenge in this area could significantly affect the affordability of insurance to low-income individuals in states that do not administer their own exchanges, such as Arizona. A number of cases challenging the rule that all health plans must provide contraceptive services have progressed through federal appellate courts, and currently both the plaintiffs and the federal government have asked the Supreme Court to review one or more of these cases.

Finally, though legislative repeal of the ACA in its entirety is unlikely, Congress has proposed certain legislative initiatives that may affect certain provisions of the ACA. In addition to the House measure introduced in October 2013 regarding the health insurer fee, in early October 2013 Congress passed and the President signed an appropriations act related to the suspension of the federal government debt ceiling and end of the federal government shutdown. This legislation required the Secretary of HHS to certify that exchanges have processes in place to verify the eligibility of all individuals who apply for a premium tax credit or cost-sharing reductions. Although the impact of this legislation is unclear, it could result in changes that make it more difficult for individuals to receive subsidies through the exchanges and negatively affect exchange enrollment. In addition, other legislative changes to the ACA have been suggested or introduced, such as with respect to delaying the collection of reinsurance fees, delaying implementation of the individual mandate, or delaying or repealing the tax on medical devices, although none of these provisions have been enacted. Additionally, federal regulators have delayed implementation of certain ACA requirements, including the requirement that large employers provide coverage to full-time employees or pay a penalty, along with related reporting requirements, and the requirement that federal and state small business health option program exchanges be able to facilitate employee choice among multiple health plans, due to operational concerns impacting both employers and health insurance issuers. Any such amendment or withholding of ACA funding by Congress, extended delays in the issuance of clarifying regulations and other guidance, delays in implementation, or other lingering uncertainty regarding the ACA could cause us to incur additional costs of compliance or require us to significantly modify or adjust certain of the operational and strategic initiatives we have already established. Such modifications may result in the loss of some or all of the substantial resources that have been and will be invested in the ACA implementation, and, depending on the nature of the modification, could have a material adverse effect on our business and the trading price of our common stock.

Various health insurance reform proposals have been considered at the state level, and more are likely to be considered in the future. Many of the states in which we operate have been implementing parts of the ACA and many states have added new requirements that are more exacting than the ACA's requirements. States may also mandate minimum medical loss ratios, implement rate reforms and enact benefit mandates that go beyond provisions included in the ACA. For example, while proposed California legislation requiring prior approval of premium rates by the California Department of Insurance (the “CDI”) did not pass, an initiative measure in California to require prior approval for individual and small group rates by the CDI has qualified for the 2014 ballot. In addition, oversight boards associated with the state-based exchanges in California have the ability to limit the number of plans and negotiate the price of coverage sold on these exchanges and to limit the service areas in which QHPs in the exchanges may operate. These kinds of state regulations and legislation could limit or delay our ability to increase premiums in future years even where actuarially supported, and thereby could adversely impact our revenues and profitability. This also could increase the competition we face from companies that have lower health care or administrative costs than we do and therefore can price their premiums at lower levels than we can.

Further, the interaction of new federal regulations and the implementation efforts of the various states in which we do business will continue to create substantial uncertainty for us and other health insurance companies about the requirements under which we must operate. Even in cases where state action is limited to implementing federal reforms, new or amended state laws will be required in many cases, and we will be required to operate under and comply with the various laws of each of the states in which we operate. States may disagree in their interpretations of the federal

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statute and regulations, and state “guidance” that is issued could be unclear or untimely. In the case of the ACA exchanges, we will be required to operate under and comply with the regulatory authority of the federal government in addition to the regimes of each of the states that establish and administer their own exchanges. If we do not successfully implement the various state law requirements of the ACA, including with respect to the exchanges, our financial condition and results of operations may be adversely affected.

In addition, we and other health insurance companies face uncertainty and execution risk due to the multiple, complex ACA implementations that are required in abbreviated time frames in new markets. Additionally, in many cases, our operational and strategic initiatives must be implemented in evolving regulatory environments and without the benefit of established market data. In addition, the lack of operating experience in these new marketplaces for insurers and, in certain cases, providers and consumers, increases the likelihood of a dynamic marketplace that may require us to adjust our operating and strategic initiatives over time, and there is no assurance that insurers, including us, will be able to do so successfully. Our execution risk encapsulates, among other things, our simultaneous participation in the exchanges, Medicaid expansion and California’s Coordinated Care Initiative (“CCI”), as further described under the heading “-California Coordinated Care Initiative” below. These initiatives will require us to effectively incorporate new and expanded populations and, among other things, will require us to effectively and efficiently restructure our provider network to, among other things, meet the ACA’s dynamic environment. Any delay or failure by us to execute our operational and strategic initiatives with respect to health care reform or otherwise appropriately react to the legislation, implementing regulations, actions of our competitors and the changing marketplace could result in operational disruptions, disputes with our providers or members, increased exposure to litigation, regulatory issues, damage to our existing or potential member relationships or other adverse consequences.

Due to the magnitude, scope and complexity of the ACA, including the continuing modification and interpretation of the ACA rules and the operational risks involved with simultaneous implementation of multiple initiatives in new markets without established market data, we cannot predict the ultimate impact on our business of future regulations and laws, including state laws, implementing the ACA. Depending in part on its ultimate requirements, the ACA could have a material adverse effect on our business, financial condition, cash flows and results of operations.

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RESULTS OF OPERATIONS

Consolidated Results

The table below and the discussion that follows summarize our results of operations for the three and nine months ended September 30, 2013 and 2012.

	Three months ended September 30,					Nine months ended September 30,
	2013		2012			2013		2012
	(Dollars in thousands, except per share data)
Revenues
Health plan services premiums	$	2,606,754	$	2,578,689		$	7,817,697	$	7,818,565
Government contracts	149,342		169,811			423,796		527,421
Net investment income	11,276		16,355			57,970		63,356
Administrative services fees and other income	7,659		1,854			11,036		16,300
Divested operations and services revenue	—		12,863			—		25,668
Total revenues	2,775,031		2,779,572			8,310,499		8,451,310
Expenses
Health plan services (excluding depreciation and amortization)	2,196,561		2,281,388			6,657,215		6,983,502
Government contracts	125,334		151,815			378,209		467,531
General and administrative	267,683		222,425			804,355		688,457
Selling	59,498		61,053			175,828		181,004
Depreciation and amortization	9,402		7,907			28,355		22,722
Interest	7,973		8,021			24,626		24,895
Divested operations and services expenses	—		17,587			—		59,973
Total expenses	2,666,451		2,750,196			8,068,588		8,428,084
Income from continuing operations before income taxes	108,580		29,376			241,911		23,226
Income tax provision	41,740		8,898			91,538		5,712
Income from continuing operations	66,840		20,478			150,373		17,514
Discontinued operations:
Loss from discontinued operation, net of tax	—		—			—		(18,452		)
(Adjustment to) gain on sale of discontinued operation, net of tax	—		(2,450		)	—		116,990
(Loss) income on discontinued operation, net of tax	—		(2,450		)	—		98,538
Net income	$	66,840	$	18,028		$	150,373	$	116,052
Net income per share—basic:
Income from continuing operations	$	0.84	$	0.25		$	1.89	$	0.21
(Loss) income on discontinued operation, net of tax	$	—	$	(0.03	)	$	—	$	1.20
Net income per share—basic	$	0.84	$	0.22		$	1.89	$	1.41
Net income per share—diluted:
Income (loss) from continuing operations	$	0.83	$	0.25		$	1.87	$	0.21
(Loss) income on discontinued operation, net of tax	$	—	$	(0.03	)	$	—	$	1.18
Net income per share—diluted	$	0.83	$	0.22		$	1.87	$	1.39

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On April 1, 2012, we completed the sale of our Medicare PDP business to CVS Caremark. See Note 3 to our consolidated financial statements for more information. As a result of the sale, our results of operations for the nine months ended September 30, 2012, included loss from discontinued operation of $(18.5) million related to our Medicare PDP business. Additionally, as a result of this sale, we recorded a gain on sale of discontinued operation in the amount of $132.8 million pretax, or $117.0 million after-tax, for nine months ended September 30, 2012. As of September 30, 2013 and 2012, respectively, we had no Medicare stand-alone prescription drug plan members.

For the three and nine months ended September 30, 2013, we reported net income of $66.8 million or $0.83 per diluted share and net income of $150.4 million or $1.87 per diluted share, respectively, as compared to net income of $18.0 million or $0.22 per diluted share and net income of $116.1 million or $1.39 per diluted share, respectively, for the same periods in 2012. For the three and nine months ended September 30, 2013, we reported net income from continuing operations of $66.8 million and $150.4 million, respectively, as compared to net income from continuing operations of $20.5 million and $17.5 million, respectively, for the same periods in 2012. Pretax margins from continuing operations were 3.9 percent and 2.9 percent, respectively, for the three and nine months ended September 30, 2013 compared to 1.1 percent and 0.3 percent for the same periods in 2012.

Our total revenues decreased approximately 0.2 percent for the three months ended September 30, 2013 to $2.8 billion compared to the same period in 2012 and decreased 1.7 percent for the nine months ended September 30, 2013 to $8.3 billion from $8.5 billion in the same period in 2012.

Health plan services premium revenues increased by 1.1 percent to approximately $2.6 billion for the three months ended September 30, 2013 compared to the same period in 2012, and remained flat at approximately $7.8 billion for the nine months ended September 30, 2013 compared to the same period in 2012. Health plan services expenses decreased by 3.7 percent to approximately $2.2 billion for the three months ended September 30, 2013 compared to the same period in 2012, and decreased by 4.7 percent to approximately $6.7 billion for the nine months ended September 30, 2013 compared to the same period in 2012. Investment income decreased to $11.3 million and $58.0 million for the three and nine months ended September 30, 2013, respectively, compared with $16.4 million and $63.4 million for the three and nine months ended September 30, 2012, respectively.

Our Government Contracts revenues decreased by 12.1 percent for the three months ended September 30, 2013 to $149.3 million from $169.8 million in the same period in 2012 and decreased by 19.6 percent for the nine months endedSeptember 30, 2013 to $423.8 million from $527.4 million in the same period in 2012. Our Government Contracts costs decreased by 17.4 percent for the three months endedSeptember 30, 2013 to $125.3 million from $151.8 million in the same period in 2012, and decreased by 19.1 percent for the nine months endedSeptember 30, 2013 to $378.2 million from $467.5 million in the same period in 2012. The declines in our Government Contracts revenues for the three and nine months ended September 30, 2013 as compared to the same periods in 2012 were primarily due to the terms and structure of the MFLC contract we entered into in August 2012, as compared to the prior MFLC contract, partially offset by higher incentives on the T-3 contract. Declines in Government Contracts costs for the three and nine months ended September 30, 2013 as compared to the same periods in 2012 were primarily due to the different terms and structure of the current MFLC contract, as compared to the prior MFLC contract. For additional information about our T-3 and MFLC contracts, see "—Government Contracts Reportable Segment."

Our operating results for the nine months ended September 30, 2012 were impacted by approximately $32.8 million of negative prior period reserve development. This negative prior period reserve development was recorded as part of health care costs. For the nine months ended September 30, 2013, we had approximately $55.9 million in favorable reserve developments related to prior years. The reserve developments related to prior years when considered together with the provision for adverse deviation recorded as of September 30, 2013, did not have a material impact on our operating results or financial condition. See Note 2 to our consolidated financial statements for additional information on our reserve developments.

Days Claims Payable

Days claims payable ("DCP") for the third quarter of 2013 was 41.5days compared with 41.6days in the third quarter of 2012. Adjusted DCP, which we calculate in accordance with the paragraph below, for the third quarter of 2013 was 61.1days compared with 57.7days in the third quarter of 2012.

Set forth below is a reconciliation of adjusted DCP, a non-GAAP financial measure, to the comparable GAAP financial measure, DCP. DCP is calculated by dividing the amount of reserve for claims and other settlements ("Claims Reserve") by health plan services cost ("Health Plan Costs") during the quarter and multiplying that amount by the number of days in the quarter. In this Quarterly Report on Form 10-Q, the following table presents an adjusted DCP metric that subtracts capitation, provider and other claim settlements and Medicare Advantage Prescription Drug ("MAPD") payables/costs from the Claims Reserve and Health Plan Costs. Management believes that adjusted DCP

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provides useful information to investors because the adjusted DCP calculation excludes from both Claims Reserve and Health Plan Costs amounts related to health care costs for which no or minimal reserves are maintained. Therefore, management believes that adjusted DCP may present a more accurate reflection of DCP than does GAAP DCP, which includes such amounts. This non-GAAP financial information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating the adjusted amounts, you should be aware that we have incurred expenses that are the same as or similar to some of the adjustments in the current presentation and we may incur them again in the future. Our presentation of the adjusted amounts should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

	Three Months Ended September 30,
	2013			2012
	(Dollars in millions)
Reconciliation of Days Claims Payable:
(1) Reserve for Claims and Other Settlements—GAAP	$	990.2		$	1,032.2
Less: Capitation, Provider and Other Claim Settlements and MAPD Payables	(80.1		)	(126.3		)
(2) Reserve for Claims and Other Settlements—Adjusted	$	910.1		$	905.9
(3) Health Plan Services Cost—GAAP	$	2,196.6		$	2,281.4
Less: Capitation, Provider and Other Claim Settlements and MAPD Costs	(827.3		)	(835.9		)
(4) Health Plan Services Cost—Adjusted	$	1,369.3		$	1,445.5
(5) Number of Days in Period	92			92
(1) / (3) * (5) Days Claims Payable—GAAP (using end of period reserve amount)	41.5			41.6
(2) / (4) * (5) Days Claims Payable—Adjusted (using end of period reserve amount)	61.1			57.7

Income Tax Provision

Our income tax expense (benefit) and the effective income tax rate for the three and nine months ended September 30, 2013 and 2012 are as follows:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(Dollars in millions)
Continuing Operations:
Income tax expense (benefit) from continuing operations	$	41.7		$	8.9		$	91.5		$	5.7
Effective income tax rate for continuing operations	38.4		%	30.3		%	37.8		%	24.6		%
Discontinued Operation:
Income tax expense (benefit) from discontinued operation A, B	—			—			—			$	(10.3	)
Effective income tax rate for discontinued operation A, B	—			—			—			35.8		%
Income tax expense from gain on sale of discontinued operation A, C	—			$	2.5		—			$	15.8
Effective income tax rate for gain on sale of discontinued operation A, C	—			—			—			11.9		%

________

A - For the three and nine months ended September 30, 2013, we had no discontinued operation or sale of a discontinued operation; therefore, income tax expense from discontinued operation and gain on sale of discontinued operation and the corresponding effective income tax rates are not applicable.

B - For the three months ended September 30, 2012, there was no income tax provision from discontinued operation; therefore, an effective income rate tax for discontinued operation is not applicable.

C - For the three months ended September 30, 2012 tax expense was recorded for the effects of a valuation allowance adjustment. No gain or loss on sale of discontinued operation was recorded in the period; therefore, an effective tax rate

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from gain on sale of discontinued operation is not applicable.

Continuing Operations

The effective income tax rate for continuing operations was 38.4% and 30.3% for the three months ended September 30, 2013 and 2012, respectively and 37.8% and 24.6% for the nine months ended September 30, 2013 and 2012, respectively. The effective income tax rate differs from the statutory federal tax rate of 35% for the three and nine months ended September 30, 2013 primarily due to state income taxes, tax-exempt investment income, and non-deductible compensation.

The effective income tax rate for continuing operations differs from the statutory federal tax rate of 35% for the three and nine months ended September 30, 2012 primarily due to reductions of valuation allowances against deferred assets as a result of the gain on sale of the Medicare PDP business.

Discontinued Operation

On April 1, 2012, we completed the sale of our Medicare PDP business to CVS Caremark. See Note 3 for additional information regarding the sale of our Medicare PDP business.

Also in connection with the sale of our Medicare PDP business, we classified the operating results of our Medicare PDP business as discontinued operation in 2012. We recorded tax benefits of $10.3 million against losses from discontinued operation for the nine months ended September 30, 2012. We had no income or loss and no tax expense or benefit from discontinued operation for the three months ended September 30, 2012. We also recorded tax expense of $15.8 million net against gain on sale of discontinued operation for the nine months ended September 30, 2012. For the three months ended September 30, 2012, $2.5 million of tax expense was recorded for the effects of a valuation allowance adjustment. With respect to discontinued operation, the effective income tax rate was slightly higher than the statutory federal rate of 35% for the nine months ended September 30, 2012 as a result of state income taxes. The effective income tax rate on the gain on sale of discontinued operation varies from the statutory federal rate of 35% for the nine months ended September 30, 2012 due to state income taxes and the release of a valuation allowance against deferred tax assets for capital loss carryforwards, which were utilized upon the gain on sale of the Medicare PDP business.

We had no income or loss and no tax expense or benefit for discontinued operation for the three and nine months ended September 30, 2013.

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Western Region Operations Reportable Segment

Our Western Region Operations segment includes the operations of our commercial, Medicare and Medicaid health plans, the operations of our health and life insurance companies primarily in California, Arizona, Oregon and Washington and our pharmaceutical services subsidiary and certain operations of our behavioral health subsidiaries in several states including Arizona, California and Oregon. Our Western Region Operations segment excludes the operating results of our Medicare PDP business, which has been classified as discontinued operation for the three and nine months ended September 30, 2012.

Western Region Operations Segment Membership (in thousands)

	September 30, 2013	September 30, 2012	Increase/ (Decrease)		% Change
California
Large Group	576	714	(138	)	(19.3	)%
Small Group and Individual	346	307	39		12.7	%
Commercial Risk	922	1,021	(99	)	(9.7	)%
Medicare Advantage	149	143	6		4.2	%
Medi-Cal/Medicaid	1,126	1,069	57		5.3	%
Total California	2,197	2,233	(36	)	(1.6	)%
Arizona
Large Group	59	84	(25	)	(29.8	)%
Small Group and Individual	54	59	(5	)	(8.5	)%
Commercial Risk	113	143	(30	)	(21.0	)%
Medicare Advantage	43	43	—		—	%
Total Arizona	156	186	(30	)	(16.1	)%
Northwest
Large Group	24	30	(6	)	(20.0	)%
Small Group and Individual	42	58	(16	)	(27.6	)%
Commercial Risk	66	88	(22	)	(25.0	)%
Medicare Advantage	47	45	2		4.4	%
Total Northwest	113	133	(20	)	(15.0	)%
Total Health Plan Enrollment
Large Group	659	828	(169	)	(20.4	)%
Small Group and Individual	442	424	18		4.2	%
Commercial Risk	1,101	1,252	(151	)	(12.1	)%
Medicare Advantage	239	231	8		3.5	%
Medi-Cal/Medicaid	1,126	1,069	57		5.3	%
	2,466	2,552	(86	)	(3.4	)%

Total Western Region Operations enrollment was approximately 2.5 million members at September 30, 2013, a decrease of 3.4 percent compared with enrollment at September 30, 2012. Total enrollment in our California health plans declined by 1.6 percent to approximately 2.2 million members from September 30, 2012 to September 30, 2013.

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Western Region Operations commercial enrollment declined by 12.1 percent from approximately 1.3 million members at September 30, 2012 to approximately 1.1 million members at September 30, 2013, primarily due to increasingly competitive markets and our efforts to reposition our commercial book of business away from unprofitable full network large group accounts towards smaller accounts and tailored network products. Enrollment in our large group segment decreased by 20.4 percent, or 169,000 members, from 828,000 members at September 30, 2012 to 659,000 members at September 30, 2013. Enrollment in our small group and individual segment in our Western Region Operations segment increased by 4.2 percent, from 424,000 members at September 30, 2012 to 442,000 members at September 30, 2013. Membership in our tailored network products decreased by 6.5 percent, or 28,000 members, from September 30, 2012 to September 30, 2013. This decrease was primarily due to aggressive pricing by our competitors on certain tailored network products. As of September 30, 2013, membership in tailored network products accounted for 36.8 percent of our Western Region Operations commercial enrollment compared with 34.6 percent at September 30, 2012.

Enrollment in our Medicare Advantage plans in our Western Region Operations segment at September 30, 2013 was 239,000 members, an increase of 3.5 percent compared with 231,000 members at September 30, 2012. This increase was due to gains of 6,000 members in California and 2,000 members in the Northwest.

We participate in the state Medicaid program in California, where the program is known as Medi-Cal. Our Medicaid enrollment in California increased by 57,000 members or 5.3 percent to 1,126,000 members at September 30, 2013 compared with 1,069,000 members at September 30, 2012. The increase in our Medicaid membership includes the impact of our participation in California's seniors and persons with disabilities ("SPDs") program. On November 2, 2010, the Centers for Medicare & Medicaid Services ("CMS") approved California's Section 1115 Medicaid waiver proposal, which, among other things, authorized mandatory enrollment of certain Medi-Cal only SPDs in managed care programs to help achieve care coordination and better manage chronic conditions. The mandatory SPD enrollment period began in June 2011 in 16 California counties, including Los Angeles County. As of September 30, 2013, we had approximately 119,000 total SPD members.

We are the sole commercial plan contractor with the State of California Department of Health Care Services ("DHCS") to provide Medi-Cal services in Los Angeles County, California. As of September 30, 2013, 571,000 of our Medi-Cal members resided in Los Angeles County, representing approximately 51 percent of our Medi-Cal membership. As of September 30, 2013, 571,000 of our California state health program members resided in Los Angeles County, representing approximately 51 percent of our membership in all California state health programs. As part of our 2012 settlement agreement with DHCS, DHCS agreed, among other things, to the extension of all of our existing Medi-Cal managed care contracts, including our contract with DHCS to provide Medi-Cal services in Los Angeles County, for an additional five years from their then existing expiration dates. Accordingly, our Medi-Cal contract for Los Angeles County is scheduled to expire in April 2019.

California Coordinated Care Initiative

In 2012, the California legislature enacted the Coordinated Care Initiative, or “CCI.” The stated purpose of the CCI is to provide a more efficient health care delivery system and improved coordination of care to individuals that are fully eligible for Medicare and Medi-Cal benefits, or "dual eligibles," as well as to all Medi-Cal only beneficiaries who rely on long-term services and supports, or “LTSS,” which includes institutional long-term care and home and community-based services and other support services. Accordingly, in participating counties, the CCI will establish a voluntary three-year “dual eligibles demonstration”, referred to as the "Cal MediConnect" program, to coordinate medical, behavioral health, long-term institutional, and home- and community-based services for dual eligibles through a single health plan, and will require that all Medi-Cal beneficiaries in participating counties join a Medi-Cal managed care health plan to receive their Medi-Cal benefits, including LTSS.

The DHCS has selected eight counties to participate in the CCI—Los Angeles, San Diego, Orange, San Bernardino, Riverside, Alameda, San Mateo and Santa Clara. Health plans selected to participate in the CCI in a given county will be required to provide a full range of benefits for medical services, including primary care and specialty physician, hospital and ancillary services, as well as behavioral health services and LTSS. On April 4, 2012, DHCS selected us to participate in the CCI for both Los Angeles County and San Diego County. We currently do not provide all of the benefits required for participation in the CCI, including, among others, custodial care in nursing homes and in-home supportive services. We will need to make arrangements to provide such benefits either directly or by subcontracting with other parties prior to the commencement of the CCI.

Dual eligibles are expected to receive advance notice regarding their enrollment options which varies by county. On March 27, 2013, CMS and DHCS signed an MOU that establishes the framework of the dual eligibles demonstration portion of the CCI. As currently proposed, the dual eligibles demonstration would continue for a three-

46

year term beginning no sooner than April 2014 based on DHCS' current timetable, with initial enrollment occurring on a phased in basis based on birth date.

The DHCS has selected Health Net and the local initiative plan, L.A. Care Health Plan (“L.A. Care”), for the dual eligibles demonstration in Los Angeles County. L.A. Care is a public agency that serves low-income persons in Los Angeles County through health coverage programs such as Medi-Cal. Dual eligibles in Los Angeles County will be able to choose between an “opt out” option or choose either L.A. Care or us for benefits under the dual eligibles demonstration. Dual eligibles who "opt out" will continue to receive Medi-Cal benefits through a managed care health plan under the CCI, but will receive separate fee-for-service Medicare benefits. If no selection is made, the dual eligibles would be passively enrolled and allocated to either L.A. Care or us. The methodology for this allocation process has yet to be determined. The initial enrollment period in Los Angeles County is still under consideration by DHCS and CMS, but will likely be phased in over 12 or 15 months. During the first three months, the dual eligibles will have the option to enroll in the dual eligibles demonstration, with passive enrollment currently scheduled to begin in July 2014.

The DHCS has selected us and three other health plans for the dual eligibles demonstration in San Diego County. Dual eligibles in San Diego County will be able to select to receive benefits from any one of these health plans, or elect an “opt out” option similar to the option in Los Angeles County. If no selection is made, the dual eligibles will be passively enrolled and allocated to one of the health plans. The methodology for this allocation process has yet to be determined. The initial enrollment period in San Diego County will be phased in over 12 months and is currently scheduled to begin in April 2014.

Participation in the dual eligibles demonstration would require us to enter into a three-way agreement with the DHCS and CMS, under which, among other things, we would receive prospective blended capitated payments in an amount to be determined to provide coverage for dual eligibles. The dual eligibles demonstration is subject to the approval of CMS. Prior to CMS' determination on whether to approve the CCI, various stakeholders have been given the opportunity to comment on the program, which may impact CMS' decision. In addition, on an ongoing basis we will likely be required to make certain filings with, and obtain approvals from, DMHC in connection with our proposed participation in the dual eligibles demonstration. For example, on October 1, 2012, the DMHC approved certain modifications to the internal organizational structure of our subsidiaries related to our participation in the dual eligibles demonstration.

Our participation in the CCI, and the dual eligibles demonstration in particular, represents a significant new business opportunity for us. However, we will not be able to participate in the CCI in either Los Angeles or San Diego County unless a number of objectives and conditions are met including, among others, our entry into a contract on satisfactory terms (including, without limitation, satisfactory rates) with the DHCS and CMS for the CCI and our execution of necessary modifications to our internal administrative and operations structure to meet the demands of the CCI. Certain of these conditions are outside of our control and there can be no assurances that we will be able to meet all of the objectives and conditions necessary for our participation in the CCI in Los Angeles County, San Diego County or both. In addition, the changes to our administrative and operations structure will include implementing delivery systems for benefits with which we have limited operating experience, including LTSS. We have incurred and expect that we will continue to incur significant incremental costs to prepare for the CCI. If we do not participate in the CCI in either county, this would result in the loss of some or all of the resources that have been and will be invested in this opportunity and could have a material adverse effect on our business and the trading price of our common stock.

In addition, if we participate in the CCI in either Los Angeles or San Diego County, there can be no assurance that this business opportunity will prove to be successful. The CCI is a model of providing health care that is new to regulatory authorities and health plans in the State of California. Our participation and success in the CCI will be subject to a number of risks inherent in untested health care initiatives. For example, there may be difficulties in the implementation of the dual eligibles demonstration that could detract from its acceptance by beneficiaries or increase our costs of participation in the dual eligibles demonstration. In addition, our participation in the CCI will require us to provide benefits with which we have limited operating experience, including but not limited to LTSS. Our failure to organize and deliver on this new model would negatively affect the operating and financial success of this business opportunity.

Some of the risks involved in our proposed participation in the CCI include that dual eligibles are generally among the most chronically ill individuals within each of Medicare and Medi-Cal, requiring a complex range of services from multiple providers. Among other things, if we do not accurately predict the costs of providing benefits to dual eligibles or fail to obtain suitable rates under our agreement with CMS and DHCS, our participation in the CCI may prove to be unprofitable. In addition, we may not be able to effectively design and implement the necessary modifications to our internal administrative and operations structure to meet the demands of the CCI, which may

47

negatively impact our profitability in the CCI and have an adverse effect on our financial condition and results of operations. For example, our profitability in the CCI will be dependent in part on our ability to successfully provide and administer LTSS benefits, either directly or by subcontracting with other parties. Because we have limited operating experience in providing and administering this benefit, particularly with respect to cost management, there is no assurance that we will be able to make such arrangements on favorable terms, which may adversely affect our results of operations. Our failure to successfully participate in the CCI could have a material adverse effect on our business, financial condition and/or results of operations.

State-Sponsored Health Plans Rate Settlement Agreement

On November 2, 2012, our wholly owned subsidiaries, Health Net of California, Inc. and Health Net Community Solutions, Inc., entered into a settlement agreement (the "Agreement") with the DHCS to settle historical rate disputes with respect to our participation in Medi-Cal for rate years prior to the 2011–2012 rate year. As part of the Agreement, DHCS has agreed, among other things, to (1) an extension of all of our Medi-Cal managed care contracts existing on the date of the Agreement for an additional five years from their then existing expiration dates; (2) retrospective premium adjustments on all of our state-sponsored health care programs, including Medi-Cal, Healthy Families, SPDs, our proposed participation in the dual eligibles demonstration portion of the CCI that is expected to begin in 2014 and any potential future Medi-Cal expansion populations (our “state-sponsored health care programs”), which will be tracked in a settlement account as discussed in more detail below; and (3) compensate us should DHCS terminate any of our state-sponsored health care programs contracts early.

Effective January 1, 2013, the settlement account (the "Account") was established with an initial balance of zero, and will be settled in cash on December 31, 2019, except that under certain circumstances DHCS may extend the final settlement for up to three additional one-year periods (as may be extended, the “Term”).

During the Term, the balance in the Account is adjusted annually to reflect retrospective premium adjustments for each calendar year (referenced in the Agreement as a deficit or surplus) following DHCS' review of our adjustment amount. Cash settlement of the Account will occur upon expiration of the Term as provided in the Agreement, subject to certain provisions for interim partial settlement payments to us in the event that DHCS terminates any of our state-sponsored health care programs contracts early. Upon expiration of the Term, if the Account is in a surplus position, then no monies are owed to either party. If the Account is in a deficit position, then DHCS shall pay the amount of the deficit to us. In no event, however, shall the amount paid by DHCS to us under the Agreement exceed $264 million or be less than an alternative minimum amount. The alternative minimum amount is calculated as follows: (i) $264 million, minus (ii) any partial settlement payments previously made to us by DHCS, minus (iii) 50% of the pretax income on our state-sponsored health care programs business in excess of a 2.0% pretax margin for each calendar year of the Term. Under the Agreement, DHCS will make an interim partial settlement payment to us based on a pro rata portion of the alternative minimum amount if it terminates any of our state-sponsored health care programs contracts early. We believe that the use of the Account will help promote greater financial stability and predictability in our state health care programs business during the Term.

We estimate and recognize the retrospective adjustments to premium revenue based upon experience to date under our state-sponsored health care programs contracts. As of September 30, 2013, we had calculated and recorded a deficit of $51.7 million, net of a valuation discount in the amount of $3.7 million, reflecting our estimated retrospective premium adjustment to the Account based on our actual pretax margin for the nine months ended September 30, 2013. The retrospective premium adjustment is recorded as an adjustment to premium revenue and other noncurrent assets.

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Western Region Operations Segment Results

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(Dollars in thousands, except PMPM data)
Commercial premiums	$	1,279,834		$	1,420,370		$	3,903,817		$	4,310,023
Medicare premiums	685,340			682,924			2,080,317			2,089,371
Medicaid premiums	641,580			475,395			1,833,563			1,419,171
Health plan services premiums	2,606,754			2,578,689			7,817,697			7,818,565
Net investment income	11,276			16,355			57,970			63,356
Administrative services fees and other income	7,659			1,843			11,036			16,289
Total revenues	2,625,689			2,596,887			7,886,703			7,898,210
Health plan services	2,196,561			2,281,354			6,657,215			6,989,131
General and administrative	267,086			218,400			796,434			667,893
Selling	59,498			61,053			175,828			181,004
Depreciation and amortization	9,402			7,907			28,355			22,721
Interest	7,973			8,021			24,626			24,895
Total expenses	2,540,520			2,576,735			7,682,458			7,885,644
Income from continuing operations before income taxes	85,169			20,152			204,245			12,566
Income tax provision (benefit)	32,184			1,640			75,836			(2,497		)
Income from continuing operations	$	52,985		$	18,512		$	128,409		$	15,063
Pretax margin	3.2		%	0.8		%	2.6		%	0.2		%
Commercial premium yield	2.6		%	4.7		%	2.5		%	4.9		%
Commercial premium PMPM (d)	$	386.69		$	376.89		$	384.07		$	374.78
Commercial health care cost trend	(0.3		)%	7.1		%	(2.0		)%	9.2		%
Commercial health care cost PMPM (d)	$	325.62		$	326.60		$	326.60		$	333.27
Commercial MCR (e)	84.2		%	86.7		%	85.0		%	88.9		%
Medicare Advantage MCR (e)	89.9		%	90.1		%	90.6		%	90.0		%
Medicaid MCR (e)	79.4		%	91.6		%	79.6		%	90.0		%
Health plan services MCR (a)	84.3		%	88.5		%	85.2		%	89.4		%
G&A expense ratio (b)	10.2		%	8.5		%	10.2		%	8.5		%
Selling costs ratio (c)	2.3		%	2.4		%	2.2		%	2.3		%

__________

(a) Health plan services MCR is calculated as health plan services cost divided by health plan services premiums revenue.

(b) The G&A expense ratio is computed as general and administrative expenses divided by the sum of health plan services premiums revenue and administrative services fees and other income.

(c) The selling costs ratio is computed as selling expenses divided by health plan services premiums revenue.

(d) Per member per month ("PMPM") is calculated based on commercial at-risk member months and excludes administrative services only ("ASO") member months.

(e) Commercial, Medicare Advantage and Medicaid MCR is calculated as commercial, Medicare Advantage or Medicaid health care cost divided by commercial, Medicare Advantage or Medicaid premiums, as applicable.

Revenues

Total revenues in our Western Region Operations segment increased 1.1 percent to approximately $2.6 billion for the three months ended September 30, 2013 and decreased 0.1 percent to approximately $7.9 billion for the nine months ended September 30, 2013, compared to the same periods in 2012.

Health plan services premium revenues in our Western Region Operations segment increased 1.1 percent to approximately $2.6 billion for the three months ended September 30, 2013 and remained flat at approximately $7.8

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billion for the nine months ended September 30, 2013 compared to the same periods in 2012 primarily due to increases in Medicaid premium revenues, partially offset by decreases in commercial premium revenues.

Our Medicaid premium revenue increased by $166.2 million and $414.4 million in the three and nine months ended September 30, 2013, respectively, compared to the same periods in 2012. These increases in our Medicaid premium revenue for the three and nine months ended September 30, 2013 included $32.1 million and $74.3 million, respectively, of retroactive rate adjustments for our SPD and non-SPD members for periods prior to 2013. Retroactive rate adjustments for our SPD and non-SPD members were not material for the three and nine months endedSeptember 30, 2012. These increases also included $25.6 million and $68.4 million in Medicaid premium revenues related to certain reinstated premium taxes for the three and nine months ended September 30, 2013, respectively. See Note 2 to our consolidated financial statements for additional information regarding these premium taxes. Medicaid premium revenue for the three and nine months ended September 30, 2013 also included $16.3 million and $51.7 million, respectively, of retrospective adjustments to premium revenue related to the state-sponsored health plans rate agreement as described in Note 10 to our consolidated financial statements.

Investment income in our Western Region Operations segment decreased to $11.3 million for the three months ended September 30, 2013 from $16.4 million for the same period in 2012 and decreased to $58.0 million for the nine months ended September 30, 2013 from $63.4 million for the same period in 2012. These decreases were due to lower investment gains realized during the three and nine months ended September 30, 2013 as compared to the same periods in 2012.

Health Plan Services Expenses

Health plan services expenses in our Western Region Operations segment were $2.2 billion and $6.7 billion for the three and nine months ended September 30, 2013, respectively, compared to $2.3 billion and $7.0 billion for the three and nine months ended September 30, 2012, respectively. Health plan services expenses in our Western Region Operations segment declined by 3.7 percent and 4.7 percent for the three and nine months ended September 30, 2013 compared to the same periods in 2012 primarily due to decreases in commercial health plan services costs.

Commercial Premium Yields and Health Care Cost Trends

In our Western Region Operations segment, commercial premium PMPM increased by 2.6 percent to approximately $387 for the three months ended September 30, 2013 compared to an increase of 4.7 percent to approximately $377 for the same period of 2012. Commercial premium PMPM for the nine months ended September 30, 2013 was approximately $384, a 2.5 percent increase over the commercial premium PMPM of approximately $375 for the same period of 2012.

Commercial health care costs PMPM for the three months ended September 30, 2013 in our Western Region Operations segment were approximately $326, a 0.3 percent decrease over the commercial health care costs PMPM of $327 for the same period of 2012. Commercial health care costs PMPM for the nine months ended September 30, 2013 in our Western Region Operations segment were approximately $327, a 2.0 percent decrease over the commercial health care costs PMPM of $333 for the same period of 2012. We believe these decreases in the commercial health care costs PMPM for the three and nine months ended September 30, 2013 were primarily due to the absence of adverse prior period development in 2012 and our efforts to reposition our commercial book of business away from unprofitable full network large group accounts towards smaller accounts and tailored network products.

Medical Care Ratios

The health plan services MCR in our Western Region Operations segment was 84.3 percent and 85.2 percent for the three and nine months ended September 30, 2013, respectively, compared with 88.5 percent and 89.4 percent for the three and nine months ended September 30, 2012, respectively.

Commercial MCR in our Western Region Operations segment was 84.2 percent and 85.0 percent for the three and nine months ended September 30, 2013, respectively, compared with 86.7 percent and 88.9 percent for the three and nine months ended September 30, 2012, respectively. The improvement of 250 basis points in our commercial MCR for the three months ended September 30, 2013 and the improvement of 390 basis points in our commercial MCR for the nine months ended September 30, 2013 were primarily due to, repositioning of our large group commercial business, lower utilization and changes in product and geographic mix. The improvement for the nine months ended September 30, 2013 compared to same period in 2012 is also due to the absence of adverse prior period development recorded in 2012.

The Medicare Advantage MCR in our Western Region Operations segment was 89.9 percent and 90.6 percent for the three and nine months ended September 30, 2013, respectively, compared with 90.1 percent and 90.0 percent for the

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three and nine months ended September 30, 2012, respectively. The Medicare Advantage MCR improved 20 basis points for the three months ended September 30, 2013 compared to the same period in 2012, primarily due to lower health care cost trends. The Medicare Advantage MCR deteriorated 60 basis points for the nine months ended September 30, 2013 compared to the same period in 2012, primarily due to lower premium yield from funding reductions.

The Medicaid MCR in our Western Region Operations segment was 79.4 percent and 79.6 percent for the three and nine months ended September 30, 2013, respectively, compared with 91.6 percent and 90.0 percent for the three and nine months ended September 30, 2012, respectively. The improvements in the Medicaid MCR for the three and nine months ended September 30, 2013 compared to the same periods in 2012 were primarily due to favorable California Medicaid rate adjustments primarily related to prior periods, the impact of the reinstated Medicaid premium taxes that increased our Medicaid premium revenues, and the retrospective adjustments to premium revenues as a result of our rate settlement agreement. For additional information on the Medicaid rate adjustments and the reinstated Medicaid premium taxes see Note 2 to our consolidated financial statements, and see Note 10 for additional information on our rate settlement agreement.

G&A, Selling and Interest Expenses

General and administrative expense in our Western Region Operations segment was $267.1 million and $796.4 million for the three and nine months ended September 30, 2013, respectively, compared with $218.4 million and $667.9 million for the three and nine months ended September 30, 2012, respectively. The G&A expense ratio was 10.2 percent and 10.2 percent for the three and nine months ended September 30, 2013, respectively, compared to 8.5 percent for each of the three and nine months ended September 30, 2012, respectively. Increases in our general and administrative expenses for both the three and nine months ended September 30, 2013 are primarily due to increases in insurance, taxes and related fees, including the reinstated Medicaid premium taxes of $25.6 million and $68.4 million for three and nine months ended September 30, 2013, respectively. See Note 2 to our consolidated financial statements for additional information regarding these premium taxes. Such increases in insurance, taxes and related fees impacted the G&A expense ratio by 150 basis points for each of the three and nine months ended September 30, 2013. In addition, increases in our general and administrative expenses for the nine months ended September 30, 2013 are impacted by costs related to the implementation of the CCI, including the dual eligibles demonstration, and the ACA, including the exchanges. We expect to continue to incur significant additional expenses for the remainder of 2013 and 2014 in connection with our implementation of the CCI, including the dual eligibles demonstration and the ACA, as well as new business initiatives, which include our expected plans to administer Medicaid benefits in Arizona's Maricopa County and provide HMO benefits to beneficiaries of the California Public Employees' Retirement System in six Southern California counties.

Selling expense in our Western Region Operations segment was $59.5 million and $175.8 million for the three and nine months ended September 30, 2013, respectively, compared with $61.1 million and $181.0 million for the three and nine months ended September 30, 2012, respectively. The selling costs ratio was 2.3 percent and 2.2 percent for the three and nine months ended September 30, 2013, respectively, compared to 2.4 percent and 2.3 percent for the three and nine months ended September 30, 2012, respectively.

Interest expense in our Western Region Operations segment was $8.0 million and $24.6 million for the three and nine months ended September 30, 2013, respectively, compared with $8.0 million and $24.9 million for the three and nine months ended September 30, 2012, respectively.

Government Contracts Reportable Segment

On April 1, 2011, we began delivery of administrative services under our T-3 contract for the TRICARE North Region. The T-3 contract was awarded to us on May 13, 2010. Under the T-3 contract for the TRICARE North Region, we provide administrative services to approximately 2.9 million MHS eligible beneficiaries as of September 30, 2013. For a description of the T-3 contract, see "—Overview—How We Measure Our Profitability.”

In addition to the beneficiaries that we service under the T-3 contract, we administer contracts with the U.S. Department of Veterans Affairs to manage community-based outpatient clinics in four states covering approximately 7,166 enrollees and provide behavioral health services to military families under the Department of Defense sponsored MFLC program.

On August 15, 2012, our wholly owned subsidiary, MHN Government Services, Inc. entered into a new contract to provide counseling services to military service members and their families under the MFLC program with a five-year term that includes a 12-month base period and four 12-month option periods. MHN Government Services, Inc. was the sole contractor under the previous MFLC contract, and is one of three contractors initially selected to participate in the

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MFLC program under the current MFLC contract. Revenues from the current and prior MFLC contracts were $25.4 million and $75.5 million for the three and nine months ended September 30, 2013, respectively, compared to $65.0 million and $181.2 million for the three and nine months ended September 30, 2012, respectively.

Government Contracts Segment Results

The following table summarizes the operating results for the Government Contracts segment for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
	(Dollars in thousands)
Government contracts revenues	$	149,342	$	169,811	$	423,796	$	527,421
Government contracts costs	125,841		148,705		373,142		460,733
Income from continuing operations before income taxes	23,501		21,106		50,654		66,688
Income tax provision	9,591		8,372		20,752		26,453
Income from continuing operations	$	13,910	$	12,734	$	29,902	$	40,235

Government Contracts revenues decreased by $20.5 million, or 12.1 percent, for the three months ended September 30, 2013 and decreased by $103.6 million, or 19.6 percent, for the nine months ended September 30, 2013 as compared to the same periods in 2012. Government Contracts costs decreased by $22.9 million, or 15.4 percent, for the three months ended September 30, 2013 and decreased by $87.6 million, or 19.0 percent, for the nine months ended September 30, 2013 as compared to the same periods in 2012. Declines in Government Contracts revenues for the three and nine months ended September 30, 2013 were primarily due to the different terms and structure of the current MFLC contract as compared to the prior MFLC contract, partially offset by higher incentives on the T-3 contract. Declines in Government Contracts costs for the three and nine months ended September 30, 2013 were primarily due to the different terms and structure of the current MFLC contract as compared to the prior MFLC contract.

Divested Operations and Services Reportable Segment Results

The following table summarizes the operating results for our Divested Operations and Services reportable segment for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,					Nine months ended September 30,
	2013		2012			2013		2012
	(Dollars in thousands)
Administrative services fees and other income	—		11			—		11
Divested operations and services revenue	$	—	$	12,863		$	—	$	25,668
Total revenues	—		12,874			—		25,679
Health plan services	—		34			—		174
General and administrative	—		(90)			—		(92)
Depreciation and amortization	—		—			—		1
Divested operations and services expenses	—		17,587			—		59,973
Total expenses	—		17,531			—		60,056
Loss from continuing operations before income taxes	—		(4,657)			—		(34,377)
Income tax benefit	—		(1,946)			—		(13,329)
Net loss from continuing operations	$	—	$	(2,711	)	$	—	$	(21,048	)

Our Divested Operations and Services reportable segment includes the operations of our businesses that provided administrative services to United in connection with the Northeast Sale and transition-related revenues and expenses of our Medicare PDP business that was sold on April 1, 2012. As of December 31, 2012, we had substantially completed

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the administration and run-out of our divested businesses. See Note 3 to our consolidated financial statements for additional information on the sale of our Medicare PDP business, and Note 4 for more information regarding our reportable segments.

Corporate/Other

The following table summarizes the Corporate/Other segment for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(Dollars in thousands)
Costs included in health plan services costs	$	—		$	—		$	—		$	(5,803	)
Costs included in government contract costs	(507		)	3,110			5,067			6,798
Costs included in G&A	597			4,115			7,921			20,656
Loss from continuing operations before income taxes	(90		)	(7,225		)	(12,988		)	(21,651		)
Income tax provision (benefit)	(35		)	832			(5,050		)	(4,915		)
Net loss from continuing operations	$	(55	)	$	(8,057	)	$	(7,938	)	$	(16,736	)

Our Corporate/Other segment is not a business operating segment. It is added to our reportable segments to reconcile to our consolidated results. Our Corporate/Other segment includes costs that are excluded from the calculation of segment pretax income because they are not managed within our reportable segments.

Our results in our Corporate/Other segment for the three months ended September 30, 2013 were impacted by $1.8 million in pretax costs related to litigation expenses, partially reduced by $1.7 million in severance liability true-ups. Our results in our Corporate/Other segment for the nine months ended September 30, 2013 were impacted by $13.0 million in pretax costs, primarily severance expenses related to continuing efforts to address scale issues.

Our results in our Corporate/Other segment for the three months ended September 30, 2012 were impacted primarily by $7.2 million in pretax costs related to our G&A cost reduction efforts. Our operating results in our Corporate/Other segment for the nine months ended September 30, 2012 were impacted primarily by $27.5 million in pretax costs related to our G&A cost reduction efforts and $0.7 million in pretax litigation reserve true-ups, partially reduced by a $6.5 million insurance reimbursement related to a prior litigation settlement.

LIQUIDITY AND CAPITAL RESOURCES

Market and Economic Conditions

The global economy is showing some signs of improvement but market conditions continue to be challenging with elevated levels of unemployment and volatility in both U.S. and international capital and credit markets. Market conditions could limit our ability to timely replace maturing liabilities, or otherwise access capital markets for liquidity needs, which could adversely affect our business, financial condition and results of operations. Furthermore, if our customer base experiences cash flow problems and other financial difficulties, it could, in turn, adversely impact membership in our plans. For example, our customers may modify, delay or cancel plans to purchase our products, may reduce the number of individuals to whom they provide coverage, or may make changes in the mix of products purchased from us. In addition, if our customers experience financial issues, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us. Further, our customers or potential customers may force us to compete more vigorously on factors such as price and service to retain or obtain their business. A significant decline in membership in our plans and the inability of current and/or potential customers to pay their premiums as a result of unfavorable conditions may adversely affect our business, including our revenues, profitability and cash flow.

Cash and Investments

As of September 30, 2013, the fair value of our investment securities available-for-sale was $1.6 billion, which includes both current and noncurrent investments. Noncurrent investments were $52.6 million, or 3.2% of the total investments available-for-sale as of September 30, 2013. We hold high-quality fixed income securities primarily

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comprised of corporate bonds, asset-backed securities, mortgage-backed bonds, municipal bonds and bank loans. We evaluate and determine the classification of our investments based on management’s intent. We also closely monitor the fair values of our investment holdings and regularly evaluate them for other-than-temporary impairments.

Our cash flow from investing activities is primarily impacted by the sales, maturities and purchases of our available-for-sale investment securities and restricted investments. Our investment objective is to maintain safety and preservation of principal by investing in a diversified mix of high-quality fixed-income securities, which are largely investment grade, while maintaining liquidity in each portfolio sufficient to meet our cash flow requirements and attaining an expected total return on invested funds.

Our investment holdings are currently primarily comprised of investment grade securities with an average rating of “A+” and “A1” as rated by S&P and/or Moody’s, respectively. At this time, there is no indication of default on interest and/or principal payments under our holdings. We have the ability and current intent to hold to recovery all securities with an unrealized loss position. As of September 30, 2013, our investment portfolio includes $408.1 million, or 25.0% of our portfolio holdings, of mortgage-backed and asset-backed securities. The majority of our mortgage-backed securities are Fannie Mae, Freddie Mac and Ginnie Mae issues, and the average rating of our entire asset-backed securities is AA+/Aa1. However, any failure by Fannie Mae or Freddie Mac to honor the obligations under the securities they have issued or guaranteed could cause a significant decline in the value or cash flow of our mortgage-backed securities. As of September 30, 2013, our investment portfolio also included $762.1 million, or 46.7% of our portfolio holdings, of obligations of states and other political subdivisions and $435.9 million, or 26.7% of our portfolio holdings, of corporate debt securities.

We had gross unrealized losses of $52.2 million as of September 30, 2013, and $2.7 million as of December 31, 2012. Included in the gross unrealized losses as of September 30, 2013 was $7.5 million related to noncurrent investments available-for-sale. There were no noncurrent investments available-for-sale included in the gross unrealized losses as of December 31, 2012. We believe that these impairments are temporary and we do not intend to sell these investments. It is not likely that we will be required to sell any security in an unrealized loss position before recovery of its amortized cost basis. Given the current market conditions and the significant judgments involved, there is a continuing risk that further declines in fair value may occur and additional other-than-temporary impairments, which may be material, may be recorded in future periods. No impairment was recognized during the three and nine months ended September 30, 2013 or 2012.

Liquidity

We believe that expected cash flow from operating activities, any existing cash reserves and other working capital and lines of credit are adequate to allow us to fund existing obligations, repurchase shares of our common stock, introduce new products and services, enter into new lines of business and continue to operate and develop health care-related businesses as we may determine to be appropriate at least for the next twelve months. We regularly evaluate cash requirements for current operations and commitments, for acquisitions and other strategic transactions, to address regulatory changes such as the ACA, and for business expansion opportunities, such as the CCI, Medicaid expansion under the ACA and the commencement of our participation in Arizona's Medicaid program in Maricopa County. We may elect to raise additional funds for these purposes, either through issuance of debt or equity, the sale of investment securities or otherwise, as appropriate. Based on the composition and quality of our investment portfolio, our expected ability to liquidate our investment portfolio as needed, and our expected operating and financing cash flows, we do not anticipate any liquidity constraints as a result of the current credit environment. However, continued turbulence in U.S. and international markets and certain costs associated with the implementation of health care reform legislation and costs associated with our proposed participation in the CCI and the Medicaid program in Arizona, among other things, could adversely affect our liquidity.

Our cash flow from operating activities is impacted by, among other things, the timing of collections on our amounts receivable from state and federal governments and agencies. Our receivable from CMS related to our Medicare business was $85.3 million as of September 30, 2013 and $129.9 million as of December 31, 2012. The receivable from DHCS related to our California Medicaid business was $214.9 million as of September 30, 2013 and $174.0 million as of December 31, 2012. Our receivable from the DoD relating to our current and prior contracts for the TRICARE North Region was $194.8 million and $228.3 million as of September 30, 2013 and December 31, 2012, respectively. The timing of collection of such receivables is impacted by government audits as well as government appropriations, allocation and funding processes, among other things, and can extend for periods beyond a year. For example, reimbursement payments from the federal government for underwritten claims under our current contract for the TRICARE North Region were delayed for a period of approximately three weeks in connection with the recent shutdown of the federal government in October 2013.

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Operating Cash Flows

Our net cash flow provided by (used in) operating activities for the nine months ended September 30, 2013 compared to the same period in 2012 is as follows:

	September 30,		September 30,			Change Period over Period
	2013		2012
	(Dollars in millions)
Net cash provided by (used in) operating activities	$	167.7	$	(45.4	)	$	213.1

The increase of $213.1 million in operating cash flows is primarily due to $150.9 million received for Medi-Cal rate changes from the State of California during the nine months ended September 30, 2013, and a $30.3 million increase in CMS risk adjuster payments received during the nine months ended September 30, 2013 as compared to the same period in 2012.

Investing Activities

Our net cash flow provided by investing activities for the nine months ended September 30, 2013 compared to the same period in 2012 is as follows:

	September 30,		September 30,		Change Period over Period
	2013		2012
	(Dollars in millions)
Net cash provided by investing activities	$	27.3	$	146.7	$	(119.4	)

Net cash provided by investing activities decreased by $119.4 million during the nine months ended September 30, 2013 as compared to the same period in 2012. This decrease is primarily due to $248.2 million in proceeds received from the sale of our Medicare PDP business in 2012, partially offset by a $127.1 million increase in net sales and maturities of available for sale securities.

Financing Activities

Our net cash flow provided by (used in) financing activities for the nine months ended September 30, 2013 compared to the same period in 2012 is as follows:

	September 30,		September 30,			Change Period over Period
	2013		2012
	(Dollars in millions)
Net cash provided by (used in) financing activities	$	151.0	$	(18.9	)	$	169.9

Net cash provided by financing activities increased by $169.9 million during the nine months ended September 30, 2013 as compared to the same period in 2012 primarily due to a $217.1 million increase in inter-governmental pass-through payment from the State of California, partially offset by an $8.2 million increase in share repurchases and a $23.9 million decrease in checks outstanding, net of deposits. See Note 1 to our consolidated financial statements for additional information regarding inter-governmental pass through payments.

Capital Structure

Our debt-to-total capital ratio was 23.8 percent as of September 30, 2013 compared with 24.3 percent as of December 31, 2012. This decrease is due to an increase in our stockholders' equity primarily resulting from net income, partially offset by an increase in treasury stock due to share repurchases.

Share Repurchases. On May 2, 2011, our Board of Directors authorized a stock repurchase program pursuant to which a total of $300.0 million of our outstanding common stock could be repurchased (our "stock repurchase program"). On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program. During the three months ended September 30, 2013 we made no share repurchases and during the nine months ended September 30, 2013 we repurchased approximately 2.7 million shares of our common stock for aggregate consideration of $70.0 million under our stock repurchase program. The remaining authorization under our stock

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repurchase program as of September 30, 2013 was $280.0 million. For additional information on our stock repurchase program, see Note 6 to our consolidated financial statements.

Under our various stock option and long-term incentive plans, in certain circumstances employees and non-employee directors may elect for the Company to withhold shares to satisfy minimum statutory federal, state and local tax withholding and/or exercise price obligations, as applicable, arising from the exercise of stock options. For certain other equity awards, we have the right to withhold shares to satisfy any tax obligations that may be required to be withheld or paid in connection with such equity award, including any tax obligation arising on the vesting date. These repurchases were not part of our stock repurchase program.

The following table presents monthly information related to repurchases of our common stock, including shares withheld by the Company to satisfy tax withholdings and exercise price obligations, as of September 30, 2013:

Period	Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Programs (b)	Maximum Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Programs (b)
January 1—January 31	2,400,059	(c)	$	26.20	$	62,873,931	2,400,000	$	287,127,636
February 1—February 28	818,916	(c)	27.22		22,289,959		257,211	$	280,000,018
March 1—March 31	834	(c)	28.68		23,919		—	$	280,000,018
April 1—April 30	1,203	(c)	29.40		35,368		—	$	280,000,018
May 1—May 31	7,492	(c)	31.77		238,020		—	$	280,000,018
June 1—June 30	259	(c)	31.07		8,047		—	$	280,000,018
July 1—July 31	589	(c)	31.47		18,534		—	$	280,000,018
August 1—August 31	1,937	(c)	30.84		59,741		—	$	280,000,018
September 1—September 30	38,661	(c)	33.73		1,304,036		—	$	280,000,018
	3,269,950		$	26.56	$	86,851,555	2,657,211

________

(a) During the nine months ended September 30, 2013, we did not repurchase any shares of our common stock outside our stock repurchase program, except shares withheld in connection with our various stock option and long-term incentive plans.

(b) On May 2, 2011, our Board of Directors authorized our stock repurchase program, pursuant to which a total of $300.0 million of our common stock could be repurchased. On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program. Our stock repurchase program does not have an expiration date. During the nine months ended September 30, 2013, we did not have any repurchase program expire, and we did not terminate any repurchase program prior to its expiration date.

(c) Includes shares withheld by the Company to satisfy tax withholding and/or exercise price obligations arising from the vesting and/or exercise of restricted stock units, stock options and other equity awards.

Revolving Credit Facility. In October 2011, we entered into a $600 million unsecured revolving credit facility due in October 2016, which includes a $400 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swing line loans (which sublimits may be increased in connection with any increase in the credit facility described below). In addition, we have the ability from time to time to increase the credit facility by up to an additional $200 million in the aggregate, subject to the receipt of additional commitments. As of September 30, 2013, $100.0 million was outstanding under our revolving credit facility and the maximum amount available for borrowing under the revolving credit facility was $491.3 million (see "—Letters of Credit" below). As of November 4, 2013, we had $100.0 million in borrowings outstanding under the revolving credit facility.

Amounts outstanding under our revolving credit facility bear interest, at the Company’s option, at either (a) the base rate (which is a rate per annum equal to the greatest of (i) the federal funds rate plus one-half of one percent, (ii) Bank of America, N.A.’s “prime rate” and (iii) the Eurodollar Rate (as such term is defined in the credit facility) for a one-month interest period plus one percent) plus an applicable margin ranging from 45 to 105 basis points or (b) the Eurodollar Rate plus an applicable margin ranging from 145 to 205 basis points. The applicable margins are based on

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our consolidated leverage ratio, as specified in the credit facility, and are subject to adjustment following the Company’s delivery of a compliance certificate for each fiscal quarter.

Our revolving credit facility includes, among other customary terms and conditions, limitations (subject to specified exclusions) on our and our subsidiaries’ ability to incur debt; create liens; engage in certain mergers, consolidations and acquisitions; sell or transfer assets; enter into agreements that restrict the ability to pay dividends or make or repay loans or advances; make investments, loans, and advances; engage in transactions with affiliates; and make dividends. In addition, we are required to be in compliance at the end of each fiscal quarter with a specified consolidated leverage ratio and consolidated fixed charge coverage ratio.

Our revolving credit facility contains customary events of default, including nonpayment of principal or other amounts when due; breach of covenants; inaccuracy of representations and warranties; cross-default and/or cross-acceleration to other indebtedness of the Company or our subsidiaries in excess of $50 million; certain ERISA-related events; noncompliance by the Company or any of our subsidiaries with any material term or provision of the HMO Regulations or Insurance Regulations (as each such term is defined in the credit facility) in a manner that could reasonably be expected to result in a material adverse effect; certain voluntary and involuntary bankruptcy events; inability to pay debts; undischarged, uninsured judgments greater than $50 million against us and/or our subsidiaries that are not stayed within 60 days; actual or asserted invalidity of any loan document; and a change of control. If an event of default occurs and is continuing under the revolving credit facility, the lenders thereunder may, among other things, terminate their obligations under the facility and require us to repay all amounts owed thereunder.

As of September 30, 2013, we were in compliance with all covenants under our revolving credit facility.

Letters of Credit

Pursuant to the terms of our revolving credit facility, we can obtain letters of credit in an aggregate amount of $400 million and the maximum amount available for borrowing is reduced by the dollar amount of any outstanding letters of credit. As of September 30, 2013 and November 4, 2013, we had outstanding letters of credit of $8.7 million and $7.8 million, respectively, resulting in a maximum amount available for borrowing of $491.3 million as of September 30, 2013 and $492.2 million as of November 4, 2013. As of September 30, 2013 and November 4, 2013, no amount had been drawn on any of these letters of credit.

Senior Notes. We have issued $400 million in aggregate principal amount of 6.375% Senior Notes due 2017 (the “Senior Notes”). The indenture governing the Senior Notes limits our ability to incur certain liens, or consolidate, merge or sell all or substantially all of our assets. In the event of the occurrence of both (1) a change of control of Health Net, Inc. and (2) a below investment grade rating by any two of Fitch, Inc., Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, within a specified period, we will be required to make an offer to purchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes plus accrued and unpaid interest to the date of repurchase. As of September 30, 2013, we were in compliance with all of the covenants under the indenture governing the Senior Notes.

The Senior Notes may be redeemed in whole at any time or in part from time to time, prior to maturity at our option, at a redemption price equal to the greater of:

• 100% of the principal amount of the Senior Notes then outstanding to be redeemed; or

• the sum of the present values of the remaining scheduled payments of principal and interest on the Senior Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable treasury rate plus 30 basis points

plus, in each case, accrued and unpaid interest on the principal amount being redeemed to the redemption date.

Each of the following will be an Event of Default under the indenture governing the Senior Notes:

• failure to pay interest for 30 days after the date payment is due and payable; provided that an extension of an interest payment period by us in accordance with the terms of the Senior Notes shall not constitute a failure to pay interest;

• failure to pay principal or premium, if any, on any note when due, either at maturity, upon any redemption, by declaration or otherwise;

• failure to perform any other covenant or agreement in the notes or indenture for a period of 60 days after notice that performance was required;

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• (A) our failure or the failure of any of our subsidiaries to pay indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, at the later of final maturity and the expiration of any related applicable grace period and such defaulted payment shall not have been made, waived or extended within 30 days after notice or (B) acceleration of the maturity of indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, if that acceleration results from a default under the instrument giving rise to or securing such indebtedness for money borrowed and such indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days after notice; or

• events in bankruptcy, insolvency or reorganization of our Company.

Statutory Capital Requirements

Certain of our subsidiaries must comply with minimum capital and surplus requirements under applicable state laws and regulations, and must have adequate reserves for claims. Management believes that as of September 30, 2013, all of our active health plans and insurance subsidiaries met their respective regulatory requirements relating to maintenance of minimum capital standards, surplus requirements and adequate reserves for claims in all material respects.

By law, regulation and governmental policy, our health plan and insurance subsidiaries, which we refer to as our regulated subsidiaries, are required to maintain minimum levels of statutory capital and surplus. The minimum statutory capital and surplus requirements differ by state and are generally based on balances established by statute, a percentage of annualized premium revenue, a percentage of annualized health care costs, or risk-based capital (“RBC”) or tangible net equity (“TNE”) requirements. The RBC requirements are based on guidelines established by the National Association of Insurance Commissioners. The RBC formula, which calculates asset risk, underwriting risk, credit risk, business risk and other factors, generates the authorized control level (“ACL”), which represents the minimum amount of capital and surplus believed to be required to support the regulated entity’s business. For states in which the RBC requirements have been adopted, the regulated entity typically must maintain the greater of the Company Action Level RBC, calculated as 200% of the ACL, or the minimum statutory capital and surplus requirement calculated pursuant to pre-RBC guidelines. Because our regulated subsidiaries are also subject to their state regulators’ overall oversight authority, some of our subsidiaries are required to maintain minimum capital and surplus in excess of the RBC requirement, even though RBC has been adopted in their states of domicile.

Under the California Knox-Keene Health Care Service Plan Act of 1975, as amended (“Knox-Keene”), certain of our California subsidiaries must comply with TNE requirements. Under these Knox-Keene TNE requirements, actual net worth less unsecured receivables and intangible assets must be more than the greater of (i) a fixed minimum amount, (ii) a minimum amount based on premiums or (iii) a minimum amount based on health care expenditures, excluding capitated amounts. In addition, certain of our California subsidiaries have made certain undertakings to the DMHC to restrict dividends and loans to affiliates, to the extent that the payment of such would reduce such entities' TNE below the minimum requirement or 130% of the minimum requirement, or reduce the cash-to-claims ratio below 1:1. At September 30, 2013, all of our subsidiaries subject to the TNE requirements and the undertakings to DMHC exceeded the minimum requirements.

As necessary, we make contributions to and issue standby letters of credit on behalf of our subsidiaries to meet RBC or other statutory capital requirements under state laws and regulations. During the nine months ended September 30, 2013, we made $7.5 million in capital contributions to a subsidiary to meet regulatory requirements. Health Net, Inc. made no capital contributions to any of its subsidiaries to meet RBC or other statutory capital requirements under state laws and regulations thereafter through November 4, 2013.

Legislation may be enacted in certain states in which our subsidiaries operate imposing substantially increased minimum capital and/or statutory deposit requirements for HMOs in such states. Such statutory deposits may only be drawn upon under limited circumstances relating to the protection of policyholders.

As a result of the above requirements and other regulatory requirements, certain of our subsidiaries are subject to restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies. Such restrictions, unless amended or waived or unless regulatory approval is granted, limit the use of any cash generated by these subsidiaries to pay our obligations. The maximum amount of dividends that can be paid by our insurance company subsidiaries without prior approval of the applicable state insurance departments is subject to restrictions relating to statutory surplus, statutory income and unassigned surplus.

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CONTRACTUAL OBLIGATIONS

Pursuant to Item 303(a)(5) of Regulation S-K, we identified our known contractual obligations as of December 31, 2012 in our Form 10-K. During the nine months ended September 30, 2013, there were no significant changes to our contractual obligations as previously disclosed in our Form 10-K.

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2013, we had no off-balance sheet arrangements as defined under Regulation S-K Item 303(a)(4) and the instructions thereto. See Note 7 to our consolidated financial statements for a discussion of our letters of credit.

CRITICAL ACCOUNTING ESTIMATES

In our Form 10-K, we identified the critical accounting policies, which affect the more significant estimates and assumptions used in preparing our consolidated financial statements. Those policies include revenue recognition, health care costs, including IBNR amounts, reserves for contingent liabilities, amounts receivable or payable under government contracts, goodwill and other intangible assets, recoverability of long-lived assets and investments, and income taxes. We have not changed existing policies from those previously disclosed in our Form 10-K. Our critical accounting policy on estimating reserves for claims and other settlements and the quantification of the sensitivity of financial results to reasonably possible changes in the underlying assumptions used in such estimation as of September 30, 2013 is discussed below. There were no significant changes to the critical accounting estimates as disclosed in our Form 10-K.

Reserves for Claims and Other Settlements

Reserves for claims and other settlements include reserves for claims (IBNR claims and received but unprocessed claims), and other liabilities including capitation payable, shared risk settlements, provider disputes, provider incentives and other reserves for our Western Region Operations reporting segment. Because reserves for claims include various actuarially developed estimates, our actual health care services expenses may be more or less than our previously developed estimates.

We calculate our best estimate of the amount of our IBNR reserves in accordance with GAAP and using standard actuarial developmental methodologies. This method is also known as the chain-ladder or completion factor method. The developmental method estimates reserves for claims based upon the historical lag between the month when services are rendered and the month claims are paid while taking into consideration, among other things, expected medical cost inflation, seasonal patterns, product mix, benefit plan changes and changes in membership. A key component of the developmental method is the completion factor, which is a measure of how complete the claims paid to date are relative to the estimate of the claims for services rendered for a given period. While the completion factors are reliable and robust for older service periods, they are more volatile and less reliable for more recent periods since a large portion of health care claims are not submitted to us until several months after services have been rendered. Accordingly, for the most recent months, the incurred claims are estimated from a trend analysis based on per member per month claims trends developed from the experience in preceding months. This method is applied consistently year over year while assumptions may be adjusted to reflect changes in medical cost inflation, seasonal patterns, product mix, benefit plan changes and changes in membership, among other things.

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An extensive degree of actuarial judgment is used in this estimation process, considerable variability is inherent in such estimates, and the estimates are highly sensitive to changes in medical claims submission and payment patterns and medical cost trends. As such, the completion factors and the claims per member per month trend factor are the most significant factors used in estimating our reserves for claims. Since a large portion of the reserves for claims is attributed to the most recent months, the estimated reserves for claims are highly sensitive to these factors. The following table illustrates the sensitivity of these factors and the estimated potential impact on our operating results caused by these factors:

Completion Factor (a) Percentage-point Increase (Decrease) in Factor	Western Region Operations Health Plan Services (Decrease) Increase in Reserves for Claims
2%	$ (52.2) million
1%	$ (26.7) million
(1)%	$ 27.9 million
(2)%	$ 57.2 million

Medical Cost Trend (b) Percentage-point Increase (Decrease) in Factor	Western Region Operations Health Plan Services Increase (Decrease) in Reserves for Claims
2%	$ 24.1 million
1%	$ 12.0 million
(1)%	$ (12.0) million
(2)%	$ (24.1) million

__________

(a) Impact due to change in completion factor for the most recent three months. Completion factors indicate how complete claims paid to date are in relation to the estimate of total claims for a given period. Therefore, an increase in completion factor percent results in a decrease in the remaining estimated reserves for claims.

(b) Impact due to change in annualized medical cost trend used to estimate the per member per month cost for the most recent three months.

Our IBNR best estimate also includes a provision for adverse deviation, which is an estimate for known environmental factors that are reasonably likely to affect the required level of IBNR reserves. This provision for adverse deviation is intended to capture the potential adverse development from known environmental factors such as our entry into new geographical markets, changes in our geographic or product mix, the introduction of new customer populations, variation in benefit utilization, disease outbreaks, changes in provider reimbursement, fluctuations in medical cost trend, variation in claim submission patterns and variation in claims processing speed and payment patterns, changes in technology that provide faster access to claims data or change the speed of adjudication and settlement of claims, variability in claim inventory levels, non-standard claim development, and/or exceptional situations that require judgmental adjustments in setting the reserves for claims.

We consistently apply our IBNR estimation methodology from period to period. Our IBNR best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known to us, we adjust our assumptions accordingly to change our estimate of IBNR. Therefore, if moderately adverse conditions do not occur, evidenced by more complete claims information in the following period, then our prior period estimates will be revised downward, resulting in favorable development. However, any favorable prior period reserve development would increase current period net income only to the extent that the current period provision for adverse deviation is less than the benefit recognized from the prior period favorable development. If moderately adverse conditions occur and are more acute than we estimated, then our prior period estimates will be revised upward, resulting in unfavorable development, which would decrease current period net income. For the nine months ended September 30, 2013, we had $55.9 million in favorable reserve developments related to prior years. We believe this favorable development was primarily due to the absence of moderately adverse conditions. As part of our best estimate for IBNR, the provision for adverse deviation recorded as of September 30, 2013 was $52.9 million. The reserve developments related to prior years for the nine months ended

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September 30, 2013, when considered together with the provision for adverse deviation recorded as of September 30, 2013, did not have a material impact on our operating results or financial condition. For the nine months ended September 30, 2012, we had $32.8 million in unfavorable reserve developments related to prior years. We believe this unfavorable reserve development for the nine months ended September 30, 2012 was primarily due to significant delays in claims submissions for the fourth quarter of 2011 arising from issues related to a new billing format required by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") coupled with an unanticipated flattening of commercial trends.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to interest rate and market risk primarily due to our investing and borrowing activities. Market risk generally represents the risk of loss that may result from the potential change in the value of a financial instrument as a result of fluctuations in interest rates and/or market conditions and in equity prices. Interest rate risk is a consequence of maintaining variable interest rate earning investments and fixed rate liabilities or fixed income investments and variable rate liabilities. We are exposed to interest rate risks arising from changes in the level or volatility of interest rates, prepayment speeds and/or the shape and slope of the yield curve. In addition, we are exposed to the risk of loss related to changes in credit spreads. Credit spread risk arises from the potential changes in an issuer’s credit rating or credit perception that may affect the value of financial instruments. We believe that no material changes to any of these risks have occurred since December 31, 2012.

For a more detailed discussion of our market risks relating to these activities, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, based on the framework in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of such period.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the nine months ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item  1. Legal Proceedings.

A description of the legal proceedings to which the Company and its subsidiaries are a party is contained in Note 9 to the consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2012 (our "Form 10-K"), which could materially affect our business, financial condition, results of operations or future results. The risks described in our Form 10-K and this Quarterly Report on Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, cash flows, financial condition and/or results of operations. The risk factors set forth below update, and should be read together with, the risk factors disclosed in Part I, Item IA of our Form 10-K.

A significant reduction in revenues from the government programs in which we participate or other changes to these programs could have a material adverse effect on our business, financial condition or results of operations.

Approximately 52% of our total revenues in the nine months ended September 2013 relate to federal, state and local government health care coverage or counseling programs, such as Medicare, Medicaid, TRICARE and MFLC. Nearly all of the revenues in our Government Contracts reportable segment, which does not include Medicare and Medicaid related revenues, come from the federal government, either directly or as a sub-contractor for a federal government contract. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations” for more information regarding our reportable segments. In addition, a growing portion of our revenues for our Western Region Operations reportable segment, which includes Medicare and Medi-Cal related revenues, relates to government programs, and this portion could increase if we are able to successfully pursue opportunities under the CCI and other government programs, including any expansion of the Medi-Cal program as a result of the ACA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Western Region Operations Reportable Segment-California Coordinated Care Initiative” and the risk factors in our Form 10-K for more information regarding our opportunities under the CCI and related risks. Due to this concentration of revenues, a significant reduction in revenues from the government programs in which we participate could have a material adverse effect on our business, financial condition or results of operations.

Our contracts with the government are generally subject to a highly structured competitive bid process and government discretion in the negotiation process, including with respect to performance requirements. If we fail to design and maintain programs attractive to our government customers, if we are not successful in winning new contracts or contract renewals, or if our existing contracts are terminated, our current government health care coverage or counseling programs business and our ability to expand these businesses could be materially and adversely affected. Under government-funded health programs, the government payor typically determines premium and reimbursement levels and generally has the ability to terminate our contract for convenience. If the government payor reduces premium or reimbursement levels, such as Medicare Advantage payment rates as provided in the ACA, delays payments to us or increases premiums by less than our costs increase, and we are unable to make offsetting adjustments through supplemental premiums and changes in benefit plans, we could be adversely affected. In addition, the amount of government receivables set forth in our consolidated financial statements for our Government Contracts reportable segment represents our best estimate of the government's liability to us under TRICARE, MFLC and other government contracts, or amounts due us as a sub-contractor. These government receivables are generally estimates subject to government audit and negotiation, and there is an inherent uncertainty in government contracts based in large part on a vulnerability to disagreements with the government. As a result, the final amounts we ultimately receive under government contracts for our Government Contracts reportable segment may be significantly greater or less than the amounts we initially recognize in our consolidated financial statements. Medicare revenue that we record may also be subject to change due to risk adjustment reimbursement settlements. For additional information, see the risk factors included in our Form 10-K.

Contracts under our government programs are generally subject to frequent change, including but not limited to changes that may reduce the number of persons enrolled or eligible, reduce the revenue received by us or increase our

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administrative or health care costs, as applicable, under such programs. An enrollment freeze or significant reduction in payments from government programs in which we participate could adversely affect our business, financial condition or results of operations. Such changes are more likely during re-competition of government contracts. For example, prior to August 2012, we were the sole contractor providing behavioral health services to military families under the Department of Defense sponsored MFLC program. Under the current MFLC contract that we entered into in August 2012, we are one of three contractors initially selected to participate in the MFLC program. As a result of the revised terms and structure of the new MFLC contract and the government's decision to award the new MFLC contract to multiple contractors, the revenues from the new contract have been substantially reduced in comparison to the original MFLC contract. For additional information on our MFLC contract see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Government Contracts Reportable Segment”. Furthermore, the T-3 contract for our TRICARE business has one remaining one-year option period, and if that remaining option period is exercised, the T-3 contract would conclude on March 31, 2015. However, there can be no assurance that the Department of Defense will exercise the remaining option period under the contract, and if it is not exercised, and our TRICARE business is opened up for rebidding, our results of operations could be adversely impacted. For additional information on our TRICARE operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Government Contracts Reportable Segment”.

In addition, the reimbursement rates we receive from federal and state governments relating to our government-funded health care coverage programs may be subject to change. For example, on April 1, 2013, CMS announced final 2014 Medicare Advantage benchmark payment rates for 2014 Medicare Advantage and Part D payments that we receive in connection with our participation in these programs. These payment rates represent reduced funding from the federal government compared to prior periods, and will have an adverse impact on our expected Medicare revenues for 2014. Furthermore, in response to a recent history of budget deficits, the State of California enacted proposed spending cuts for services as part of its 2011-12 budget as authorized by California Assembly Bill 97 (“AB 97”). In October 2011, CMS approved certain elements of AB 97, including a 10 percent reduction in Medi-Cal reimbursement rates for a number of providers. DHCS preliminarily indicated that the Medi-Cal managed care rate reductions could be effective retroactive to July 1, 2011. However, a series of preliminary injunctions arising from various legal challenges have prevented the implementation of AB 97, and no such reductions have been made as of September 30, 2013. In December 2012, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) issued a decision that reversed the preliminary injunctions against the implementation of AB 97. The Ninth Circuit subsequently denied a motion by the plaintiffs for an en banc hearing and a petition to stay implementation of AB 97 pending appeal to the U.S. Supreme Court. Consequently, after the Ninth Circuit's ruling and as of September 30, 2013, there was no legal bar to the implementation of AB 97. As a result, the reimbursement rate reductions authorized by AB 97 are reflected in California’s 2013-2014 budget proposal, which was passed by the legislature and signed into law by Governor Brown. The State has not formally determined the effective date for the implementation of AB 97, and the plaintiffs in the AB 97 legal actions may still file a petition to the U.S. Supreme Court to review the Ninth Circuit's ruling. In any case, even if the reductions are implemented as currently authorized, they would be applied to Medi-Cal managed care plans only on a prospective basis, and the impact of such reductions could be limited since they would need to be reconciled with minimum payment rates for primary care physicians dictated by the ACA for 2013 and 2014. Due to these uncertainties, we cannot reasonably estimate the range of reductions in premiums and/or related health care cost recoveries, if any, that may result in connection with AB 97. As another example of our changing reimbursement rates, the State of California’s decision to transition its Healthy Families program members into Medi-Cal effectively reduced our reimbursement rates, as the rates we receive for Medi-Cal members are lower than those we received through the Healthy Families program. Any significant reduction in the reimbursement rates that we receive in connection with our government-funded health care coverage programs could adversely affect our business, financial condition or results of operations, particularly as our membership in and focus on government programs increases.

Furthermore, on August 2, 2011, the Budget Control Act of 2011 was enacted in order to increase the federal government's debt limit and reduce the federal deficit. The Budget Control Act established a 12-member joint committee of Congress known as the Joint Select Committee on Deficit Reduction (the “Joint Select Committee”). The Joint Select Committee was tasked with proposing legislation to reduce the United States federal deficit by at least $1.2 trillion for fiscal years 2012-21 by December 23, 2011. Because the Joint Select Committee did not propose such legislation by the proposed deadline, approximately $1.2 trillion in domestic and defense spending reductions over fiscal years 2013-21 were to be automatically implemented beginning on January 1, 2013. The implementation of such reductions was delayed until April 1, 2013 as a result of the American Taxpayer Relief Act of 2012, and the reductions are split evenly (in dollar terms) between defense and non-defense spending. Medicare is subject to automatic spending reductions, subject to a 2% cap. Certain other programs, including Medicaid benefits, are exempt from the sequestration cuts. All parts of the Medicare program, including Medicare Advantage, were subject to cuts, and these reductions have

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adversely impacted our Medicare Advantage MCR. In addition, reductions in defense spending could have an adverse impact on certain government programs in which we currently participate by, among other things, terminating or materially changing such programs, or by decreasing or delaying payments made under such programs.

Federal and state governments could also choose to require benefits to be delivered to new populations of potential members or require us to deliver new services to existing populations. If we have limited cost experience with these new populations or services, we may not be able to accurately predict or adequately control the associated health care costs. For example, California began mandatory Medi-Cal enrollment of SPDs in June 2011, and the higher than expected claims experience in this population contributed in part to the higher than expected health care costs we reported in 2012. In addition, as part of the CCI, we will be required to expand our current Medi-Cal offerings to provide LTSS benefits to all our existing Medi-Cal members, including SPDs and those who do not participate in the duals demonstration portion of the CCI. We have limited operating experience in providing this benefit and will need to make arrangements to provide such services either directly or by subcontracting with other parties prior to the commencement of the CCI. If we are unable to effectively make such arrangements on favorable terms or otherwise fail to adequately administer this new benefit, including successfully managing the associated costs, our financial condition and results of operations may be adversely affected.

In addition, Medicaid expansion in California and our entrance into Medicaid in Arizona will significantly increase our Medicaid enrollment. This new population of potential members may have different characteristics than our existing Medicaid population. If we do not accurately predict the costs of providing benefits to this new population, fail to obtain suitable rates or otherwise fail to effectively incorporate this new population into our existing Medicaid business, our results of operations, financial condition and cash flows could be adversely affected.

Finally, we are also exposed to other risks associated with U.S. and state government contracting, including but not limited to the general ability of the federal and/or state government to terminate contracts with it, in whole or in part, without prior notice, for convenience or for default based on performance; and our dependence upon Congressional or legislative appropriation and allotment of funds and the impact that delays in government payments could have on our operating cash flow and liquidity. For example, due to the federal government shutdown in October 2013, the Office of the Assistant Secretary of Defense, Health Affairs, Defense Health Agency delayed reimbursement payments owed to us for underwritten claims under the T-3 contract for our TRICARE business. These reimbursement payments were ultimately received following the conclusion of the government shutdown, and the delay did not have a material adverse effect on our results of operations or financial position. However, there can be no assurance that we will avoid similar payment delays in the future, which, if extended for any significant period of time, could have a material adverse effect on our results of operations, financial position, cash flows or liquidity. In addition, delays in obtaining, or failure to obtain or maintain, governmental approvals, or moratoria imposed by regulatory authorities, could adversely affect our revenue or membership, increase costs or adversely affect our ability to bring new products to market as forecasted.

Other changes to our government programs could affect our willingness or ability to participate in these programs or otherwise have a material adverse effect on our business, financial condition or results of operations.

Item  2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c) Purchases of Equity Securities by the Issuer

On May 2, 2011, our Board of Directors authorized a stock repurchase program pursuant to which a total of $300.0 million of our outstanding common stock could be repurchased (our "stock repurchase program"). On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program. Including the additional $323.7 million authorized repurchase authority, the remaining authorization under our stock repurchase program as of September 30, 2013 was $280.0 million.

Under the Company’s various stock option and long-term incentive plans, in certain circumstances employees and non-employee directors may elect for the Company to withhold shares to satisfy minimum statutory federal, state and local tax withholding and/or exercise price obligations, as applicable, arising from the exercise of stock options. For certain other equity awards, the Company has the right to withhold shares to satisfy any tax obligations for employees that may be required to be withheld or paid in connection with such equity awards, including any tax obligation arising on the vesting date.

A description of our stock repurchase program and tabular disclosure of the information required under this Item 2 is contained in Note 6 to the consolidated financial statements included in Part I of this Quarterly Report on

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Form 10-Q and in Part I— “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Structure—Share Repurchases.”

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

65

Item 6. Exhibits

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

Exhibit Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, a copy of which is filed herewith.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, a copy of which is filed herewith.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, a copy of which is filed herewith.
101	The following materials from Health Net, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012, (2) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012, (3) Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, (4) Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2013 and 2012, (5) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 and (6) Condensed Notes to Consolidated Financial Statements.

66

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			HEALTH NET, INC. (REGISTRANT)
Date:	November 7, 2013	By:	/s/    JOSEPH C. CAPEZZA
			Joseph C. Capezza
			Executive Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer)
Date:	November 7, 2013	By:	/s/    MARIE MONTGOMERY
			Marie Montgomery
			Senior Vice President and Corporate Controller (Principal Accounting Officer)

67

EXHIBIT INDEX

Exhibit Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, a copy of which is filed herewith.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, a copy of which is filed herewith.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, a copy of which is filed herewith.
101	The following materials from Health Net, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012, (2) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012, (3) Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, (4) Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2013 and 2012, (5) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 and (6) Condensed Notes to Consolidated Financial Statements.

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jay M. Gellert, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Health Net, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 7, 2013	/S/    JAY M. GELLERT
	Jay M. Gellert
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joseph C. Capezza, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Health Net, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 7, 2013	/S/    JOSEPH C. CAPEZZA
	Joseph C. Capezza
	Chief Financial Officer

EX-32

Exhibit 32

Certification of CEO and CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Health Net, Inc. (the “Company”) for the quarterly period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jay M. Gellert, as Chief Executive Officer of the Company, and Joseph C. Capezza, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jay M. Gellert

Jay M. Gellert

Chief Executive Officer

November 7, 2013

/s/ Joseph C. Capezza

Joseph C. Capezza

Chief Financial Officer

November 7, 2013

XML

State-Sponsored Health Plans Rate Settlement Agreement

9 Months Ended

Sep. 30, 2013

State-Sponsored Health Plans Rate Settlement Agreement [Abstract]

State-Sponsored Health Plans Rate Settlement Agreement

STATE-SPONSORED HEALTH PLANS RATE SETTLEMENT AGREEMENT

On November 2, 2012, our wholly owned subsidiaries, Health Net of California, Inc. and Health Net Community Solutions, Inc., entered into a settlement agreement (the "Agreement") with DHCS to settle historical rate disputes with respect to our participation in the Medi-Cal program, for rate years prior to the 2011–2012 rate year. As part of the Agreement, DHCS agreed, among other things, to (1) an extension of all of our Medi-Cal managed care contracts existing as of the date of the Agreement for an additional five years from their then existing expiration dates; (2) retrospective premium adjustments on all of our state-sponsored health care programs, including Medi-Cal, Healthy Families, SPDs, our proposed participation in the dual eligibles demonstration portion of the California Coordinated Care Initiative that is expected to begin in 2014 and any potential future Medi-Cal expansion populations (our “state-sponsored health care programs”), which will be tracked in a settlement account as discussed in more detail below; and (3) compensate us should DHCS terminate any of our state-sponsored health care programs contracts early.

Effective January 1, 2013, the settlement account (the "Account") was established with an initial balance of zero. The balance in the Account is adjusted annually to reflect retrospective premium adjustments for each calendar year (referenced in the Agreement as a deficit or surplus). A deficit or surplus will result to the extent our actual pretax margin (as defined in the Agreement) on our state-sponsored health care programs is below or above a predetermined pretax margin target. The amount of any deficit or surplus is calculated as described in the Agreement. Cash settlement of the Account will occur on December 31, 2019, except that under certain circumstances the DHCS may extend the final settlement for up to three additional one-year periods (as may be extended, the "Term"). In addition, the DHCS will make an interim partial settlement payment to us if it terminates any of our state-sponsored health care programs contracts early. Upon expiration of the Term, if the Account is in a surplus position, then no monies are owed to either party. If the Account is in a deficit position, then DHCS shall pay the amount of the deficit to us. In no event, however, shall the amount paid by DHCS to us under the Agreement exceed $264 million or be less than an alternative minimum amount as defined in the Agreement.

We estimate and recognize the retrospective adjustments to premium revenue based upon experience to date under our state-sponsored health care programs contracts. As of September 30, 2013, we had calculated and recorded a deficit of $51.7 million, net of a valuation discount in the amount of $3.7 million (see Note 8), reflecting our estimated retrospective premium adjustment to the Account based on our actual pretax margin for the nine months ended September 30, 2013. The retrospective premium adjustment is recorded as an adjustment to premium revenue and other noncurrent assets.

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 686,139	$ 340,110
Investments-available-for-sale (amortized cost: 2013-$1,611,091, 2012-$1,753,931)	1,580,032	1,812,512
Premiums receivable, net of allowance for doubtful accounts (2013-$763, 2012-$668)	343,502	373,269
Amounts receivable under government contracts	194,820	228,316
Other receivables	69,885	113,875
Deferred taxes	78,257	51,086
Other assets	103,685	130,796
Total current assets	3,056,320	3,049,964
Property and equipment, net	195,954	183,793
Goodwill	565,886	565,886
Other intangible assets, net	14,699	17,271
Deferred taxes	3,394	13,583
Investments-available-for-sale-noncurrent (amortized cost: 2013-$60,080, 2012-$0)	52,637	0
Other noncurrent assets	152,611	103,893
Total Assets	4,041,501	3,934,390
LIABILITIES AND STOCKHOLDERS’ EQUITY
Reserves for claims and other settlements	990,195	1,037,973
Health care and other costs payable under government contracts	55,532	75,649
Unearned premiums	129,081	151,048
Accounts payable and other liabilities	544,704	373,426
Total current liabilities	1,719,512	1,638,096
Senior notes payable	399,248	399,095
Borrowings under revolving credit facility	100,000	100,000
Deferred taxes	1,746	0
Other noncurrent liabilities	220,404	240,169
Total Liabilities	2,440,910	2,377,360
Commitments and contingencies
Stockholders’ Equity:
Preferred stock ($0.001 par value, 10,000 shares authorized, none issued and outstanding)	0	0
Common stock ($0.001 par value, 350,000 shares authorized; issued 2013-150,193 shares; 2012-148,727 shares )	150	149
Additional paid-in capital	1,370,744	1,329,000
Treasury common stock, at cost (2013-70,696 shares of common stock; 2012-67,426 shares of common stock)	(2,179,503)	(2,092,625)
Retained earnings	2,443,895	2,293,522
Accumulated other comprehensive income	(34,695)	26,984
Total Stockholders’ Equity	1,600,591	1,557,030
Total Liabilities and Stockholders’ Equity	$ 4,041,501	$ 3,934,390

XML

Sale of Medicare PDP Business

9 Months Ended

Sep. 30, 2013

Sale of Businesses [Abstract]

Sale of Medicare PDP Business

SALE OF MEDICARE PDP BUSINESS

On April 1, 2012, our subsidiary HNL sold substantially all of the assets, properties and rights of HNL used primarily or exclusively in our Medicare PDP business to CVS Caremark for a total purchase price of $248.2 million. In the nine months ended September 30, 2012 we recognized a $132.8 million pretax gain on the sale of our Medicare PDP business, $117.0 million net of tax, and this after tax gain is reported as gain on sale of discontinued operation, net of tax.

Our revenues related to our Medicare PDP business were $0 and $191.8 million for the three and nine months ended September 30, 2012, respectively. These revenues were excluded from our continuing operating results and included in loss from discontinued operation. Our Medicare PDP business had a pretax income (loss) of $0 and $(28.8) million for the three and nine months ended September 30, 2012, respectively. As of September 30, 2012 and September 30, 2013, we had no Medicare stand-alone prescription drug plan members. We had no revenues and no pretax income related to the Medicare PDP business for each of the three and nine months ended September 30, 2013.

XML

Significant Accounting Policies (Cash and Cash Equivalents, Investments and Fair Value of Financial Instruments) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Accounting Policies [Abstract]
Checks outstanding	$ 0		$ 0		$ 23.8
Losses recognized from other-than-temporary impairments	0	0	0	0
Fair value of fixed rate borrowings	428.0		428.0		424.0
Fair value of variable rate borrowings	$ 100.0		$ 100.0		$ 100.0

XML

Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with maturity of three months or less when purchased. We had no checks outstanding, net of deposits as of September 30, 2013 and $23.8 million as of December 31, 2012. Checks outstanding, net of deposits are classified as accounts payable and other liabilities in the consolidated balance sheets and the changes are reflected in the line item net increase (decrease) in checks outstanding, net of deposits within the cash flows from financing activities in the consolidated statements of cash flows.

Investments

Investments

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We analyze all debt investments that have unrealized losses for impairment consideration and assess the intent to sell such securities. If such intent exists, impaired securities are considered other-than-temporarily impaired. Management also assesses if we may be required to sell the debt investments prior to the recovery of amortized cost, which may also trigger an impairment charge. If securities are considered other-than-temporarily impaired based on intent or ability, we assess whether the amortized costs of the securities can be recovered. If management anticipates recovering an amount less than the amortized cost of the securities, an impairment charge is calculated based on the expected discounted cash flows of the securities. Any deficit between the amortized cost and the expected cash flows is recorded through earnings as a charge. All other temporary impairment changes are recorded through other comprehensive income. During the three and nine months endedSeptember 30, 2013 and 2012, respectively, no losses were recognized from other-than-temporary impairments.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The estimated fair value amounts of cash equivalents, investments available-for-sale, premiums and other receivables, notes receivable and notes payable have been determined by using available market information and appropriate valuation methodologies. The carrying amounts of cash equivalents approximate fair value due to the short maturity of those instruments. Fair values for debt and equity securities are generally based upon quoted market prices. Where quoted market prices were not readily available, fair values were estimated using valuation methodologies based on available and observable market information. Such valuation methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly traded companies in a similar line of business, and reviewing the underlying financial performance including estimating discounted cash flows. The carrying value of premiums and other receivables, long-term notes receivable and nonmarketable securities approximates the fair value of such financial instruments. The fair value of notes payable is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt with the same remaining maturities. The fair value of our fixed-rate borrowings was $428.0 million and $424.0 million as of September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013 and December 31, 2012, the fair value of our variable-rate borrowings under our revolving credit facility was $100.0 million and $100.0 million, respectively. The fair value of our fixed-rate borrowings was determined using the quoted market price, which is a Level 1 input in the fair value hierarchy. The fair value of our variable-rate borrowings was estimated to equal the carrying value because the interest rates paid on these borrowings were based on prevailing market rates. Since the pricing inputs are other than quoted prices and fair value is determined using an income approach, our variable-rate borrowings are classified as a Level 2 in the fair value hierarchy. See Notes 7 and 8 for additional information regarding our financing arrangements and fair value measurements, respectively.

Health Plan Services Health Care Cost

Health Plan Services Health Care Cost

The cost of health care services is recognized in the period in which services are provided and includes an estimate of the cost of services that have been incurred but not yet reported. Such costs include payments to primary care physicians, specialists, hospitals and outpatient care facilities, and the costs associated with managing the extent of such care.

Our health care cost can also include from time to time remediation of certain claims as a result of periodic reviews by various regulatory agencies. We estimate the amount of the provision for health care service costs incurred but not yet reported ("IBNR") in accordance with GAAP and using standard actuarial developmental methodologies based upon historical data including the period between the date services are rendered and the date claims are received and paid, denied claim activity, expected medical cost inflation, seasonality patterns and changes in membership, among other things.

Our IBNR best estimate also includes a provision for adverse deviation, which is an estimate for known environmental factors that are reasonably likely to affect the required level of IBNR reserves. This provision for adverse deviation is intended to capture the potential adverse development from known environmental factors such as our entry into new geographical markets, changes in our geographic or product mix, the introduction of new customer populations, variation in benefit utilization, disease outbreaks, changes in provider reimbursement, fluctuations in medical cost trend, variation in claim submission patterns and variation in claims processing speed and payment patterns, changes in technology that provide faster access to claims data or change the speed of adjudication and settlement of claims, variability in claim inventory levels, non-standard claim development, and/or exceptional situations that require judgmental adjustments in setting the reserves for claims.

We consistently apply our IBNR estimation methodology from period to period. Our IBNR best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known to us, we adjust our assumptions accordingly to change our estimate of IBNR. Therefore, if moderately adverse conditions do not occur, evidenced by more complete claims information in the following period, then our prior period estimates will be revised downward, resulting in favorable development. However, any favorable prior period reserve development would increase current period net income only to the extent that the current period provision for adverse deviation is less than the benefit recognized from the prior period favorable development. If moderately adverse conditions occur and are more acute than we estimated, then our prior period estimates will be revised upward, resulting in unfavorable development, which would decrease current period net income. For the nine months ended September 30, 2013, we had $55.9 million in favorable reserve developments related to prior years. We believe this favorable development was primarily due to the absence of moderately adverse conditions. As part of our best estimate for IBNR, the provision for adverse deviation recorded as of September 30, 2013 was $52.9 million. The reserve developments related to prior years for the nine months ended September 30, 2013, when considered together with the provision for adverse deviation recorded as of September 30, 2013, did not have a material impact on our operating results or financial condition. For the nine months ended September 30, 2012, we had $32.8 million in unfavorable reserve developments related to prior years. We believe this unfavorable reserve development for the nine months ended September 30, 2012 was primarily due to significant delays in claims submissions for the fourth quarter of 2011 arising from issues related to a new billing format required by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") coupled with an unanticipated flattening of commercial trends.

The majority of the IBNR reserve balance held at each quarter-end is associated with the most recent months' incurred services because these are the services for which the fewest claims have been paid. The degree of uncertainty in the estimates of incurred claims is greater for the most recent months' incurred services. Revised estimates for prior periods are determined in each quarter based on the most recent updates of paid claims for prior periods. Estimates for service costs incurred but not yet reported are subject to the impact of changes in the regulatory environment, economic conditions, changes in claims trends, and numerous other factors. Given the inherent variability of such estimates, the actual liability could differ significantly from the amounts estimated.

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investments and premiums receivable. All cash equivalents and investments are managed within established guidelines, which provide us diversity among issuers. Concentrations of credit risk with respect to premiums receivable are limited due to the large number of payers comprising our customer base. The federal government is the primary customer of our Government Contracts reportable segment with fees and premiums associated with this customer accounting for approximately95% of our Government Contracts revenue. In addition, the federal government is a significant customer of our Western Region Operations reportable segment as a result of our contract with Centers for Medicare & Medicaid Services ("CMS") for coverage of Medicare-eligible individuals. Furthermore, all of our Medicaid revenue is currently derived from our participation in the state Medicaid program in California ("Medi-Cal") through our relationship with the State of California Department of Health Care Services ("DHCS"). As a result, DHCS is a significant customer of our Western Region Operations reportable segment.

Comprehensive Income

Comprehensive Income

Comprehensive income includes all changes in stockholders’ equity (except those arising from transactions with stockholders) and includes net income (loss), net unrealized appreciation (depreciation) after tax on investments available-for-sale and prior service cost and net loss related to our defined benefit pension plan.

Our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Unrealized Gains (Losses) on investments available-for-sale			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (loss)
Three Months Ended September 30:				(Dollars in millions)
Balance as of July 1, 2012	$	19.6		$	(11.9	)	$	7.7
Other comprehensive income before reclassifications	22.4			—			22.4
Amounts reclassified from accumulated other comprehensive income	(2.8		)	0.6			(2.2		)
Other comprehensive income for the three months ended September 30, 2012	19.6			0.6			20.2
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of July 1, 2013	$	(25.4	)	$	(10.2	)	$	(35.6	)
Other comprehensive income before reclassifications	0.7			—			0.7
Amounts reclassified from accumulated other comprehensive income	(0.2		)	0.4			0.2
Other comprehensive income for the three months ended September 30, 2013	0.5			0.4			0.9
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)
Nine Months Ended September 30:
Balance as of January 1, 2012	$	29.8		$	(13.2	)	$	16.6
Other comprehensive income before reclassifications	28.7			—			28.7
Amounts reclassified from accumulated other comprehensive income	(19.3		)	1.9			(17.4		)
Other comprehensive income for the nine months ended September 30, 2012	9.4			1.9			11.3
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of January 1, 2013	$	38.0		$	(11.0	)	$	27.0
Other comprehensive loss before reclassifications	(47.8		)	—			(47.8		)
Amounts reclassified from accumulated other comprehensive income	(15.1		)	1.2			(13.9		)
Other comprehensive (loss) income for the nine months ended September 30, 2013	(62.9		)	1.2			(61.7		)
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)

The following table shows reclassifications out of accumulated other comprehensive income and the affected line items in the consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,						Nine months ended September 30,						Affected line item in the Consolidated Statements of Operations
	2013			2012			2013			2012
	(Dollars in millions)
Unrealized gains on investments available-for-sale	$	0.3		$	4.3		$	23.3		$	29.7		Net investment income
	0.3			4.3			23.3			29.7			Total before tax
	0.1			1.5			8.2			10.4			Tax expense
	0.2			2.8			15.1			19.3			Net of tax
Amortization of defined benefit pension items:
Prior-service cost	(0.1		)	—			(0.1		)	(0.1		)	(a)
Actuarial gains (losses)	(0.6		)	(1.0		)	(1.9		)	(3.0		)	(a)
	(0.7		)	(1.0		)	(2.0		)	(3.1		)	Total before tax
	(0.3		)	(0.4		)	(0.8		)	(1.2		)	Tax benefit
	(0.4		)	(0.6		)	(1.2		)	(1.9		)	Net of tax
Total reclassifications for the period	$	(0.2	)	$	2.2		$	13.9		$	17.4		Net of tax

_________

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

Earnings Per Share

Earnings Per Share

Basic earnings per share excludes dilution and reflects net income divided by the weighted average shares of common stock outstanding during the periods presented. Diluted earnings per share is based upon the weighted average shares of common stock and dilutive common stock equivalents (this reflects the potential dilution that could occur if stock options were exercised and restricted stock units ("RSUs") and performance share units ("PSUs") were vested) outstanding during the periods presented.

The inclusion or exclusion of common stock equivalents arising from stock options, RSUs and PSUs in the computation of diluted earnings per share is determined using the treasury stock method. For the three and nine months endedSeptember 30, 2013, respectively, 1,009,000 shares and 903,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share. For the three and nine months endedSeptember 30, 2012, respectively, 432,000 shares and 996,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share.

For the three and nine months endedSeptember 30, 2013, respectively, an aggregate of 812,000 shares and 1,019,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. For the three and nine months endedSeptember 30, 2012, respectively, an aggregate of 4,342,000 shares and 1,819,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. Stock options expire at various times through February 2019.

In May 2011, our Board of Directors authorized a stock repurchase program for the repurchase of up to $300 million of our outstanding common stock (our "stock repurchase program"). On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program. As of December 31, 2012, the remaining authorization under our stock repurchase program was $350.0 million. The remaining authorization under our stock repurchase program as of September 30, 2013 was $280.0 million. See Note 6 for more information regarding our stock repurchase program.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

We performed our annual impairment test on our goodwill and other intangible assets as of June 30, 2013 for our Western Region Operations reporting unit and also re-evaluated the useful lives of our other intangible assets. No goodwill impairment was identified. We also determined that the estimated useful lives of our other intangible assets properly reflected the current estimated useful lives.

The carrying amount of goodwill by reporting unit is as follows:

	Western Region Operations		Total
	(Dollars in millions)
Balance as of December 31, 2012	$	565.9	$	565.9
Balance as of September 30, 2013	$	565.9	$	565.9

Due to the many variables inherent in the estimation of a business’s fair value and the relative size of recorded goodwill, changes in assumptions may have a material effect on the results of our impairment test. The discounted cash flows and market participant valuations (and the resulting fair value estimates of the Western Region Operations reporting unit) are sensitive to changes in assumptions including, among others, certain valuation and market assumptions, the Company’s ability to adequately incorporate into its premium rates the future costs of premium-based assessments imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA"), and assumptions related to the achievement of certain administrative cost reductions and the profitable implementation of California's Coordinated Care Initiative, which includes the dual eligibles demonstration. Changes to any of these assumptions could cause the fair value of our Western Region Operations reporting unit to be below its carrying value. As of June 30, 2013 and June 30, 2012, the ratio of the fair value of our Western Region Operations reporting unit to its carrying value was approximately 149% and 115%, respectively.

The intangible assets that continue to be subject to amortization using the straight-line method over their estimated lives are as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Balance		Weighted Average Life (in years)
	(Dollars in millions)
As of September 30, 2013:
Provider networks	$	40.5	$	(35.4	)	$	5.1	19.4
Customer relationships and other	29.5		(19.9		)	9.6		11.1
	$	70.0	$	(55.3	)	$	14.7
As of December 31, 2012:
Provider networks	$	40.5	$	(34.6	)	$	5.9	19.4
Customer relationships and other	29.5		(18.1		)	11.4		11.1
	$	70.0	$	(52.7	)	$	17.3

Estimated annual pretax amortization expense for other intangible assets for each of the next five years ending December 31 is as follows (dollars in millions):

Year	Amount
2013	$	3.4
2014	2.8
2015	2.6
2016	2.0
2017	2.0

Restricted Assets

Restricted Assets

We and our consolidated subsidiaries are required to set aside certain funds that may only be used for certain purposes pursuant to state regulatory requirements. We have discretion as to whether we invest such funds in cash and cash equivalents or other investments. As of September 30, 2013 and December 31, 2012, the restricted cash and cash equivalents balances totaled $1.7 million and $0.8 million, respectively, and are included in other noncurrent assets. Investment securities held by trustees or agencies were $26.6 million and $25.5 million as of September 30, 2013 and December 31, 2012, respectively, and are included in investments available-for-sale.

Divested Operations and Services

Divested Operations and Services

Divested operations and services revenues and expenses include any revenues and expenses related to the run-out of our business that was sold in connection with the Northeast Sale (as defined below) on December 11, 2009, including items related to our performance under related administrative services and/or claims servicing agreements, and transition-related revenues and expenses related to the sale of our Medicare PDP business on April 1, 2012. The "Northeast Sale" refers to the sale of all of the outstanding shares of capital stock of our health plan subsidiaries that were domiciled and/or had conducted businesses in Connecticut, New Jersey, New York and Bermuda to an affiliate of UnitedHealth Group Incorporated ("United"), and includes the acquisition by United of membership renewal rights for certain commercial health care business conducted by our subsidiary, Health Net Life Insurance Company ("HNL") in the states of Connecticut and New Jersey. As of December 31, 2012, we had substantially completed the administration and run-out of our divested businesses. See Note 3 for additional information regarding the sale of our Medicare PDP business.

Medicaid/Medi-Cal Rate Adjustment , Medi-Cal Rate Reduction and Medicaid Premium Taxes

Medicaid/Medi-Cal Rate Adjustment

Our revenue from the Medi-Cal program, including seniors and persons with disabilities ("SPD") programs, and other state-sponsored health programs are subject to certain retroactive rate adjustments based on expected and actual health care cost. For the three and nine months ended September 30, 2013, we recognized $32.1 million and $74.3 million, respectively, of premium revenues as a result of retroactive rate adjustments for our SPD and non-SPD members for periods prior to 2013. Retroactive rate adjustments for our SPD and non-SPD members were not material for the three and nine months endedSeptember 30, 2012.

Medi-Cal Rate Reduction

In October 2011, CMS approved certain elements of California's 2011-2012 budget proposals to reduce Medi-Cal provider reimbursement rates as authorized by California Assembly Bill 97 (“AB 97”). The elements approved by CMS include a 10 percent reduction in reimbursement rates for a number of providers. DHCS preliminarily indicated that the Medi-Cal managed care rate reductions could be effective retroactive to July 1, 2011. However, a series of preliminary injunctions arising from various legal challenges have prevented the implementation of AB 97, and no such reductions have been made as of September 30, 2013.

In December 2012, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) issued a decision that reversed the preliminary injunctions against the implementation of AB 97. The Ninth Circuit subsequently denied a motion by the plaintiffs for an en banc hearing and a petition to stay implementation of AB 97 pending appeal to the U.S. Supreme Court. Consequently, after the Ninth Circuit's ruling and as of September 30, 2013, there was no legal bar to the implementation of AB 97. As a result, the reimbursement rate reductions authorized by AB 97 are reflected in California's 2013-2014 budget proposal, which was recently passed by the legislature and signed into law by Governor Brown. The State has not formally determined the effective date for the implementation of AB 97, and the plaintiffs in the AB 97 legal actions may still file a petition to the U.S. Supreme Court to review the Ninth Circuit's ruling. In any case, even if the reductions are implemented as currently authorized, they would be applied to Medi-Cal managed care plans only on a prospective basis, and the impact of such reductions could be limited since they would need to be reconciled with minimum payment rates for primary care physicians dictated by the ACA for 2013 and 2014. Due to these uncertainties, we cannot reasonably estimate the range of reductions in premiums and/or related health care cost recoveries, if any, that may result in connection with AB 97.

Medicaid Premium Taxes

On June 27, 2013, the State of California reinstated premium taxes retroactive to July 1, 2012 for plans participating in Medi-Cal. As a result of this reinstatement, we recorded $25.6 million in premium taxes, primarily related to 2013, as general and administrative expense for the three months ended September 30, 2013. For the nine months ended September 30, 2013, we recorded $68.4 million, including $18.8 million attributable to periods prior to 2013, as general and administrative expense. In addition, the State of California increased Medicaid premium revenues in an amount equal to the increase in the premium taxes. As a result, we recorded $25.6 million and $68.4 million in health plan services premiums for the three and nine months ended September 30, 2013, respectively. These Medicaid premium taxes are currently authorized by the State of California through July 1, 2016.

CMS Risk Factor Adjustments

CMS Risk Factor Adjustments

We have an arrangement with CMS that relates to certain of our Medicare products and pursuant to which periodic changes in our risk factor adjustment scores for certain diagnostic codes result in changes to our health plan services premium revenues. We recognize such changes when the amounts become determinable and the collectability is reasonably assured. Because the recorded revenue is based on our best estimate at the time, the actual payment we receive from CMS for risk adjustment reimbursement settlements may be materially different than the amounts we have initially recognized on our financial statements. The change in our estimate for the risk adjustment revenue in each of the three and nine months ended September 30, 2013 and 2012 was not significant.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncement

Effective January 1, 2014, we will adopt new accounting guidance relating to the recognition and income statement reporting of any mandated fees to be paid to the federal government by health insurers, pursuant to the Accounting Standards Update ("ASU") No. 2011-06, issued by the Financial Accounting Standards Board ("FASB") in July 2011. This guidance will apply primarily to new fees enacted in the ACA. The mandated fees are expected to be material, and this new accounting guidance will result in the recognition of this expense on a straight-line basis beginning in 2014.

XML

Fair Value Measurements (Quantitative Information About Level 3 Fair Value Measurements) (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Goodwill	$ 565,886,000	$ 565,886,000
Western Region Operations [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Goodwill	565,900,000	565,900,000
Level 3 [Member] | Monte Carlo Simulation Approach [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Embedded contractual derivative asset	12,700,000	11,200,000
Embedded contractual derivative liability	700,000	3,200,000
Level 3 [Member] | Income Approach [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Lease impairment obligation		7,400,000
State-sponsored health plans settlement account deficit	51,700,000
Level 3 [Member] | Western Region Operations [Member] | Income Approach [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Goodwill	$ 565,900,000	$ 565,900,000
Level 3 [Member] | Goodwill [Member] | Western Region Operations [Member] | Income Approach [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)	10.00%	9.00%
Level 3 [Member] | Goodwill [Member] | Western Region Operations [Member] | Income Approach [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)	10.00%	9.00%
Level 3 [Member] | Goodwill [Member] | Western Region Operations [Member] | Income Approach [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)	10.00%	9.00%
Level 3 [Member] | Liability [Member] | Income Approach [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)		3.26%
Level 3 [Member] | Liability [Member] | Income Approach [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)		3.26%
Level 3 [Member] | Liability [Member] | Income Approach [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)		3.26%
Embedded contractual derivative liability [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | Health Net Health Care Expenditures [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	2.59%	(0.30%)
Embedded contractual derivative liability [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | Health Net Health Care Expenditures [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	6.10%	10.10%
Embedded contractual derivative liability [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | Health Net Health Care Expenditures [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	4.26%	4.90%
Embedded contractual derivative liability [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | National Health Care Expenditures [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	(1.80%)	(0.10%)
Embedded contractual derivative liability [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | National Health Care Expenditures [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	8.85%	7.30%
Embedded contractual derivative liability [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | National Health Care Expenditures [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	4.00%	3.30%
Embedded Contractual Derivative Asset [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | Health Net Health Care Expenditures [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	(5.34%)	(1.70%)
Embedded Contractual Derivative Asset [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | Health Net Health Care Expenditures [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	7.91%	0.80%
Embedded Contractual Derivative Asset [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | Health Net Health Care Expenditures [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	0.69%	(0.40%)
Embedded Contractual Derivative Asset [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | National Health Care Expenditures [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	(0.55%)	3.70%
Embedded Contractual Derivative Asset [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | National Health Care Expenditures [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	7.04%	3.70%
Embedded Contractual Derivative Asset [Member] | Level 3 [Member] | Monte Carlo Simulation Approach [Member] | National Health Care Expenditures [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Health Care Expenditures, range (as a percentage)	3.35%	3.70%
State-sponsored health plans settlement account deficit [Member] | Level 3 [Member] | Income Approach [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)	1.135%
State-sponsored health plans settlement account deficit [Member] | Level 3 [Member] | Income Approach [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)	1.135%
State-sponsored health plans settlement account deficit [Member] | Level 3 [Member] | Income Approach [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate, range (as a percentage)	1.135%

XML

Investments (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Investments [Abstract]
Losses from other-than-temporary impairments	$ 0	$ 0	$ 0	$ 0
Available-for-sale Securities, Noncurrent	52,637,000		52,637,000		0
Proceeds from sales of investments available-for-sale	80,400,000	117,600,000	653,786,000	1,132,836,000
Gross realized gains	1,000,000	4,300,000	25,500,000	30,100,000
Gross realized losses	$ 700,000	$ 36,000	$ 2,200,000	$ 400,000

XML

Significant Accounting Policies (Accumulated Other Comprehensive Income) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (35,600,000)	$ 7,700,000	$ 26,984,000	$ 16,600,000
Other comprehensive income before reclassifications	700,000	22,400,000	(47,800,000)	28,700,000
Amounts reclassified from accumulated other comprehensive income	200,000	(2,200,000)	(13,900,000)	(17,400,000)
Other comprehensive income (loss), net of tax	914,000	20,255,000	(61,679,000)	11,299,000
Ending balance	(34,695,000)	27,900,000	(34,695,000)	27,900,000
Unrealized Gains (Losses) on investments available-for-sale [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(25,400,000)	19,600,000	38,000,000	29,800,000
Other comprehensive income before reclassifications	700,000	22,400,000	(47,800,000)	28,700,000
Amounts reclassified from accumulated other comprehensive income	(200,000)	(2,800,000)	(15,100,000)	(19,300,000)
Other comprehensive income (loss), net of tax	500,000	19,600,000	(62,900,000)	9,400,000
Ending balance	(24,900,000)	39,200,000	(24,900,000)	39,200,000
Defined Benefit Pension Plans [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(10,200,000)	(11,900,000)	(11,000,000)	(13,200,000)
Other comprehensive income before reclassifications	0	0	0	0
Amounts reclassified from accumulated other comprehensive income	400,000	600,000	1,200,000	1,900,000
Other comprehensive income (loss), net of tax	400,000	600,000	1,200,000	1,900,000
Ending balance	$ (9,800,000)	$ (11,300,000)	$ (9,800,000)	$ (11,300,000)

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Significant Accounting Policies (Concentration of Credit Risk) (Details) (Government Contracts Concentration Risk [Member])	9 Months Ended
	Sep. 30, 2013
Government Contracts Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	95.00%

XML

Fair Value Measurements (Changes in the Balances of Level 3 Financial Liabilities) (Details) (Embedded contractual derivative liability [Member], USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Embedded contractual derivative liability [Member]
Changes in Level 3 Financial Liabilities
Opening balance	$ 4.8	$ 3.2
Transfers Into Level 3	0	0
Transfers out of Level 3	0	0
Realized in net income	(4.1)	(2.5)
Unrealized in accumulated other comprehensive income	0	0
Purchases, issues, sales and settlements:
Purchases	0	0
Issues	0	0
Sales	0	0
Settlements	0	0
Closing balance	$ 0.7	$ 0.7

XML

Segment Information (Segment Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 segments	Sep. 30, 2012
Segment Reporting Information [Line Items]
Number of reportable segments (in segments)			3
Revenues	$ 2,775,031	$ 2,779,572	$ 8,310,499	$ 8,451,310
Segment pretax income (loss)	108,580	29,376	241,911	23,226
Intersegment [Member]
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Western Region Operations [Member]
Segment Reporting Information [Line Items]
Revenues	2,625,700	2,596,900	7,886,700	7,898,200
Segment pretax income (loss)	85,200	20,200	204,300	12,600
Western Region Operations [Member] | Intersegment [Member]
Segment Reporting Information [Line Items]
Revenues	2,700	2,700	8,400	8,300
Government Contracts [Member]
Segment Reporting Information [Line Items]
Revenues	149,300	169,800	423,800	527,400
Segment pretax income (loss)	23,500	21,100	50,600	66,600
Government Contracts [Member] | Intersegment [Member]
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Divested Operations and Services [Member]
Segment Reporting Information [Line Items]
Revenues	0	12,900	0	25,700
Segment pretax income (loss)	0	(4,700)	0	(34,400)
Divested Operations and Services [Member] | Intersegment [Member]
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Corporate/Other/Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Segment pretax income (loss)	(100)	(7,200)	(13,000)	(21,600)
Corporate/Other/Eliminations [Member] | Intersegment [Member]
Segment Reporting Information [Line Items]
Revenues	$ (2,700)	$ (2,700)	$ (8,400)	$ (8,300)

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Investments (Number of Securities Included in Loss Position of Current and Noncurrent Investments) (Details)	Sep. 30, 2013 Securities
Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	551
12 Months or More	11
Total, number of securities	562
Current [Member] | Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	101
12 Months or More	7
Total, number of securities	108
Current [Member] | Obligations of States and Other Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	237
12 Months or More	1
Total, number of securities	238
Current [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	213
12 Months or More	3
Total, number of securities	216
Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	27
12 Months or More	1
Total, number of securities	28
Noncurrent [Member] | Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	0
12 Months or More	1
Total, number of securities	1
Noncurrent [Member] | Obligations of States and Other Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	18
12 Months or More	0
Total, number of securities	18
Noncurrent [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months	9
12 Months or More	0
Total, number of securities	9

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Legal Proceedings (Details) (Litigation Related to Information Security Issues [Member], USD $)	9 Months Ended
	Sep. 30, 2013 employees_members_providers actions	Mar. 28, 2011 claims	Mar. 18, 2011 Customers
Litigation Related to Information Security Issues [Member]
Litigation and Investigations Related to Unaccounted-for Server Drives [Abstract]
Number of pending litigations	3
Total number of people with information on drives	2,000,000
Period of free credit monitoring services	2 years
Remaining actions currently pending, after consolidation	2
Estimated putative class members			800,000
Damages sought for each class member			$ 1,000
Number of named plaintiffs' claims on which arbitration was requested		2
Number of motions for arbitration granted		1
Settlement terms	Under the terms of the Settlement Agreement, which would cover all individuals whose personal information was identified as being on the unaccounted-for server drives, class members who did not previously accept our offer of the credit monitoring and related services described above would be eligible to receive such credit monitoring and related services for a period of two years at no cost to them. Class members who previously accepted our original offer would be eligible to receive one additional year of such services. In addition, under the Settlement Agreement, class members would be eligible to receive reimbursement for certain unreimbursed losses arising from identity theft during a specified time period, up to a cap of $50,000 per class member, and $2 million in the aggregate. The Settlement Agreement also provides that we will continue our ongoing activities to enhance our information security measures, including the encryption of data at rest on our servers and storage area networks. We will also be responsible for the payment of any award of fees and expenses to plaintiffs' counsel for each of the three class actions described above as determined by the Sacramento County Superior Court. Finally, we will be responsible for the costs of administering the Settlement Agreement.
Litigation settlement amount, per member, maximum	50,000
Litigation settlement amount, maximum	$ 2,000,000

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Significant Accounting Policies (Restricted Assets) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Summary of Significant Accounting Policies [Abstract]
Restricted cash and cash equivalents	$ 1.7	$ 0.8
Investment securities held by trustees or agencies	$ 26.6	$ 25.5

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Financing Arrangements (Senior Notes) (Details) (USD $)	9 Months Ended		9 Months Ended	12 Months Ended	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 6.375% Senior Notes [Member]	Dec. 31, 2007 6.375% Senior Notes [Member]	Sep. 30, 2013 Change in Control and Below Investment Grade Rating [Member] 6.375% Senior Notes [Member]
Debt Instrument [Line Items]
Debt instrument, aggregate principal amount				$ 400,000,000
Debt instrument, stated interest rate (as a percentage)				6.375%
Debt instrument, maturity date				Jun. 01, 2017
Debt Instrument, Redemption Price (as a percentage)			100.00%		101.00%
Default on senior notes			0
Number of days in year per debt terms			360 days
Number of months in year per debt terms			12 months
Number of days in month, per debt terms			30 days
Debt instrument, benchmark for variable rate basis			Treasury rate
Treasury rate basis points (as a percentage)			0.30%
Senior note, failure to perform covenant	60 days
Senior note, grace period for defaulted payment	30 days
Threshold for noncompliance			50,000,000
Accelerated principal amount threshold			50,000,000
Senior notes amount	$ 399,248,000	$ 399,095,000

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Significant Accounting Policies (Health Plan Services Health Care Cost) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Summary of Significant Accounting Policies [Abstract]
Prior Years Favorable Reserve Development	$ 55.9
Provision For Adverse Deviation	52.9
Prior Years Unfavorable Reserve Development		$ 32.8

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Consolidated Statements Of Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Common Stock Held In Treasury [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Dec. 31, 2011	$ 1,443,146	$ 147	$ 1,278,037	$ (2,023,129)	$ 2,171,459	$ 16,632
Balance, shares at Dec. 31, 2011		146,804,000		(64,847,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	116,052				116,052
Other comprehensive income (loss)	11,299					11,299
Exercise of stock options and vesting of restricted stock units	16,589	2	16,587
Exercise of stock options and vesting of restricted stock units, shares		1,885,000
Share-based compensation expense	23,413		23,413
Tax benefit (detriment) related to equity compensation plans	5,113		5,113
Repurchases of common stock	(69,330)			(69,330)
Repurchases of common stock, shares				(2,572,000)
Balance at Sep. 30, 2012	1,546,282	149	1,323,150	(2,092,459)	2,287,511	27,931
Balance, shares at Sep. 30, 2012		148,689,000		(67,419,000)
Balance at Dec. 31, 2012	1,557,030	149	1,329,000	(2,092,625)	2,293,522	26,984
Balance, shares at Dec. 31, 2012		148,727,000		(67,426,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	150,373				150,373
Other comprehensive income (loss)	(61,679)					(61,679)
Exercise of stock options and vesting of restricted stock units	19,951	1	19,950
Exercise of stock options and vesting of restricted stock units, shares		1,466,000
Share-based compensation expense	23,388		23,388
Tax benefit (detriment) related to equity compensation plans	(1,594)		(1,594)
Repurchases of common stock	(86,878)			(86,878)
Repurchases of common stock, shares				(3,270,000)
Balance at Sep. 30, 2013	$ 1,600,591	$ 150	$ 1,370,744	$ (2,179,503)	$ 2,443,895	$ (34,695)
Balance, shares at Sep. 30, 2013		150,193,000		(70,696,000)

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Basis of Presentation [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

Health Net, Inc. prepared the accompanying unaudited consolidated financial statements following the rules and regulations of the Securities and Exchange Commission ("SEC") for interim reporting. In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Company,” “Health Net,” “we,” “us,” and “our” refer to Health Net, Inc. and its subsidiaries. As permitted under those rules and regulations, certain notes or other financial information that are normally required by accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted if they substantially duplicate the disclosures contained in the annual audited financial statements. The accompanying unaudited consolidated financial statements should be read together with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012 ("Form 10-K").

We are responsible for the accompanying unaudited consolidated financial statements. These consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results in accordance with GAAP. In accordance with GAAP, we make certain estimates and assumptions that affect the reported amounts. Actual results could differ from those estimates and assumptions. In addition, revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for the full year.

Subsequent to the issuance of the Company’s 2012 quarterly financial statements for the three and nine months ended September 30, 2012, we determined that inter-governmental pass-through funds ("IGT") received during the three months ended September 30, 2012, were incorrectly classified as operating cash flows in the consolidated statements of cash flows. Generally, IGTs are funds that we receive as intermediaries from government entities, which we subsequently distribute to other third party government entities. As a result, the consolidated statement of cash flows has been restated from the amounts previously reported to reclassify $44.6 million of IGT funds received from operating activities in the consolidated statements of cash flows for the nine months ended September 30, 2012 to cash flows from financing activities. We believe the effects of the restatement are immaterial.

On April 1, 2012, we completed the sale of the business operations of our Medicare stand-alone Prescription Drug Plan business ("Medicare PDP business") to Pennsylvania Life Insurance Company, a subsidiary of CVS Caremark Corporation ("CVS Caremark"). As a result of the sale, the operating results of our Medicare PDP business have been classified as discontinued operations in our consolidated statements of operations for the nine months ended September 30, 2012. See Note 3 for more information on the sale of our Medicare PDP business.

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Segment Information

9 Months Ended

Sep. 30, 2013

Segment Reporting Information, Additional Information [Abstract]

Segment Information

SEGMENT INFORMATION

We operate within three reportable segments, Western Region Operations, Government Contracts and Divested Operations and Services. Our Western Region Operations reportable segment includes the operations of our commercial, Medicare and Medicaid health plans, our health and life insurance companies, and our behavioral health and pharmaceutical services subsidiaries. These operations are conducted primarily in California, Arizona, Oregon and Washington. As a result of the classification of our Medicare PDP business as discontinued operations, our Western Region Operations reportable segment excludes the operating results of our Medicare PDP business for the three and nine months ended September 30, 2012. Our Government Contracts reportable segment includes government-sponsored managed care and administrative services contracts through the TRICARE program, the Department of Defense sponsored Military and Family Life Counseling, formerly Military and Family Life Consultant, program, and certain other health care-related government contracts. Our Divested Operations and Services reportable segment includes the operations of our businesses that provided administrative services to United in connection with the Northeast Sale and transition-related revenues and expenses related to the Medicare PDP business that was sold on April 1, 2012. As of December 31, 2012, we had substantially completed the administration and run-out of our divested businesses.

The financial results of our reportable segments are reviewed on a monthly basis by our chief operating decision maker ("CODM"). We continuously monitor our reportable segments to ensure that they reflect how our CODM manages our company.

We evaluate performance and allocate resources based on segment pretax income. Our assets are managed centrally and viewed by our CODM on a consolidated basis; therefore, they are not allocated to our segments and our segments are not evaluated for performance based on assets. The accounting policies of our reportable segments are the same as those described in Note 2 to the consolidated financial statements included in our Form 10-K, except that intersegment transactions are not eliminated.

We also have a Corporate/Other segment that is not a business operating segment. It is added to our reportable segments to provide a reconciliation to our consolidated results. The Corporate/Other segment includes costs that are excluded from the calculation of segment pretax income because they are not managed within the segments and are not directly identified with a particular operating segment. Accordingly, these costs are not included in the performance evaluation of our reportable segments by our CODM. In addition, certain charges, including but not limited to those related to our continuing efforts to address scale issues, as well as asset impairments, are reported as part of Corporate/Other.

Our segment information for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Western Region Operations		Government Contracts		Divested Operationsand Services			Corporate/Other/ Eliminations			Total
	(Dollars in millions)
Three months ended September 30, 2013
Revenues from external sources	$	2,625.7	$	149.3	$	—		$	—		$	2,775.0
Intersegment revenues	2.7		—		—			(2.7		)	—
Segment pretax income (loss)	85.2		23.5		—			(0.1		)	108.6
Three months ended September 30, 2012
Revenues from external sources	$	2,596.9	$	169.8	$	12.9		$	—		$	2,779.6
Intersegment revenues	2.7		—		—			(2.7		)	—
Segment pretax income (loss)	20.2		21.1		(4.7		)	(7.2		)	29.4
Nine months ended September 30, 2013
Revenues from external sources	$	7,886.7	$	423.8	$	—		$	—		$	8,310.5
Intersegment revenues	8.4		—		—			(8.4		)	—
Segment pretax income (loss)	204.3		50.6		—			(13.0		)	241.9
Nine months ended September 30, 2012
Revenues from external sources	$	7,898.2	$	527.4	$	25.7		$	—		$	8,451.3
Intersegment revenues	8.3		—		—			(8.3		)	—
Segment pretax income (loss)	12.6		66.6		(34.4		)	(21.6		)	23.2

Our health plan services premium revenue by line of business is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
	(Dollars in millions)
Commercial premium revenue	$	1,279.8	$	1,420.4	$	3,903.8	$	4,310.0
Medicare premium revenue	685.4		682.9		2,080.3		2,089.4
Medicaid premium revenue	641.6		475.4		1,833.6		1,419.2
Total health plan services premiums	$	2,606.8	$	2,578.7	$	7,817.7	$	7,818.6

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Significant Accounting Policies

SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with maturity of three months or less when purchased. We had no checks outstanding, net of deposits as of September 30, 2013 and $23.8 million as of December 31, 2012. Checks outstanding, net of deposits are classified as accounts payable and other liabilities in the consolidated balance sheets and the changes are reflected in the line item net increase (decrease) in checks outstanding, net of deposits within the cash flows from financing activities in the consolidated statements of cash flows.

Investments

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We analyze all debt investments that have unrealized losses for impairment consideration and assess the intent to sell such securities. If such intent exists, impaired securities are considered other-than-temporarily impaired. Management also assesses if we may be required to sell the debt investments prior to the recovery of amortized cost, which may also trigger an impairment charge. If securities are considered other-than-temporarily impaired based on intent or ability, we assess whether the amortized costs of the securities can be recovered. If management anticipates recovering an amount less than the amortized cost of the securities, an impairment charge is calculated based on the expected discounted cash flows of the securities. Any deficit between the amortized cost and the expected cash flows is recorded through earnings as a charge. All other temporary impairment changes are recorded through other comprehensive income. During the three and nine months endedSeptember 30, 2013 and 2012, respectively, no losses were recognized from other-than-temporary impairments.

Fair Value of Financial Instruments

The estimated fair value amounts of cash equivalents, investments available-for-sale, premiums and other receivables, notes receivable and notes payable have been determined by using available market information and appropriate valuation methodologies. The carrying amounts of cash equivalents approximate fair value due to the short maturity of those instruments. Fair values for debt and equity securities are generally based upon quoted market prices. Where quoted market prices were not readily available, fair values were estimated using valuation methodologies based on available and observable market information. Such valuation methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly traded companies in a similar line of business, and reviewing the underlying financial performance including estimating discounted cash flows. The carrying value of premiums and other receivables, long-term notes receivable and nonmarketable securities approximates the fair value of such financial instruments. The fair value of notes payable is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt with the same remaining maturities. The fair value of our fixed-rate borrowings was $428.0 million and $424.0 million as of September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013 and December 31, 2012, the fair value of our variable-rate borrowings under our revolving credit facility was $100.0 million and $100.0 million, respectively. The fair value of our fixed-rate borrowings was determined using the quoted market price, which is a Level 1 input in the fair value hierarchy. The fair value of our variable-rate borrowings was estimated to equal the carrying value because the interest rates paid on these borrowings were based on prevailing market rates. Since the pricing inputs are other than quoted prices and fair value is determined using an income approach, our variable-rate borrowings are classified as a Level 2 in the fair value hierarchy. See Notes 7 and 8 for additional information regarding our financing arrangements and fair value measurements, respectively.

Health Plan Services Health Care Cost

The cost of health care services is recognized in the period in which services are provided and includes an estimate of the cost of services that have been incurred but not yet reported. Such costs include payments to primary care physicians, specialists, hospitals and outpatient care facilities, and the costs associated with managing the extent of such care.

Our health care cost can also include from time to time remediation of certain claims as a result of periodic reviews by various regulatory agencies. We estimate the amount of the provision for health care service costs incurred but not yet reported ("IBNR") in accordance with GAAP and using standard actuarial developmental methodologies based upon historical data including the period between the date services are rendered and the date claims are received and paid, denied claim activity, expected medical cost inflation, seasonality patterns and changes in membership, among other things.

Our IBNR best estimate also includes a provision for adverse deviation, which is an estimate for known environmental factors that are reasonably likely to affect the required level of IBNR reserves. This provision for adverse deviation is intended to capture the potential adverse development from known environmental factors such as our entry into new geographical markets, changes in our geographic or product mix, the introduction of new customer populations, variation in benefit utilization, disease outbreaks, changes in provider reimbursement, fluctuations in medical cost trend, variation in claim submission patterns and variation in claims processing speed and payment patterns, changes in technology that provide faster access to claims data or change the speed of adjudication and settlement of claims, variability in claim inventory levels, non-standard claim development, and/or exceptional situations that require judgmental adjustments in setting the reserves for claims.

We consistently apply our IBNR estimation methodology from period to period. Our IBNR best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known to us, we adjust our assumptions accordingly to change our estimate of IBNR. Therefore, if moderately adverse conditions do not occur, evidenced by more complete claims information in the following period, then our prior period estimates will be revised downward, resulting in favorable development. However, any favorable prior period reserve development would increase current period net income only to the extent that the current period provision for adverse deviation is less than the benefit recognized from the prior period favorable development. If moderately adverse conditions occur and are more acute than we estimated, then our prior period estimates will be revised upward, resulting in unfavorable development, which would decrease current period net income. For the nine months ended September 30, 2013, we had $55.9 million in favorable reserve developments related to prior years. We believe this favorable development was primarily due to the absence of moderately adverse conditions. As part of our best estimate for IBNR, the provision for adverse deviation recorded as of September 30, 2013 was $52.9 million. The reserve developments related to prior years for the nine months ended September 30, 2013, when considered together with the provision for adverse deviation recorded as of September 30, 2013, did not have a material impact on our operating results or financial condition. For the nine months ended September 30, 2012, we had $32.8 million in unfavorable reserve developments related to prior years. We believe this unfavorable reserve development for the nine months ended September 30, 2012 was primarily due to significant delays in claims submissions for the fourth quarter of 2011 arising from issues related to a new billing format required by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") coupled with an unanticipated flattening of commercial trends.

The majority of the IBNR reserve balance held at each quarter-end is associated with the most recent months' incurred services because these are the services for which the fewest claims have been paid. The degree of uncertainty in the estimates of incurred claims is greater for the most recent months' incurred services. Revised estimates for prior periods are determined in each quarter based on the most recent updates of paid claims for prior periods. Estimates for service costs incurred but not yet reported are subject to the impact of changes in the regulatory environment, economic conditions, changes in claims trends, and numerous other factors. Given the inherent variability of such estimates, the actual liability could differ significantly from the amounts estimated.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investments and premiums receivable. All cash equivalents and investments are managed within established guidelines, which provide us diversity among issuers. Concentrations of credit risk with respect to premiums receivable are limited due to the large number of payers comprising our customer base. The federal government is the primary customer of our Government Contracts reportable segment with fees and premiums associated with this customer accounting for approximately95% of our Government Contracts revenue. In addition, the federal government is a significant customer of our Western Region Operations reportable segment as a result of our contract with Centers for Medicare & Medicaid Services ("CMS") for coverage of Medicare-eligible individuals. Furthermore, all of our Medicaid revenue is currently derived from our participation in the state Medicaid program in California ("Medi-Cal") through our relationship with the State of California Department of Health Care Services ("DHCS"). As a result, DHCS is a significant customer of our Western Region Operations reportable segment.

Comprehensive Income

Comprehensive income includes all changes in stockholders’ equity (except those arising from transactions with stockholders) and includes net income (loss), net unrealized appreciation (depreciation) after tax on investments available-for-sale and prior service cost and net loss related to our defined benefit pension plan.

Our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Unrealized Gains (Losses) on investments available-for-sale			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (loss)
Three Months Ended September 30:				(Dollars in millions)
Balance as of July 1, 2012	$	19.6		$	(11.9	)	$	7.7
Other comprehensive income before reclassifications	22.4			—			22.4
Amounts reclassified from accumulated other comprehensive income	(2.8		)	0.6			(2.2		)
Other comprehensive income for the three months ended September 30, 2012	19.6			0.6			20.2
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of July 1, 2013	$	(25.4	)	$	(10.2	)	$	(35.6	)
Other comprehensive income before reclassifications	0.7			—			0.7
Amounts reclassified from accumulated other comprehensive income	(0.2		)	0.4			0.2
Other comprehensive income for the three months ended September 30, 2013	0.5			0.4			0.9
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)
Nine Months Ended September 30:
Balance as of January 1, 2012	$	29.8		$	(13.2	)	$	16.6
Other comprehensive income before reclassifications	28.7			—			28.7
Amounts reclassified from accumulated other comprehensive income	(19.3		)	1.9			(17.4		)
Other comprehensive income for the nine months ended September 30, 2012	9.4			1.9			11.3
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of January 1, 2013	$	38.0		$	(11.0	)	$	27.0
Other comprehensive loss before reclassifications	(47.8		)	—			(47.8		)
Amounts reclassified from accumulated other comprehensive income	(15.1		)	1.2			(13.9		)
Other comprehensive (loss) income for the nine months ended September 30, 2013	(62.9		)	1.2			(61.7		)
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)

The following table shows reclassifications out of accumulated other comprehensive income and the affected line items in the consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,						Nine months ended September 30,						Affected line item in the Consolidated Statements of Operations
	2013			2012			2013			2012
	(Dollars in millions)
Unrealized gains on investments available-for-sale	$	0.3		$	4.3		$	23.3		$	29.7		Net investment income
	0.3			4.3			23.3			29.7			Total before tax
	0.1			1.5			8.2			10.4			Tax expense
	0.2			2.8			15.1			19.3			Net of tax
Amortization of defined benefit pension items:
Prior-service cost	(0.1		)	—			(0.1		)	(0.1		)	(a)
Actuarial gains (losses)	(0.6		)	(1.0		)	(1.9		)	(3.0		)	(a)
	(0.7		)	(1.0		)	(2.0		)	(3.1		)	Total before tax
	(0.3		)	(0.4		)	(0.8		)	(1.2		)	Tax benefit
	(0.4		)	(0.6		)	(1.2		)	(1.9		)	Net of tax
Total reclassifications for the period	$	(0.2	)	$	2.2		$	13.9		$	17.4		Net of tax

_________

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

Earnings Per Share

Basic earnings per share excludes dilution and reflects net income divided by the weighted average shares of common stock outstanding during the periods presented. Diluted earnings per share is based upon the weighted average shares of common stock and dilutive common stock equivalents (this reflects the potential dilution that could occur if stock options were exercised and restricted stock units ("RSUs") and performance share units ("PSUs") were vested) outstanding during the periods presented.

The inclusion or exclusion of common stock equivalents arising from stock options, RSUs and PSUs in the computation of diluted earnings per share is determined using the treasury stock method. For the three and nine months endedSeptember 30, 2013, respectively, 1,009,000 shares and 903,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share. For the three and nine months endedSeptember 30, 2012, respectively, 432,000 shares and 996,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share.

For the three and nine months endedSeptember 30, 2013, respectively, an aggregate of 812,000 shares and 1,019,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. For the three and nine months endedSeptember 30, 2012, respectively, an aggregate of 4,342,000 shares and 1,819,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. Stock options expire at various times through February 2019.

In May 2011, our Board of Directors authorized a stock repurchase program for the repurchase of up to $300 million of our outstanding common stock (our "stock repurchase program"). On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program. As of December 31, 2012, the remaining authorization under our stock repurchase program was $350.0 million. The remaining authorization under our stock repurchase program as of September 30, 2013 was $280.0 million. See Note 6 for more information regarding our stock repurchase program.

Goodwill and Other Intangible Assets

We performed our annual impairment test on our goodwill and other intangible assets as of June 30, 2013 for our Western Region Operations reporting unit and also re-evaluated the useful lives of our other intangible assets. No goodwill impairment was identified. We also determined that the estimated useful lives of our other intangible assets properly reflected the current estimated useful lives.

The carrying amount of goodwill by reporting unit is as follows:

	Western Region Operations		Total
	(Dollars in millions)
Balance as of December 31, 2012	$	565.9	$	565.9
Balance as of September 30, 2013	$	565.9	$	565.9

Due to the many variables inherent in the estimation of a business’s fair value and the relative size of recorded goodwill, changes in assumptions may have a material effect on the results of our impairment test. The discounted cash flows and market participant valuations (and the resulting fair value estimates of the Western Region Operations reporting unit) are sensitive to changes in assumptions including, among others, certain valuation and market assumptions, the Company’s ability to adequately incorporate into its premium rates the future costs of premium-based assessments imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA"), and assumptions related to the achievement of certain administrative cost reductions and the profitable implementation of California's Coordinated Care Initiative, which includes the dual eligibles demonstration. Changes to any of these assumptions could cause the fair value of our Western Region Operations reporting unit to be below its carrying value. As of June 30, 2013 and June 30, 2012, the ratio of the fair value of our Western Region Operations reporting unit to its carrying value was approximately 149% and 115%, respectively.

The intangible assets that continue to be subject to amortization using the straight-line method over their estimated lives are as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Balance		Weighted Average Life (in years)
	(Dollars in millions)
As of September 30, 2013:
Provider networks	$	40.5	$	(35.4	)	$	5.1	19.4
Customer relationships and other	29.5		(19.9		)	9.6		11.1
	$	70.0	$	(55.3	)	$	14.7
As of December 31, 2012:
Provider networks	$	40.5	$	(34.6	)	$	5.9	19.4
Customer relationships and other	29.5		(18.1		)	11.4		11.1
	$	70.0	$	(52.7	)	$	17.3

Estimated annual pretax amortization expense for other intangible assets for each of the next five years ending December 31 is as follows (dollars in millions):

Year	Amount
2013	$	3.4
2014	2.8
2015	2.6
2016	2.0
2017	2.0

Restricted Assets

We and our consolidated subsidiaries are required to set aside certain funds that may only be used for certain purposes pursuant to state regulatory requirements. We have discretion as to whether we invest such funds in cash and cash equivalents or other investments. As of September 30, 2013 and December 31, 2012, the restricted cash and cash equivalents balances totaled $1.7 million and $0.8 million, respectively, and are included in other noncurrent assets. Investment securities held by trustees or agencies were $26.6 million and $25.5 million as of September 30, 2013 and December 31, 2012, respectively, and are included in investments available-for-sale.

Divested Operations and Services

Divested operations and services revenues and expenses include any revenues and expenses related to the run-out of our business that was sold in connection with the Northeast Sale (as defined below) on December 11, 2009, including items related to our performance under related administrative services and/or claims servicing agreements, and transition-related revenues and expenses related to the sale of our Medicare PDP business on April 1, 2012. The "Northeast Sale" refers to the sale of all of the outstanding shares of capital stock of our health plan subsidiaries that were domiciled and/or had conducted businesses in Connecticut, New Jersey, New York and Bermuda to an affiliate of UnitedHealth Group Incorporated ("United"), and includes the acquisition by United of membership renewal rights for certain commercial health care business conducted by our subsidiary, Health Net Life Insurance Company ("HNL") in the states of Connecticut and New Jersey. As of December 31, 2012, we had substantially completed the administration and run-out of our divested businesses. See Note 3 for additional information regarding the sale of our Medicare PDP business.

Medicaid/Medi-Cal Rate Adjustment

Our revenue from the Medi-Cal program, including seniors and persons with disabilities ("SPD") programs, and other state-sponsored health programs are subject to certain retroactive rate adjustments based on expected and actual health care cost. For the three and nine months ended September 30, 2013, we recognized $32.1 million and $74.3 million, respectively, of premium revenues as a result of retroactive rate adjustments for our SPD and non-SPD members for periods prior to 2013. Retroactive rate adjustments for our SPD and non-SPD members were not material for the three and nine months endedSeptember 30, 2012.

Medi-Cal Rate Reduction

In October 2011, CMS approved certain elements of California's 2011-2012 budget proposals to reduce Medi-Cal provider reimbursement rates as authorized by California Assembly Bill 97 (“AB 97”). The elements approved by CMS include a 10 percent reduction in reimbursement rates for a number of providers. DHCS preliminarily indicated that the Medi-Cal managed care rate reductions could be effective retroactive to July 1, 2011. However, a series of preliminary injunctions arising from various legal challenges have prevented the implementation of AB 97, and no such reductions have been made as of September 30, 2013.

In December 2012, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) issued a decision that reversed the preliminary injunctions against the implementation of AB 97. The Ninth Circuit subsequently denied a motion by the plaintiffs for an en banc hearing and a petition to stay implementation of AB 97 pending appeal to the U.S. Supreme Court. Consequently, after the Ninth Circuit's ruling and as of September 30, 2013, there was no legal bar to the implementation of AB 97. As a result, the reimbursement rate reductions authorized by AB 97 are reflected in California's 2013-2014 budget proposal, which was recently passed by the legislature and signed into law by Governor Brown. The State has not formally determined the effective date for the implementation of AB 97, and the plaintiffs in the AB 97 legal actions may still file a petition to the U.S. Supreme Court to review the Ninth Circuit's ruling. In any case, even if the reductions are implemented as currently authorized, they would be applied to Medi-Cal managed care plans only on a prospective basis, and the impact of such reductions could be limited since they would need to be reconciled with minimum payment rates for primary care physicians dictated by the ACA for 2013 and 2014. Due to these uncertainties, we cannot reasonably estimate the range of reductions in premiums and/or related health care cost recoveries, if any, that may result in connection with AB 97.

Medicaid Premium Taxes

On June 27, 2013, the State of California reinstated premium taxes retroactive to July 1, 2012 for plans participating in Medi-Cal. As a result of this reinstatement, we recorded $25.6 million in premium taxes, primarily related to 2013, as general and administrative expense for the three months ended September 30, 2013. For the nine months ended September 30, 2013, we recorded $68.4 million, including $18.8 million attributable to periods prior to 2013, as general and administrative expense. In addition, the State of California increased Medicaid premium revenues in an amount equal to the increase in the premium taxes. As a result, we recorded $25.6 million and $68.4 million in health plan services premiums for the three and nine months ended September 30, 2013, respectively. These Medicaid premium taxes are currently authorized by the State of California through July 1, 2016.

CMS Risk Factor Adjustments

We have an arrangement with CMS that relates to certain of our Medicare products and pursuant to which periodic changes in our risk factor adjustment scores for certain diagnostic codes result in changes to our health plan services premium revenues. We recognize such changes when the amounts become determinable and the collectability is reasonably assured. Because the recorded revenue is based on our best estimate at the time, the actual payment we receive from CMS for risk adjustment reimbursement settlements may be materially different than the amounts we have initially recognized on our financial statements. The change in our estimate for the risk adjustment revenue in each of the three and nine months ended September 30, 2013 and 2012 was not significant.

Recently Issued Accounting Pronouncement

Effective January 1, 2014, we will adopt new accounting guidance relating to the recognition and income statement reporting of any mandated fees to be paid to the federal government by health insurers, pursuant to the Accounting Standards Update ("ASU") No. 2011-06, issued by the Financial Accounting Standards Board ("FASB") in July 2011. This guidance will apply primarily to new fees enacted in the ACA. The mandated fees are expected to be material, and this new accounting guidance will result in the recognition of this expense on a straight-line basis beginning in 2014.

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Stock Repurchase Program (Details) (USD $)	0 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 08, 2012	May 02, 2011	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Equity, Class of Treasury Stock [Line Items]
Treasury stock value acquired cost method					$ 86,878,000	$ 69,330,000
2011 Stock Repurchase Program [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program authorized amount	323,700,000	300,000,000
Treasury stock shares acquired			0	1,500,000	2,700,000	2,100,000
Treasury stock value acquired cost method				36,100,000	70,000,000	50,000,000
Stock repurchase program remaining authorized repurchase amount					$ 280,000,000		$ 350,000,000

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Significant Accounting Policies (Reclassifications Out of Accumulated Other Comprehensive Income) (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax benefit	$ 41,740,000		$ 8,898,000		$ 91,538,000		$ 5,712,000
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net of tax	(200,000)		2,200,000		13,900,000		17,400,000
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized gains (losses) on investments available-for-sale [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net investment income	300,000		4,300,000		23,300,000		29,700,000
Total before tax	300,000		4,300,000		23,300,000		29,700,000
Tax benefit	100,000		1,500,000		8,200,000		10,400,000
Net of tax	200,000		2,800,000		15,100,000		19,300,000
Reclassification out of Accumulated Other Comprehensive Income [Member] | Amortization of defined benefit pension items [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Prior-service cost	(100,000)	[1]	0	[1]	(100,000)	[1]	(100,000)	[1]
Actuarial gains (losses)	(600,000)	[1]	(1,000,000)	[1]	(1,900,000)	[1]	(3,000,000)	[1]
Total before tax	(700,000)		(1,000,000)		(2,000,000)		(3,100,000)
Tax benefit	(300,000)		(400,000)		(800,000)		(1,200,000)
Net of tax	$ (400,000)		$ (600,000)		$ (1,200,000)		$ (1,900,000)

[1] These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

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Significant Accounting Policies (Medicaid/Medi-Cal Adjustments) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2011
Health Care Organization Revenue and Expense [Line Items]
Medicaid retro rate adjustment	$ 32,100,000		$ 74,300,000
Percent reduction in provider reimbursement rates					10.00%
Health plan services premiums	2,606,754,000	2,578,689,000	7,817,697,000	7,818,565,000
Medicaid Premium Revenue [Member]
Health Care Organization Revenue and Expense [Line Items]
Health plan services premiums	641,600,000	475,400,000	1,833,600,000	1,419,200,000
Reinstated Medicaid premium tax [Member]
Health Care Organization Revenue and Expense [Line Items]
Taxes, Other	25,600,000		68,400,000
Reinstated Medicaid premium tax [Member] | Medicaid Premium Revenue [Member]
Health Care Organization Revenue and Expense [Line Items]
Health plan services premiums	25,600,000		68,400,000
Reinstated retroactive Medicaid premium taxes [Member] | Reinstated Medicaid premium tax [Member]
Health Care Organization Revenue and Expense [Line Items]
Taxes, Other			$ 18,800,000

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Investments (Available-for-Sale Investments Classified by Contractual Maturity Date) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Noncurrent	$ 52,637,000	$ 0
Available for sale securities, Estimated Fair Value	1,580,032,000	1,812,512,000
Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Due in one year or less, Amortized Cost	42,500,000
Due after one year through five years, Amortized Cost	281,600,000
Due after five years through ten years, Amortized Cost	442,800,000
Due after ten years, Amortized Cost	434,100,000
Available for sale securities, Amortized Cost	1,611,091,000	1,753,931,000
Due in one year or less, Estimated Fair Value	42,800,000
Due after one year through five years, Estimated Fair Value	284,100,000
Due after five years through ten years, Estimated Fair Value	434,900,000
Due after ten years, Estimated Fair Value	410,800,000
Available for sale securities, Estimated Fair Value	1,580,000,000	1,812,500,000
Current [Member] | Asset-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities, Amortized Cost	410,100,000	499,700,000
Available for sale securities, Estimated Fair Value	407,400,000	519,100,000
Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Due after one year through five years, Amortized Cost	1,000,000
Due after five years through ten years, Amortized Cost	9,500,000
Due after ten years, Amortized Cost	48,800,000
Available for sale securities, Amortized Cost	60,080,000	0
Available-for-sale Securities, Noncurrent	52,600,000
Due after one year through five years, Estimated Fair Value	800,000
Due after five years through ten years, Estimated Fair Value	8,300,000
Due after ten years, Estimated Fair Value	42,800,000
Noncurrent [Member] | Asset-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities, Amortized Cost	800,000
Available-for-sale Securities, Noncurrent	$ 700,000

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State-Sponsored Health Plans Rate Settlement Agreement (Details) (USD $)		9 Months Ended
	Dec. 31, 2012	Sep. 30, 2013 Medicaid Premium Revenue [Member]
State-Sponsored Health Plans Rate Settlement Agreement [Line Items]
State settlement premium revenue		$ 51,700,000
Settlement account balance, beginning	0
Settlement account payment, maximum		264,000,000
Settlement account payment, current balance		51,700,000
Receivable with imputed interest, discount		$ 3,700,000

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Fair Value Measurements (Changes in the Balances of Level 3 Financial Assets) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Opening balance	$ 46.2	$ 15.2	$ 11.4	$ 5.5
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Total gains or losses for the period
Realized in net income	18.2	(7.8)	53.2	1.9
Unrealized in accumulated other comprehensive income	0	0	0	0
Purchases, issues, sales and settlements
Purchases/additions	0	0	0	0
Issues	0	0	0	0
Sales	0	0	(0.2)	0
Settlements	0	0	0	0
Closing balance	64.4	7.4	64.4	7.4
Fair Value, Assets Measured on Recurring Basis, Change in Unrealized Gain (Loss)	0	0	0	0
Available-For-Sale Investments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Opening balance	0	0.2	0.2	0.2
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Total gains or losses for the period
Realized in net income	0	0	0	0
Unrealized in accumulated other comprehensive income	0	0	0	0
Purchases, issues, sales and settlements
Purchases/additions	0	0	0	0
Issues	0	0	0	0
Sales	0	0	(0.2)	0
Settlements		0	0	0
Closing balance	0	0.2	0	0.2
Fair Value, Assets Measured on Recurring Basis, Change in Unrealized Gain (Loss)	0	0	0	0
Embedded Contractual Derivative Asset [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Opening balance	10.8	15.0	11.2	5.3
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Total gains or losses for the period
Realized in net income	1.9	(7.8)	1.5	1.9
Unrealized in accumulated other comprehensive income	0	0	0	0
Purchases, issues, sales and settlements
Purchases/additions	0	0	0	0
Issues	0	0	0	0
Sales	0	0	0	0
Settlements	0	0	0	0
Closing balance	12.7	7.2	12.7	7.2
Fair Value, Assets Measured on Recurring Basis, Change in Unrealized Gain (Loss)	0	0	0	0
Other Noncurrent Asset [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Opening balance	35.4		0
Transfers into Level 3	0		0
Transfers out of Level 3	0		0
Total gains or losses for the period
Realized in net income	16.3		51.7
Unrealized in accumulated other comprehensive income	0		0
Purchases, issues, sales and settlements
Purchases/additions	0		0
Issues	0		0
Sales	0		0
Settlements	0		0
Closing balance	51.7		51.7
Fair Value, Assets Measured on Recurring Basis, Change in Unrealized Gain (Loss)	$ 0		$ 0

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net income (loss)	$ 66,840	$ 18,028	$ 150,373	$ 116,052
Unrealized gains (losses) on investments available-for-sale:
Unrealized holding gains (losses) arising during the period	1,074	36,554	(73,779)	64,126
Less: Reclassification adjustments for gains included in earnings	(370)	(4,272)	(23,306)	(29,661)
Unrealized gains (losses) on investments available-for-sale, net	704	32,282	(97,085)	34,465
Defined benefit pension plans:
Prior service cost arising during the period	0	0	0	0
Net loss arising during the period	0	0	0	0
Less: Amortization of prior service cost and net loss included in net periodic pension cost	643	1,038	1,929	3,114
Defined benefit pension plans, net	643	1,038	1,929	3,114
Other comprehensive income (loss) before tax	1,347	33,320	(95,156)	37,579
Income tax expense (benefit) related to components of other comprehensive income	433	13,065	(33,477)	26,280
Other comprehensive income (loss), net of tax	914	20,255	(61,679)	11,299
Comprehensive income	$ 67,754	$ 38,283	$ 88,694	$ 127,351

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Financing Arrangements

9 Months Ended

Sep. 30, 2013

Financing Arrangements [Abstract]

Financing Arrangements

FINANCING ARRANGEMENTS

Revolving Credit Facility

In October 2011, we entered into a $600 million unsecured revolving credit facility due in October 2016, which includes a $400 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swing line loans (which sublimits may be increased in connection with any increase in the credit facility described below). In addition, we have the ability from time to time to increase the credit facility by up to an additional $200 million in the aggregate, subject to the receipt of additional commitments. As of September 30, 2013, $100.0 million was outstanding under our revolving credit facility and the maximum amount available for borrowing under the revolving credit facility was $491.3 million (see "—Letters of Credit" below).

Amounts outstanding under our revolving credit facility bear interest, at the Company’s option, at either (a) the base rate (which is a rate per annum equal to the greatest of (i) the federal funds rate plus one-half of one percent, (ii) Bank of America, N.A.’s “prime rate” and (iii) the Eurodollar Rate (as such term is defined in the credit facility) for a one-month interest period plus one percent) plus an applicable margin ranging from 45 to 105 basis points or (b) the Eurodollar Rate plus an applicable margin ranging from 145 to 205 basis points. The applicable margins are based on our consolidated leverage ratio, as specified in the credit facility, and are subject to adjustment following the Company’s delivery of a compliance certificate for each fiscal quarter.

Our revolving credit facility includes, among other customary terms and conditions, limitations (subject to specified exclusions) on our and our subsidiaries’ ability to incur debt; create liens; engage in certain mergers, consolidations and acquisitions; sell or transfer assets; enter into agreements that restrict the ability to pay dividends or make or repay loans or advances; make investments, loans, and advances; engage in transactions with affiliates; and make dividends. In addition, we are required to be in compliance at the end of each fiscal quarter with a specified consolidated leverage ratio and consolidated fixed charge coverage ratio. As of September 30, 2013, we were in compliance with all covenants under the revolving credit facility.

Our revolving credit facility contains customary events of default, including nonpayment of principal or other amounts when due; breach of covenants; inaccuracy of representations and warranties; cross-default and/or cross-acceleration to other indebtedness of the Company or our subsidiaries in excess of $50 million; certain ERISA-related events; noncompliance by the Company or any of our subsidiaries with any material term or provision of the HMO Regulations or Insurance Regulations (as each such term is defined in the credit facility) in a manner that could reasonably be expected to result in a material adverse effect; certain voluntary and involuntary bankruptcy events; inability to pay debts; undischarged, uninsured judgments greater than $50 million against us and/or our subsidiaries that are not stayed within 60 days; actual or asserted invalidity of any loan document; and a change of control. If an event of default occurs and is continuing under the revolving credit facility, the lenders thereunder may, among other things, terminate their obligations under the facility and require us to repay all amounts owed thereunder.

Letters of Credit

Pursuant to the terms of our revolving credit facility, we can obtain letters of credit in an aggregate amount of $400 million and the maximum amount available for borrowing is reduced by the dollar amount of any outstanding letters of credit. As of September 30, 2013 and December 31, 2012, we had outstanding letters of credit of $8.7 million and $59.4 million, respectively, resulting in a maximum amount available for borrowing of $491.3 million and $440.6 million, respectively. As of September 30, 2013 and December 31, 2012, no amounts had been drawn on any of these letters of credit.

Senior Notes

In 2007 we issued $400 million in aggregate principal amount of 6.375% Senior Notes due 2017 ("Senior Notes"). The indenture governing the Senior Notes limits our ability to incur certain liens, or consolidate, merge or sell all or substantially all of our assets. In the event of the occurrence of both (1) a change of control of Health Net, Inc. and (2) a below investment grade rating by any two of Fitch, Inc., Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services within a specified period, we will be required to make an offer to purchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes plus accrued and unpaid interest to the date of repurchase. As of September 30, 2013, no default or event of default had occurred under the indenture governing the Senior Notes.

The Senior Notes may be redeemed in whole at any time or in part from time to time, prior to maturity at our option, at a redemption price equal to the greater of:

• 100% of the principal amount of the Senior Notes then outstanding to be redeemed; or

• the sum of the present values of the remaining scheduled payments of principal and interest on the Senior Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve30-day months) at the applicable treasury rate plus 30 basis points

plus, in each case, accrued and unpaid interest on the principal amount being redeemed to the redemption date.

Each of the following will be an Event of Default under the indenture governing the Senior Notes:

• failure to pay interest for 30 days after the date payment is due and payable; provided that an extension of an interest payment period by us in accordance with the terms of the Senior Notes shall not constitute a failure to pay interest;

• failure to pay principal or premium, if any, on any note when due, either at maturity, upon any redemption, by declaration or otherwise;

• failure to perform any other covenant or agreement in the notes or indenture for a period of 60 days after notice that performance was required;

• (A) our failure or the failure of any of our subsidiaries to pay indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, at the later of final maturity and the expiration of any related applicable grace period and such defaulted payment shall not have been made, waived or extended within 30 days after notice or (B) acceleration of the maturity of indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, if that acceleration results from a default under the instrument giving rise to or securing such indebtedness for money borrowed and such indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days after notice; or

• events in bankruptcy, insolvency or reorganization of our Company.

Our Senior Notes payable balances were $399.2 million as of September 30, 2013 and $399.1 million as of December 31, 2012.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Premiums receivable, allowance for doubtful accounts	$ 763	$ 668
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	150,193,000	148,727,000
Treasury stock, shares	70,696,000	67,426,000
Current [Member]
Investments available for sale, amortized cost	1,611,091	1,753,931
Noncurrent [Member]
Investments available for sale, amortized cost	$ 60,080	$ 0

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Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues
Health plan services premiums	$ 2,606,754	$ 2,578,689	$ 7,817,697	$ 7,818,565
Government contracts	149,342	169,811	423,796	527,421
Net investment income	11,276	16,355	57,970	63,356
Administrative services fees and other income	7,659	1,854	11,036	16,300
Divested operations and services revenue	0	12,863	0	25,668
Total revenues	2,775,031	2,779,572	8,310,499	8,451,310
Expenses
Health plan services (excluding depreciation and amortization)	2,196,561	2,281,388	6,657,215	6,983,502
Government contracts	125,334	151,815	378,209	467,531
General and administrative	267,683	222,425	804,355	688,457
Selling	59,498	61,053	175,828	181,004
Depreciation and amortization	9,402	7,907	28,355	22,722
Interest	7,973	8,021	24,626	24,895
Divested operations and services expenses	0	17,587	0	59,973
Total expenses	2,666,451	2,750,196	8,068,588	8,428,084
Income from continuing operations before income taxes	108,580	29,376	241,911	23,226
Income tax provision	41,740	8,898	91,538	5,712
Income from continuing operations	66,840	20,478	150,373	17,514
Discontinued operations:
Loss from discontinued operation, net of tax	0	0	0	(18,452)
(Adjustment to) gain on sale of discontinued operation, net of tax	0	(2,450)	0	116,990
(Loss) income on discontinued operation, net of tax	0	(2,450)	0	98,538
Net income	$ 66,840	$ 18,028	$ 150,373	$ 116,052
Net income per share—basic:
Income from continuing operations	$ 0.84	$ 0.25	$ 1.89	$ 0.21
(Loss) income on discontinued operation, net of tax	$ 0.00	$ (0.03)	$ 0.00	$ 1.20
Net income per share—basic	$ 0.84	$ 0.22	$ 1.89	$ 1.41
Net income per share—diluted:
Income from continuing operations	$ 0.83	$ 0.25	$ 1.87	$ 0.21
(Loss) income on discontinued operation, net of tax	$ 0.00	$ (0.03)	$ 0.00	$ 1.18
Net income per share—diluted	$ 0.83	$ 0.22	$ 1.87	$ 1.39
Weighted average shares outstanding:
Basic	79,432	81,607	79,436	82,451
Diluted	80,441	82,039	80,339	83,447

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Significant Accounting Policies (Earnings Per Share) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended		0 Months Ended		9 Months Ended	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Mar. 08, 2012 2011 Stock Repurchase Program [Member]	May 02, 2011 2011 Stock Repurchase Program [Member]	Sep. 30, 2013 2011 Stock Repurchase Program [Member]	Dec. 31, 2012 2011 Stock Repurchase Program [Member]
Significant Accounting Policies [Line Items]
Common stock equivalents (in shares)	1,009,000	432,000	903,000	996,000
Anti-dilutive securities excluded from computation of diluted earnings per share (in shares)	812,000	4,342,000	1,019,000	1,819,000
Stock repurchase program authorized amount					$ 323.7	$ 300.0
Stock repurchase program remaining authorized repurchase amount							$ 280.0	$ 350.0

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Basis of Presentation Reclassifications in Consolidated Statements of Cash Flows (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
cash flow from financing activities [Member]
Prior Period Reclassification Adjustment	$ 44.6
cash flows from operating activities [Member]
Prior Period Reclassification Adjustment	$ (44.6)

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Fair Value Measurements (Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Transfers of Assets, Levels 1 to Level 2	$ 0		$ 0
Transfer of Assets, Level 2 to Level 1	0		0
Transfer of Liabilities, Level 1 to Level 2	0		0
Transfers of Liabilities, Levels 2 to Level 1	0		0
Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	686,100,000	340,100,000
Investments at fair value	1,632,600,000	1,812,500,000
Embedded contractual derivative asset	12,700,000	11,200,000
State-sponsored health plans settlement account deficit	51,700,000
Total assets at fair value	2,383,100,000	2,163,800,000
Total liability at fair value			0
Recurring [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	208,600,000	272,400,000
Recurring [Member] | Commercial Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	157,500,000	223,100,000
Recurring [Member] | Other Asset-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	42,000,000	23,600,000
Recurring [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	26,500,000	25,900,000
Recurring [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Obligations of States and Other Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	762,100,000	842,100,000
Recurring [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	435,900,000	425,400,000
Recurring [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	686,100,000	340,100,000
Investments at fair value	26,500,000	25,900,000
Embedded contractual derivative asset	0	0
State-sponsored health plans settlement account deficit	0
Total assets at fair value	712,600,000	366,000,000
Recurring [Member] | Level 1 [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 1 [Member] | Commercial Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 1 [Member] | Other Asset-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 1 [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	26,500,000	25,900,000
Recurring [Member] | Level 1 [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 1 [Member] | Obligations of States and Other Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 1 [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Investments at fair value	1,553,500,000	1,786,400,000
Embedded contractual derivative asset	0	0
State-sponsored health plans settlement account deficit	0
Total assets at fair value	1,553,500,000	1,786,400,000
Recurring [Member] | Level 2 [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	208,600,000	272,400,000
Recurring [Member] | Level 2 [Member] | Commercial Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	156,800,000	223,100,000
Recurring [Member] | Level 2 [Member] | Other Asset-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	42,000,000	23,600,000
Recurring [Member] | Level 2 [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member] | Obligations of States and Other Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	719,200,000	841,900,000
Recurring [Member] | Level 2 [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	426,900,000	425,400,000
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Investments at fair value	52,600,000	0
Embedded contractual derivative asset	0	0
State-sponsored health plans settlement account deficit	0
Total assets at fair value	52,600,000	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | Commercial Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	700,000	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | Other Asset-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | Obligations of States and Other Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	42,900,000	0
Recurring [Member] | Level 2 [Member] | Noncurrent Assets [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	9,000,000	0
Recurring [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Investments at fair value	0	200,000
Embedded contractual derivative asset	12,700,000	11,200,000
State-sponsored health plans settlement account deficit	51,700,000
Total assets at fair value	64,400,000	11,400,000
Embedded contractual derivative liability	700,000	3,200,000
Total liability at fair value	700,000	3,200,000
Recurring [Member] | Level 3 [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 3 [Member] | Commercial Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 3 [Member] | Other Asset-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 3 [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 3 [Member] | U.S. Agency Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	0
Recurring [Member] | Level 3 [Member] | Obligations of States and Other Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	0	200,000
Recurring [Member] | Level 3 [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments at fair value	$ 0	$ 0

XML

Investments (Unrealized Loss Position for Investments) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 1,028.5	$ 303.0
Less than 12 Months, Unrealized Losses	(44.1)	(2.7)
12 Months or More, Fair Value	11.8	0.3
12 Months or More, Unrealized Losses	(0.6)	0
Total, Fair Value	1,040.3	303.3
Total, Unrealized Losses	(44.7)	(2.7)
Current [Member] | Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	232.8	54.9
Less than 12 Months, Unrealized Losses	(6.2)	(0.2)
12 Months or More, Fair Value	9.1	0.1
12 Months or More, Unrealized Losses	(0.4)	0
Total, Fair Value	241.9	55.0
Total, Unrealized Losses	(6.6)	(0.2)
Current [Member] | U.S. Government and Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value		10.1
Less than 12 Months, Unrealized Losses		0
12 Months or More, Fair Value		0
12 Months or More, Unrealized Losses		0
Total, Fair Value		10.1
Total, Unrealized Losses		0
Current [Member] | Obligations of States and Other Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	542.4	192.1
Less than 12 Months, Unrealized Losses	(28.3)	(2.0)
12 Months or More, Fair Value	0.2	0.2
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	542.6	192.3
Total, Unrealized Losses	(28.3)	(2.0)
Current [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	253.3	45.9
Less than 12 Months, Unrealized Losses	(9.6)	(0.5)
12 Months or More, Fair Value	2.5	0
12 Months or More, Unrealized Losses	(0.2)	0
Total, Fair Value	255.8	45.9
Total, Unrealized Losses	(9.8)	(0.5)
Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	51.9
Less than 12 Months, Unrealized Losses	(7.4)
12 Months or More, Fair Value	0.7
12 Months or More, Unrealized Losses	(0.1)
Total, Fair Value	52.6
Total, Unrealized Losses	(7.5)
Noncurrent [Member] | Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	0
Less than 12 Months, Unrealized Losses	0
12 Months or More, Fair Value	0.7
12 Months or More, Unrealized Losses	(0.1)
Total, Fair Value	0.7
Total, Unrealized Losses	(0.1)
Noncurrent [Member] | Obligations of States and Other Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	42.9
Less than 12 Months, Unrealized Losses	(6.0)
12 Months or More, Fair Value	0
12 Months or More, Unrealized Losses	0
Total, Fair Value	42.9
Total, Unrealized Losses	(6.0)
Noncurrent [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	9.0
Less than 12 Months, Unrealized Losses	(1.4)
12 Months or More, Fair Value	0
12 Months or More, Unrealized Losses	0
Total, Fair Value	9.0
Total, Unrealized Losses	$ (1.4)

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Segment Information (Premium Revenue By Line Of Business) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Segment Reporting Information [Line Items]
Health plans services premiums	$ 2,606,754	$ 2,578,689	$ 7,817,697	$ 7,818,565
Commercial Premium Revenue [Member]
Segment Reporting Information [Line Items]
Health plans services premiums	1,279,800	1,420,400	3,903,800	4,310,000
Medicare Premium Revenue [Member]
Segment Reporting Information [Line Items]
Health plans services premiums	685,400	682,900	2,080,300	2,089,400
Medicaid Premium Revenue [Member]
Segment Reporting Information [Line Items]
Health plans services premiums	$ 641,600	$ 475,400	$ 1,833,600	$ 1,419,200

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Investments (Fair Value of Investments Available-for-Sale) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Carrying Value, Current	$ 1,580,032,000	$ 1,812,512,000
Carrying Value, Noncurrent	52,637,000	0
Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,611,091,000	1,753,931,000
Gross Unrealized Holding Gains	13,600,000	61,300,000
Gross Unrealized Holding Losses	(44,700,000)	(2,700,000)
Carrying Value, Current	1,580,000,000	1,812,500,000
Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	60,080,000	0
Gross Unrealized Holding Gains	0
Gross Unrealized Holding Losses	(7,500,000)
Carrying Value, Noncurrent	52,600,000
Asset-Backed Securities [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	410,100,000	499,700,000
Gross Unrealized Holding Gains	3,900,000	19,600,000
Gross Unrealized Holding Losses	(6,600,000)	(200,000)
Carrying Value, Current	407,400,000	519,100,000
Asset-Backed Securities [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	800,000
Gross Unrealized Holding Gains	0
Gross Unrealized Holding Losses	(100,000)
Carrying Value, Noncurrent	700,000
U.S. Government and Agencies [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	26,500,000	25,900,000
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Carrying Value, Current	26,500,000	25,900,000
Obligations of States and Other Political Subdivisions [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	741,100,000	819,900,000
Gross Unrealized Holding Gains	6,400,000	24,200,000
Gross Unrealized Holding Losses	(28,300,000)	(2,000,000)
Carrying Value, Current	719,200,000	842,100,000
Obligations of States and Other Political Subdivisions [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	48,900,000
Gross Unrealized Holding Gains	0
Gross Unrealized Holding Losses	(6,000,000)
Carrying Value, Noncurrent	42,900,000
Corporate Debt Securities [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	433,400,000	408,400,000
Gross Unrealized Holding Gains	3,300,000	17,500,000
Gross Unrealized Holding Losses	(9,800,000)	(500,000)
Carrying Value, Current	426,900,000	425,400,000
Corporate Debt Securities [Member] | Noncurrent [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	10,400,000
Gross Unrealized Holding Gains	0
Gross Unrealized Holding Losses	(1,400,000)
Carrying Value, Noncurrent	$ 9,000,000

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Stock Repurchase Program

9 Months Ended

Sep. 30, 2013

Class of Stock Disclosures [Abstract]

Stock Repurchase Program

STOCK REPURCHASE PROGRAM

On May 2, 2011, our Board of Directors authorized our stock repurchase program pursuant to which a total of $300.0 million of our outstanding common stock could be repurchased. On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program.

Subject to the approval of our Board of Directors, we may repurchase our common stock under our stock repurchase program from time to time in privately negotiated transactions, through accelerated stock repurchase programs or open market transactions, including pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended. The timing of any repurchases and the actual number of shares of stock repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements, restrictions under the Company’s debt obligations, and other market and economic conditions. Our stock repurchase program may be suspended or discontinued at any time.

During the three and nine months ended September 30, 2012, we repurchased approximately 1.5 million and 2.1 million shares, respectively, of our common stock for aggregate consideration of $36.1 million and $50.0 million, respectively, under our stock repurchase program. As of December 31, 2012, the remaining authorization under our stock repurchase program was $350.0 million. During the three months ended September 30, 2013, we made no share repurchases and during the nine months ended September 30, 2013, we repurchased approximately 2.7 million shares of our common stock for aggregate consideration of $70.0 million under our stock repurchase program. The remaining authorization under our stock repurchase program as of September 30, 2013 was $280.0 million.

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Significant Accounting Policies (Goodwill and Other Intangible Assets) (Details) (USD $)			9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Provider Networks [Member]	Dec. 31, 2012 Provider Networks [Member]	Sep. 30, 2013 Customer Relationships and Other [Member]	Dec. 31, 2012 Customer Relationships and Other [Member]	Sep. 30, 2013 Western Region Operations [Member]	Jun. 30, 2013 Western Region Operations [Member]	Dec. 31, 2012 Western Region Operations [Member]	Jun. 30, 2012 Western Region Operations [Member]
Goodwill [Line Items]
Goodwill	$ 565,886,000	$ 565,886,000					$ 565,900,000		$ 565,900,000
Ratio of fair value to carrying value								149.00%		115.00%
Finite-Lived Intangible Assets
Gross Carrying Amount	70,000,000	70,000,000	40,500,000	40,500,000	29,500,000	29,500,000
Accumulated Amortization	(55,300,000)	(52,700,000)	(35,400,000)	(34,600,000)	(19,900,000)	(18,100,000)
Net Balance	14,700,000	17,300,000	5,100,000	5,900,000	9,600,000	11,400,000
Weighted Average Life (in years)			19 years 4 months 24 days	19 years 4 months 24 days	11 years 1 month 6 days	11 years 1 month 6 days
Future Amortization Expense, Current to Five Succeeding Fiscal Years
2013	3,400,000
2014	2,800,000
2015	2,600,000
2016	2,000,000
2017	$ 2,000,000

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Financing Arrangements (Revolving Credit Facility and Letters of Credit) (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Oct. 31, 2011
Debt Instrument [Line Items]
Maximum amount available for borrowing under the revolving credit facility			$ 600,000,000
Line of credit facility, maturity date	Oct. 24, 2016
Additional borrowing capacity			200,000,000
Revolving credit facility outstanding balance	100,000,000
Revolving credit facility, remaining capacity	491,300,000	440,600,000
Line of credit default limit	50,000,000
Limit of uninsured judgment not stayed within 60 days	50,000,000
Limit of uninsured judgment not stayed, period (in days)	60 days
Standby Letters of Credit [Member]
Debt Instrument [Line Items]
Revolving credit facility, borrowing capacity			400,000,000
Letter of Credit [Member]
Debt Instrument [Line Items]
Maximum amount available for borrowing under the revolving credit facility			400,000,000
Outstanding letters of credit	8,700,000	59,400,000
Amounts drawn on letters of credit	0	0
Bridge Loan [Member]
Debt Instrument [Line Items]
Maximum amount available for borrowing under the revolving credit facility			$ 50,000,000
Line of Credit [Member]
Debt Instrument [Line Items]
Debt instrument basis description	a) the base rate (which is a rate per annum equal to the greatest of (i) the federal funds rate plus one-half of one percent, (ii) Bank of America, N.A.’s “prime rate” and (iii) the Eurodollar Rate (as such term is defined in the credit facility) for a one-month interest period plus one percent) plus an applicable margin ranging from 45 to 105 basis points or (b) the Eurodollar Rate plus an applicable margin ranging from 145 to 205 basis points
Line of Credit [Member] | Federal Funds [Member] | Variable Base Rate A [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (as a percentage)	0.50%
Line of Credit [Member] | Eurodollar Rate Plus 45 to 105 Basis Points [Member] | Variable Base Rate A [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread (as a percentage)	1.00%
Interest period on credit facility (in months)	1 month
Line of Credit [Member] | Eurodollar Rate Plus 45 to 105 Basis Points [Member] | Variable Base Rate A [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (as a percentage)	0.45%
Line of Credit [Member] | Eurodollar Rate Plus 45 to 105 Basis Points [Member] | Variable Base Rate A [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (as a percentage)	1.05%
Line of Credit [Member] | Eurodollar Rate Plus 145 to 205 Basis Points [Member] | Variable Base Rate B [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (as a percentage)	1.45%
Line of Credit [Member] | Eurodollar Rate Plus 145 to 205 Basis Points [Member] | Variable Base Rate B [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (as a percentage)	2.05%

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Legal Proceedings

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

LEGAL PROCEEDINGS

Overview

We record reserves and accrue costs for certain legal proceedings and regulatory matters to the extent that we determine an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect our best estimate of the probable loss for such matters, our recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to that they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings, each with a wide range of potential outcomes; or result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding in the event damages are awarded or a fine or penalty is assessed. As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material. However, it is possible that in a particular quarter or annual period our financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings, including those described below in this Note 9 under the heading “Litigation and Investigations Related to Unaccounted-for Server Drives,” depending, in part, upon our financial condition, results of operations, cash flow or liquidity in such period, and our reputation may be adversely affected. Except for the regulatory and legal proceedings discussed in this Note 9 under the heading “Litigation and Investigations Related to Unaccounted-for Server Drives,” management believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against us should not have a material adverse effect on our financial condition, results of operations, cash flow and liquidity.

Litigation and Investigations Related to Unaccounted-for Server Drives

We are a defendant in three related litigation matters pending in California state and federal courts relating to information security issues. On January 21, 2011, International Business Machines Corp. ("IBM"), which handles our data center operations, notified us that it could not locate several hard disk drives that had been used in our data center located in Rancho Cordova, California. We have since determined that personal information of approximately two million former and current Health Net members, employees and health care providers is on the drives. Commencing on March 14, 2011, we provided written notification to the individuals whose information is on the drives. To help protect the personal information of affected individuals, we offered them two years of free credit monitoring services, in addition to identity theft insurance and fraud resolution and restoration of credit files services, if needed.

On March 18, 2011, a putative class action relating to this incident was filed against us in the U.S. District Court for the Central District of California (the "Central District of California"), and similar actions were later filed against us in other federal and state courts in California. A number of those actions were transferred to and consolidated in the U.S. District Court for the Eastern District of California (the "Eastern District of California"), and the two remaining actions are currently pending in the Superior Court of California, County of San Francisco ("San Francisco County Superior Court") and the Superior Court of California, County of Sacramento ("Sacramento County Superior Court"). The consolidated amended complaint in the federal action pending in the Eastern District of California was filed on behalf of a putative class of over 800,000 of our current or former members who received the written notification, and also named IBM as a defendant. It sought to state claims for violation of the California Confidentiality of Medical Information Act and the California Customer Records Act, and sought statutory damages of up to $1,000 for each class member, as well as injunctive and declaratory relief, attorneys’ fees and other relief. On August 29, 2011, we filed a motion to dismiss the consolidated complaint. On January 20, 2012, the district court issued an order dismissing the consolidated complaint on the grounds that the plaintiffs lacked standing to bring their action in federal court. On April 20, 2012, an amended complaint with a new plaintiff was filed against us, but no longer asserted claims against IBM. The amended complaint asserted the same causes of action and sought the same relief as the earlier complaint. On June 18, 2012, we filed a motion to dismiss the amended complaint, which is currently pending.

The San Francisco County Superior Court proceeding was instituted on March 28, 2011 and is brought on behalf of a putative class of California residents who received the written notification, and seeks to state similar claims against us, as well as claims for violation of California's Unfair Competition Law, and seeks similar relief. We moved to compel arbitration of the two named plaintiffs’ claims. The court granted our motion as to one of the named plaintiffs and denied it as to the other. We have appealed the latter ruling, but subsequently dismissed the appeal. Thereafter, the plaintiff as to whom our motion to compel arbitration was granted filed a petition for a writ of mandate with the California Court of Appeal seeking review of that ruling. On July 9, 2012, the Court of Appeal issued a peremptory writ of mandate directing the Superior Court to vacate its order granting the motion to compel arbitration and to enter an order denying the motion to compel.

The Sacramento County Superior Court proceeding was instituted on April 3, 2012 and is brought on behalf of a putative class of California members whose information was contained on the unaccounted for drives. The action contains the same claims and seeks the same relief as the case pending in the Eastern District of California. On June 18, 2012, we filed a demurrer seeking dismissal of this complaint, which is currently pending.

In July 2013, we entered into a settlement agreement (the “Settlement Agreement”) with the plaintiffs in the three putative class actions described above. On October 23, 2013, counsel for the named plaintiffs filed a motion for preliminary approval of the Settlement Agreement with the Sacramento County Superior Court. The hearing on this motion is currently scheduled for November 12, 2013. If the Court grants preliminary approval, it will set a date for a final approval hearing, and notice will be sent to all settlement class members advising them of the Settlement Agreement and their right to object to or opt out of the Settlement Agreement. In the event the Settlement Agreement receives final approval, each of the three putative class actions described above will be dismissed with prejudice, and all class members who do not opt out will release all claims they may have related to or arising from the unaccounted-for server drives. Under the terms of the Settlement Agreement, which would cover all individuals whose personal information was identified as being on the unaccounted-for server drives, class members who did not previously accept our offer of the credit monitoring and related services described above would be eligible to receive such credit monitoring and related services for a period of two years at no cost to them. Class members who previously accepted our original offer would be eligible to receive one additional year of such services. In addition, under the Settlement Agreement, class members would be eligible to receive reimbursement for certain unreimbursed losses arising from identity theft during a specified time period, up to a cap of $50,000 per class member, and $2 million in the aggregate. The Settlement Agreement also provides that we will continue our ongoing activities to enhance our information security measures, including the encryption of data at rest on our servers and storage area networks. We will also be responsible for the payment of any award of fees and expenses to plaintiffs' counsel for each of the three class actions described above as determined by the Sacramento County Superior Court. Finally, we will be responsible for the costs of administering the Settlement Agreement. In the event that the Sacramento County Superior Court does not grant final approval of the Settlement Agreement, and the parties are unable to negotiate a revised settlement agreement that is finally approved by the Court, the pending litigation described above will continue. In the event the Settlement Agreement described above receives final approval, we do not believe that the terms of the Settlement Agreement would have a material impact on our consolidated financial statements.

We have also been informed that a number of regulatory agencies are investigating the incident, including the California Department of Managed Health Care ("DMHC"), the California Department of Insurance, the California Attorney General, the Massachusetts Office of Consumer Affairs and Business Regulation and the Office of Civil Rights of the U.S. Department of Health and Human Services.

Miscellaneous Proceedings

In the ordinary course of our business operations, we are subject to periodic reviews, investigations and audits by various federal and state regulatory agencies, including, without limitation, CMS, DMHC, the Office of Civil Rights of the U.S. Department of Health and Human Services and state departments of insurance, with respect to our compliance with a wide variety of rules and regulations applicable to our business, including, without limitation, HIPAA, rules relating to pre-authorization penalties, payment of out-of-network claims, timely review of grievances and appeals, and timely and accurate payment of claims, any one of which may result in remediation of certain claims, contract termination, the loss of licensure or the right to participate in certain programs, and the assessment of regulatory fines or penalties, which could be substantial. From time to time, we receive subpoenas and other requests for information from, and are subject to investigations by, such regulatory agencies, as well as from state attorneys general. There also continues to be heightened review by regulatory authorities of, and increased litigation regarding, the health care industry’s business practices, including, without limitation, information privacy, premium rate increases, utilization management, appeal and grievance processing, rescission of insurance coverage and claims payment practices.

In addition, in the ordinary course of our business operations, we are party to various other legal proceedings, including, without limitation, litigation arising out of our general business activities, such as contract disputes, employment litigation, wage and hour claims, including, without limitation, cases involving allegations of misclassification of employees and/or failure to pay for off-the-clock work, real estate and intellectual property claims, claims brought by members or providers seeking coverage or additional reimbursement for services allegedly rendered to our members, but which allegedly were denied, underpaid, not timely paid or not paid, and claims arising out of the acquisition or divestiture of various business units or other assets. We are also subject to claims relating to the performance of contractual obligations to providers, members, employer groups and others, including the alleged failure to properly pay claims and challenges to the manner in which we process claims, and claims alleging that we have engaged in unfair business practices. In addition, we are subject to claims relating to information security incidents and breaches, reinsurance agreements, rescission of coverage and other types of insurance coverage obligations and claims relating to the insurance industry in general. We are, and may be in the future, subject to class action lawsuits brought against various managed care organizations and other class action lawsuits.

We intend to vigorously defend ourselves against the miscellaneous legal and regulatory proceedings to which we are currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending against us, substantial non-economic or punitive damages are being sought.

Potential Settlements

We regularly evaluate legal proceedings and regulatory matters pending against us, including those described above in this Note 9, to determine if settlement of such matters would be in the best interests of the Company and its stockholders. The costs associated with any settlement of the various legal proceedings and regulatory matters to which we are or may be subject from time to time, including those described above in this Note 9, could be substantial and, in certain cases, could result in a significant earnings charge or impact on our cash flow in any particular quarter in which we enter into a settlement agreement and could have a material adverse effect on our financial condition, results of operations, cash flow and/or liquidity and may affect our reputation.

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Investments

9 Months Ended

Sep. 30, 2013

Investments [Abstract]

Investments

INVESTMENTS

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method, and realized gains and losses are included in net investment income. We periodically assess our investments available-for-sale for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss, which is recorded through earnings, if related to credit losses.

During the three and nine months ended September 30, 2013 and 2012, we recognized no losses from other-than-temporary impairments of our cash equivalents and available-for-sale investments.

We classified $52.6 million as investments available-for-sale-noncurrent as of September 30, 2013 because we did not intend to sell and we believed it may take longer than a year for such impaired securities to recover. This classification does not affect the marketability or the valuation of the investments, which are reflected at their market value as of September 30, 2013. We had no investments available-for-sale-noncurrent as of December 31, 2012.

As of September 30, 2013 and December 31, 2012, the amortized cost, gross unrealized holding gains and losses, and fair value of our current investments available-for-sale and our investments available-for-sale-noncurrent, after giving effect to other-than-temporary impairments, were as follows:

	September 30, 2013
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Carrying Value
	(Dollars in millions)
Current:
Asset-backed securities	$	410.1	$	3.9	$	(6.6	)	$	407.4
U.S. government and agencies	26.5		—		—			26.5
Obligations of states and other political subdivisions	741.1		6.4		(28.3		)	719.2
Corporate debt securities	433.4		3.3		(9.8		)	426.9
	$	1,611.1	$	13.6	$	(44.7	)	$	1,580.0
Noncurrent:
Asset-backed securities	$	0.8	$	—	$	(0.1	)	$	0.7
Obligations of states and other political subdivisions	48.9		—		(6.0		)	42.9
Corporate debt securities	10.4		—		(1.4		)	9.0
	$	60.1	$	—	$	(7.5	)	$	52.6

	December 31, 2012
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Carrying Value
	(Dollars in millions)
Current:
Asset-backed securities	$	499.7	$	19.6	$	(0.2	)	$	519.1
U.S. government and agencies	25.9		—		—			25.9
Obligations of states and other political subdivisions	819.9		24.2		(2.0		)	842.1
Corporate debt securities	408.4		17.5		(0.5		)	425.4
	$	1,753.9	$	61.3	$	(2.7	)	$	1,812.5

As of September 30, 2013, the contractual maturities of our current investments available-for-sale and our investments available-for-sale-noncurrent were as follows:

	Amortized Cost		Estimated Fair Value
Current:	(Dollars in millions)
Due in one year or less	$	42.5	$	42.8
Due after one year through five years	281.6		284.1
Due after five years through ten years	442.8		434.9
Due after ten years	434.1		410.8
Asset-backed securities	410.1		407.4
Total current investments available-for-sale	$	1,611.1	$	1,580.0
	Amortized Cost		Estimated Fair Value
Noncurrent:	(Dollars in millions)
Due after one year through five years	$	1.0	$	0.8
Due after five years through ten years	9.5		8.3
Due after ten years	48.8		42.8
Asset-backed securities	0.8		0.7
Total noncurrent investments available-for-sale	$	60.1	$	52.6

Proceeds from sales of investments available-for-sale during the three and nine months ended September 30, 2013 were $80.4 million and $653.8 million, respectively. Gross realized gains and losses totaled $1.0 million and $0.7 million, respectively, for the three months ended September 30, 2013, and $25.5 million and $2.2 million, respectively, for the nine months ended September 30, 2013. Proceeds from sales of investments available-for-sale during the three and nine months ended September 30, 2012 were $117.6 million and $1,132.8 million, respectively. Gross realized gains and losses totaled $4.3 million and $36,000, respectively, for the three months ended September 30, 2012, and $30.1 million and $0.4 million, respectively, for the nine months ended September 30, 2012.

The following tables show our investments’ fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013 and December 31, 2012. These investments are interest-yielding debt securities of varying maturities. We have determined that the unrealized loss position for these securities is primarily due to market volatility. Generally, in a rising interest rate environment, the estimated fair value of fixed income securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of fixed income securities would be expected to increase. These securities may also be negatively impacted by illiquidity in the market.

The following table shows our current investments' fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	232.8	$	(6.2	)	$	9.1	$	(0.4	)	$	241.9	$	(6.6	)
Obligations of states and other political subdivisions	542.4		(28.3		)	0.2		—			542.6		(28.3		)
Corporate debt securities	253.3		(9.6		)	2.5		(0.2		)	255.8		(9.8		)
	$	1,028.5	$	(44.1	)	$	11.8	$	(0.6	)	$	1,040.3	$	(44.7	)

The following table shows our noncurrent investments' fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	—	$	—		$	0.7	$	(0.1	)	$	0.7	$	(0.1	)
Obligations of states and other political subdivisions	42.9		(6.0		)	—		—			42.9		(6.0		)
Corporate debt securities	9.0		(1.4		)	—		—			9.0		(1.4		)
	$	51.9	$	(7.4	)	$	0.7	$	(0.1	)	$	52.6	$	(7.5	)

The following table shows the number of our individual securities-current that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months	12 Months or More	Total
Asset-backed securities	101	7	108
Obligations of states and other political subdivisions	237	1	238
Corporate debt securities	213	3	216
	551	11	562

The following table shows the number of our individual securities-noncurrent that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months	12 Months or More	Total
Asset-backed securities	—	1	1
Obligations of states and other political subdivisions	18	—	18
Corporate debt securities	9	—	9
	27	1	28

The following table shows our current investments’ fair values and gross unrealized losses for individual securities that have been in a continuous loss position through December 31, 2012:

	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	54.9	$	(0.2	)	$	0.1	$	—	$	55.0	$	(0.2	)
U.S. government and agencies	10.1		—			—		—		10.1		—
Obligations of states and other political subdivisions	192.1		(2.0		)	0.2		—		192.3		(2.0		)
Corporate debt securities	45.9		(0.5		)	—		—		45.9		(0.5		)
	$	303.0	$	(2.7	)	$	0.3	$	—	$	303.3	$	(2.7	)

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 150,373	$ 116,052
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization and depreciation	28,355	22,722
Gain on sale of discontinued operation	0	116,990
Share-based compensation expense	23,388	23,413
Deferred income taxes	18,321	24,883
Excess tax benefit on share-based compensation	(451)	(6,059)
Net realized (gain) loss on investments	(23,306)	(29,661)
Other changes	23,564	6,832
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Premiums receivable and unearned premiums	7,800	(173,387)
Other current assets, receivables and noncurrent assets	25,953	(78,203)
Amounts receivable/payable under government contracts	31,064	3,218
Reserves for claims and other settlements	(47,778)	113,985
Accounts payable and other liabilities	(69,558)	47,765
Net cash provided by (used in) operating activities	167,725	(45,430)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of investments	653,786	1,132,836
Maturities of investments	72,810	97,815
Purchases of investments	(652,044)	(1,283,227)
Purchases of property and equipment	(42,596)	(55,030)
Net cash received from sale of business	0	248,238
(Purchases) sales of restricted investments and other	(4,697)	6,024
Net cash provided by investing activities	27,259	146,656
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and employee stock purchases	10,642	16,589
Excess tax benefit on share-based compensation	451	6,059
Repurchases of common stock	(77,569)	(69,330)
Borrowings under financing arrangements	323,000	110,000
Repayment of borrowings under financing arrangements	(323,000)	(122,500)
Net increase (decrease) in checks outstanding, net of deposits	(23,842)	34
Customer funds administered	241,363	40,248
Net cash provided by (used in) financing activities	151,045	(18,900)
Net increase in cash and cash equivalents	346,029	82,326
Cash and cash equivalents, beginning of period	340,110	230,253
Cash and cash equivalents, end of period	686,139	312,579
SUPPLEMENTAL CASH FLOWS DISCLOSURE:
Interest paid	16,741	16,990
Income taxes paid	$ 46,031	$ 5,058

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Fair Value Measurements (Assets and Liabilities Measured at Fair Value on Non-Recurring Basis) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012 Nonrecurring [Member]	Dec. 31, 2012 Level 1 [Member] Nonrecurring [Member]	Dec. 31, 2012 Level 2 [Member] Nonrecurring [Member]	Dec. 31, 2012 Level 3 [Member] Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Lease impairment obligation		$ 7,400,000	$ 0	$ 0	$ 7,400,000
Liabilities, Fair Value Disclosure, Nonrecurring	0
Assets, Fair Value Disclosure, Nonrecurring	$ 0

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Sale of Medicare PDP Business (Details) (USD $)	0 Months Ended	3 Months Ended			9 Months Ended
	Apr. 02, 2012	Sep. 30, 2013 Customers	Sep. 30, 2012 Customers	Jun. 30, 2012	Sep. 30, 2013 Customers	Sep. 30, 2012 Customers
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
(Adjustment to) gain on sale of discontinued operation, net of tax		$ 0	$ (2,450,000)		$ 0	$ 116,990,000
Prescription Drug Plan (Medicare PDP) [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Disposal date	Apr. 01, 2012
Proceeds from divestiture of business				248,200,000
Gain on sale of discontinued operation, before tax						132,800,000
(Adjustment to) gain on sale of discontinued operation, net of tax						117,000,000
Number of customers		0	0		0	0
Discontinued operations revenues		0	0		0	191,800,000
Income (loss) from discontinued operations before income taxes		$ 0	$ 0		$ 0	$ (28,800,000)

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Accumulated Other Comprehensive (Loss) Income

Our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Unrealized Gains (Losses) on investments available-for-sale			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (loss)
Three Months Ended September 30:				(Dollars in millions)
Balance as of July 1, 2012	$	19.6		$	(11.9	)	$	7.7
Other comprehensive income before reclassifications	22.4			—			22.4
Amounts reclassified from accumulated other comprehensive income	(2.8		)	0.6			(2.2		)
Other comprehensive income for the three months ended September 30, 2012	19.6			0.6			20.2
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of July 1, 2013	$	(25.4	)	$	(10.2	)	$	(35.6	)
Other comprehensive income before reclassifications	0.7			—			0.7
Amounts reclassified from accumulated other comprehensive income	(0.2		)	0.4			0.2
Other comprehensive income for the three months ended September 30, 2013	0.5			0.4			0.9
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)
Nine Months Ended September 30:
Balance as of January 1, 2012	$	29.8		$	(13.2	)	$	16.6
Other comprehensive income before reclassifications	28.7			—			28.7
Amounts reclassified from accumulated other comprehensive income	(19.3		)	1.9			(17.4		)
Other comprehensive income for the nine months ended September 30, 2012	9.4			1.9			11.3
Balance as of September 30, 2012	$	39.2		$	(11.3	)	$	27.9
Balance as of January 1, 2013	$	38.0		$	(11.0	)	$	27.0
Other comprehensive loss before reclassifications	(47.8		)	—			(47.8		)
Amounts reclassified from accumulated other comprehensive income	(15.1		)	1.2			(13.9		)
Other comprehensive (loss) income for the nine months ended September 30, 2013	(62.9		)	1.2			(61.7		)
Balance as of September 30, 2013	$	(24.9	)	$	(9.8	)	$	(34.7	)

Reclassifications Out of Accumulated Other Comprehensive Income

The following table shows reclassifications out of accumulated other comprehensive income and the affected line items in the consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,						Nine months ended September 30,						Affected line item in the Consolidated Statements of Operations
	2013			2012			2013			2012
	(Dollars in millions)
Unrealized gains on investments available-for-sale	$	0.3		$	4.3		$	23.3		$	29.7		Net investment income
	0.3			4.3			23.3			29.7			Total before tax
	0.1			1.5			8.2			10.4			Tax expense
	0.2			2.8			15.1			19.3			Net of tax
Amortization of defined benefit pension items:
Prior-service cost	(0.1		)	—			(0.1		)	(0.1		)	(a)
Actuarial gains (losses)	(0.6		)	(1.0		)	(1.9		)	(3.0		)	(a)
	(0.7		)	(1.0		)	(2.0		)	(3.1		)	Total before tax
	(0.3		)	(0.4		)	(0.8		)	(1.2		)	Tax benefit
	(0.4		)	(0.6		)	(1.2		)	(1.9		)	Net of tax
Total reclassifications for the period	$	(0.2	)	$	2.2		$	13.9		$	17.4		Net of tax

_________

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost.

Carrying Amount of Goodwill

The carrying amount of goodwill by reporting unit is as follows:

	Western Region Operations		Total
	(Dollars in millions)
Balance as of December 31, 2012	$	565.9	$	565.9
Balance as of September 30, 2013	$	565.9	$	565.9

Schedule of Intangible Assets

The intangible assets that continue to be subject to amortization using the straight-line method over their estimated lives are as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Balance		Weighted Average Life (in years)
	(Dollars in millions)
As of September 30, 2013:
Provider networks	$	40.5	$	(35.4	)	$	5.1	19.4
Customer relationships and other	29.5		(19.9		)	9.6		11.1
	$	70.0	$	(55.3	)	$	14.7
As of December 31, 2012:
Provider networks	$	40.5	$	(34.6	)	$	5.9	19.4
Customer relationships and other	29.5		(18.1		)	11.4		11.1
	$	70.0	$	(52.7	)	$	17.3

Estimated Annual Pretax Amortization Expense For Other Intangible Assets

Estimated annual pretax amortization expense for other intangible assets for each of the next five years ending December 31 is as follows (dollars in millions):

Year	Amount
2013	$	3.4
2014	2.8
2015	2.6
2016	2.0
2017	2.0

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

We record certain assets and liabilities at fair value in the consolidated balance sheets and categorize them based upon the level of judgment associated with the inputs used to measure their fair value and the level of market price observability. We also estimate fair value when the volume and level of activity for the asset or liability have significantly decreased or in those circumstances that indicate when a transaction is not orderly.

Investments measured and reported at fair value using Level inputs are classified and disclosed in one of the following categories:

Level 1—Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments included in Level 1 include U.S. Treasury securities and listed equities. We do not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.

Level 2—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models and/or other valuation methodologies that are based on an income approach. Examples include, but are not limited to, multidimensional relational model, option adjusted spread model, and various matrices. Specific pricing inputs include quoted prices for similar securities in both active and non-active markets, other observable inputs such as interest rates, yield curve volatilities, default rates, and inputs that are derived principally from or corroborated by other observable market data. Investments that are generally included in this category include asset-backed securities, corporate bonds and loans, and state and municipal bonds.

Level 3—Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation using assumptions that market participants would use, including assumptions for risk. Level 3 includes an embedded contractual derivative asset and liability held by the Company estimated at fair value. Significant inputs used in the derivative valuation model include the estimated growth in Health Net health care expenditures and estimated growth in national health care expenditures. The growth in these expenditures was modeled using a Monte Carlo simulation approach. Level 3 also includes a state-sponsored health plans settlement account deficit asset estimated at fair value based on the income approach. See Note 10 for additional information on our state-sponsored health plans rate settlement agreement.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

The following tables present information about our assets and liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):

	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of September 30, 2013:
Assets:
Cash and cash equivalents	$	686.1	$	—	$	—	$	—	$	686.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	208.6	$	—	$	—	$	208.6
Commercial mortgage-backed securities	—		156.8		0.7		—		157.5
Other asset-backed securities	—		42.0		—		—		42.0
U.S. government and agencies:
U.S. Treasury securities	26.5		—		—		—		26.5
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		719.2		42.9		—		762.1
Corporate debt securities	—		426.9		9.0		—		435.9
Total investments at fair value	$	26.5	$	1,553.5	$	52.6	$	—	$	1,632.6
Embedded contractual derivative	—		—		—		12.7		12.7
State-sponsored health plans settlement account deficit	—		—		—		51.7		51.7
Total assets at fair value	$	712.6	$	1,553.5	$	52.6	$	64.4	$	2,383.1

	Level 3
As of September 30, 2013:
Liability:
Embedded contractual derivative	$	0.7
Total liability at fair value	$	0.7

	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of December 31, 2012:
Assets:
Cash and cash equivalents	$	340.1	$	—	$	—	$	—	$	340.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	272.4	$	—	$	—	$	272.4
Commercial mortgage-backed securities	—		223.1		—		—		223.1
Other asset-backed securities	—		23.6		—		—		23.6
U.S. government and agencies:
U.S. Treasury securities	25.9		—		—		—		25.9
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		841.9		—		0.2		842.1
Corporate debt securities	—		425.4		—		—		425.4
Total investments at fair value	$	25.9	$	1,786.4	$	—	$	0.2	$	1,812.5
Embedded contractual derivative	—		—		—		11.2		11.2
Total assets at fair value	$	366.0	$	1,786.4	$	—	$	11.4	$	2,163.8

	Level 3
As of December 31, 2012:
Liability:
Embedded contractual derivative	$	3.2
Total liability at fair value	$	3.2

We had no transfers between Levels 1 and 2 of financial assets or liabilities that are fair valued on a recurring basis during the three and nine months ended September 30, 2013 and 2012. In determining when transfers between levels are recognized, our accounting policy is to recognize the transfers based on the actual date of the event or change in circumstances that caused the transfer.

The changes in the balances of Level 3 financial assets for the three months ended September 30, 2013 and 2012 were as follows (dollars in millions):

	Three months ended September 30,
	2013								2012
	Available-For-Sale Investments		Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total		Available-For-Sale Investments		Embedded Contractual Derivative			Total
Opening balance	$	—	$	10.8	$	35.4	$	46.2	$	0.2	$	15.0		$	15.2
Transfers into Level 3	—		—		—		—		—		—			—
Transfers out of Level 3	—		—		—		—		—		—			—
Total gains or losses for the period:
Realized in net income	—		1.9		16.3		18.2		—		(7.8		)	(7.8		)
Unrealized in accumulated other comprehensive income	—		—		—		—		—		—			—
Purchases, issues, sales and settlements:
Purchases/additions	—		—		—		—		—		—			—
Issues	—		—		—		—		—		—			—
Sales	—		—		—		—		—		—			—
Settlements			—		—		—		—		—			—
Closing balance	$	—	$	12.7	$	51.7	$	64.4	$	0.2	$	7.2		$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—	$	—	$	—	$	—	$	—	$	—		$	—

The changes in the balances of Level 3 financial assets for the nine months ended September 30, 2013 and 2012 were as follows (dollars in millions):

	Nine months ended September 30,
	2013										2012
	Available-For-Sale Investments			Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total			Available-For-Sale Investments		Embedded Contractual Derivative		Total
Opening balance	$	0.2		$	11.2	$	—	$	11.4		$	0.2	$	5.3	$	5.5
Transfers into Level 3	—			—		—		—			—		—		—
Transfers out of Level 3	—			—		—		—			—		—		—
Total gains or losses for the period:
Realized in net income	—			1.5		51.7		53.2			—		1.9		1.9
Unrealized in accumulated other comprehensive income	—			—		—		—			—		—		—
Purchases, issues, sales and settlements:
Purchases/additions	—			—		—		—			—		—		—
Issues	—			—		—		—			—		—		—
Sales	(0.2		)	—		—		(0.2		)	—		—		—
Settlements	—			—		—		—			—		—		—
Closing balance	$	—		$	12.7	$	51.7	$	64.4		$	0.2	$	7.2	$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—		$	—	$	—	$	—		$	—	$	—	$	—

The changes in the balance of the Level 3 financial liability for the three and nine months ended September, 2013 were as follows (dollars in millions):

	Three months ended September 30, 2013			Nine months ended September 30, 2013
	Embedded Contractual Derivative
Opening balance, July 1 and January 1	$	4.8		$	3.2
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total gains or losses for the period:
Realized in net income	(4.1		)	(2.5		)
Unrealized in accumulated other comprehensive income	—			—
Purchases, issues, sales and settlements:
Purchases	—			—
Issues	—			—
Sales	—			—
Settlements	—			—
Closing balance	$	0.7		$	0.7

We had no financial liabilities fair valued on a recurring basis during the three and nine months ended September 30, 2012.

The following table presents information about financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):

As of December 31, 2012	Level 1		Level 2		Level 3		Total
Lease impairment obligation	$	—	$	—	$	7.4	$	7.4

We had no assets or liabilities fair valued on a non-recurring basis during the three and nine months ended September 30, 2013.

The following tables present quantitative information about Level 3 Fair Value Measurements as of September 30, 2013 and December 31, 2012 (dollars in millions):

	Fair Value as of September 30, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	12.7	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-5.34	%	—	7.91%	(0.69%)
				National Health Care Expenditures	-0.55	%	—	7.04%	(3.35%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	2.59	%	—	6.10%	(4.26%)
	$	0.7		National Health Care Expenditures	-1.80	%	—	8.85%	(4.00%)
State-sponsored health plans settlement account deficit	$	51.7	Income Approach	Discount Rate	1.135	%	—	1.135%	(1.135%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	10.0	%	—	10.0%	(10.0%)

	Fair Value as of December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	11.2	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-1.7	%	—	0.8%	-(0.4%)
				National Health Care Expenditures	3.7	%	—	3.7%	(3.7%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-0.3	%	—	10.1%	(4.9%)
	$	3.2		National Health Care Expenditures	-0.1	%	—	7.3%	(3.3%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	9.0	%	—	9.0%	(9.0%)
Lease impairment obligation	$	7.4	Income Approach	Discount Rate	3.26	%	—	3.26%	(3.26%)

Valuation policies and procedures are managed by our finance group, which regularly monitors fair value measurements. Fair value measurements, including those categorized within Level 3, are prepared and reviewed on a quarterly basis and any third-party valuations are reviewed for reasonableness and compliance with the Fair Value Measurement Topic of the Accounting Standards Codification. Specifically, we compare prices received from our pricing service to prices reported by the custodian or third-party investment advisors and we perform a review of the inputs, validating that they are reasonable and observable in the marketplace, if applicable. For our embedded contractual derivative asset and liability, we use internal historical and projected health care expenditure data and the national health care expenditures as reflected in the National External Trend Standards, which is published by CMS, to estimate the unobservable inputs. The growth rates in each of these health care expenditures are modeled using the Monte Carlo simulation approach and the resulting value is discounted to the valuation date. We estimate our recurring Level 3 state-sponsored health plans settlement account deficit asset using the income approach based on discounted cash flows. We estimate our non-recurring Level 3 asset and liability, goodwill for our Western Region Operations reporting unit and the lease impairment obligation using the income approach based on discounted cash flows.

The significant unobservable inputs used in the fair value measurement of our embedded contractual derivative are the estimated growth in Health Net health care expenditures and the estimated growth in national health care expenditures. Significant increases (decreases) in the estimated growth in Health Net health care expenditures or decreases (increases) in the estimated growth in national health expenditures would result in a significantly lower (higher) fair value measurement. The significant unobservable input used in the fair value measurement of our state-sponsored health plans settlement account deficit asset is our discount rate. Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurements [Abstract]

Schedule of assets and liabilities measured on recurring basis

The following tables present information about our assets and liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):

	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of September 30, 2013:
Assets:
Cash and cash equivalents	$	686.1	$	—	$	—	$	—	$	686.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	208.6	$	—	$	—	$	208.6
Commercial mortgage-backed securities	—		156.8		0.7		—		157.5
Other asset-backed securities	—		42.0		—		—		42.0
U.S. government and agencies:
U.S. Treasury securities	26.5		—		—		—		26.5
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		719.2		42.9		—		762.1
Corporate debt securities	—		426.9		9.0		—		435.9
Total investments at fair value	$	26.5	$	1,553.5	$	52.6	$	—	$	1,632.6
Embedded contractual derivative	—		—		—		12.7		12.7
State-sponsored health plans settlement account deficit	—		—		—		51.7		51.7
Total assets at fair value	$	712.6	$	1,553.5	$	52.6	$	64.4	$	2,383.1

	Level 3
As of September 30, 2013:
Liability:
Embedded contractual derivative	$	0.7
Total liability at fair value	$	0.7

	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of December 31, 2012:
Assets:
Cash and cash equivalents	$	340.1	$	—	$	—	$	—	$	340.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	272.4	$	—	$	—	$	272.4
Commercial mortgage-backed securities	—		223.1		—		—		223.1
Other asset-backed securities	—		23.6		—		—		23.6
U.S. government and agencies:
U.S. Treasury securities	25.9		—		—		—		25.9
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		841.9		—		0.2		842.1
Corporate debt securities	—		425.4		—		—		425.4
Total investments at fair value	$	25.9	$	1,786.4	$	—	$	0.2	$	1,812.5
Embedded contractual derivative	—		—		—		11.2		11.2
Total assets at fair value	$	366.0	$	1,786.4	$	—	$	11.4	$	2,163.8

	Level 3
As of December 31, 2012:
Liability:
Embedded contractual derivative	$	3.2
Total liability at fair value	$	3.2

Changes in the Balances of Level 3 Financial Assets on Recurring Basis

The changes in the balances of Level 3 financial assets for the three months ended September 30, 2013 and 2012 were as follows (dollars in millions):

	Three months ended September 30,
	2013								2012
	Available-For-Sale Investments		Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total		Available-For-Sale Investments		Embedded Contractual Derivative			Total
Opening balance	$	—	$	10.8	$	35.4	$	46.2	$	0.2	$	15.0		$	15.2
Transfers into Level 3	—		—		—		—		—		—			—
Transfers out of Level 3	—		—		—		—		—		—			—
Total gains or losses for the period:
Realized in net income	—		1.9		16.3		18.2		—		(7.8		)	(7.8		)
Unrealized in accumulated other comprehensive income	—		—		—		—		—		—			—
Purchases, issues, sales and settlements:
Purchases/additions	—		—		—		—		—		—			—
Issues	—		—		—		—		—		—			—
Sales	—		—		—		—		—		—			—
Settlements			—		—		—		—		—			—
Closing balance	$	—	$	12.7	$	51.7	$	64.4	$	0.2	$	7.2		$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—	$	—	$	—	$	—	$	—	$	—		$	—

The changes in the balances of Level 3 financial assets for the nine months ended September 30, 2013 and 2012 were as follows (dollars in millions):

	Nine months ended September 30,
	2013										2012
	Available-For-Sale Investments			Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total			Available-For-Sale Investments		Embedded Contractual Derivative		Total
Opening balance	$	0.2		$	11.2	$	—	$	11.4		$	0.2	$	5.3	$	5.5
Transfers into Level 3	—			—		—		—			—		—		—
Transfers out of Level 3	—			—		—		—			—		—		—
Total gains or losses for the period:
Realized in net income	—			1.5		51.7		53.2			—		1.9		1.9
Unrealized in accumulated other comprehensive income	—			—		—		—			—		—		—
Purchases, issues, sales and settlements:
Purchases/additions	—			—		—		—			—		—		—
Issues	—			—		—		—			—		—		—
Sales	(0.2		)	—		—		(0.2		)	—		—		—
Settlements	—			—		—		—			—		—		—
Closing balance	$	—		$	12.7	$	51.7	$	64.4		$	0.2	$	7.2	$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—		$	—	$	—	$	—		$	—	$	—	$	—

Changes in the Balances of Level 3 Financial Liabilities on Recurring Basis

The changes in the balance of the Level 3 financial liability for the three and nine months ended September, 2013 were as follows (dollars in millions):

	Three months ended September 30, 2013			Nine months ended September 30, 2013
	Embedded Contractual Derivative
Opening balance, July 1 and January 1	$	4.8		$	3.2
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total gains or losses for the period:
Realized in net income	(4.1		)	(2.5		)
Unrealized in accumulated other comprehensive income	—			—
Purchases, issues, sales and settlements:
Purchases	—			—
Issues	—			—
Sales	—			—
Settlements	—			—
Closing balance	$	0.7		$	0.7

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following table presents information about financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):

As of December 31, 2012	Level 1		Level 2		Level 3		Total
Lease impairment obligation	$	—	$	—	$	7.4	$	7.4

Quantitative information about level 3 assets and liabilities fair value measurements

The following tables present quantitative information about Level 3 Fair Value Measurements as of September 30, 2013 and December 31, 2012 (dollars in millions):

	Fair Value as of September 30, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	12.7	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-5.34	%	—	7.91%	(0.69%)
				National Health Care Expenditures	-0.55	%	—	7.04%	(3.35%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	2.59	%	—	6.10%	(4.26%)
	$	0.7		National Health Care Expenditures	-1.80	%	—	8.85%	(4.00%)
State-sponsored health plans settlement account deficit	$	51.7	Income Approach	Discount Rate	1.135	%	—	1.135%	(1.135%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	10.0	%	—	10.0%	(10.0%)

	Fair Value as of December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	11.2	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-1.7	%	—	0.8%	-(0.4%)
				National Health Care Expenditures	3.7	%	—	3.7%	(3.7%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-0.3	%	—	10.1%	(4.9%)
	$	3.2		National Health Care Expenditures	-0.1	%	—	7.3%	(3.3%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	9.0	%	—	9.0%	(9.0%)
Lease impairment obligation	$	7.4	Income Approach	Discount Rate	3.26	%	—	3.26%	(3.26%)

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting Information, Additional Information [Abstract]

Segment Information

Our segment information for the three and nine months ended September 30, 2013 and 2012 is as follows:

	Western Region Operations		Government Contracts		Divested Operationsand Services			Corporate/Other/ Eliminations			Total
	(Dollars in millions)
Three months ended September 30, 2013
Revenues from external sources	$	2,625.7	$	149.3	$	—		$	—		$	2,775.0
Intersegment revenues	2.7		—		—			(2.7		)	—
Segment pretax income (loss)	85.2		23.5		—			(0.1		)	108.6
Three months ended September 30, 2012
Revenues from external sources	$	2,596.9	$	169.8	$	12.9		$	—		$	2,779.6
Intersegment revenues	2.7		—		—			(2.7		)	—
Segment pretax income (loss)	20.2		21.1		(4.7		)	(7.2		)	29.4
Nine months ended September 30, 2013
Revenues from external sources	$	7,886.7	$	423.8	$	—		$	—		$	8,310.5
Intersegment revenues	8.4		—		—			(8.4		)	—
Segment pretax income (loss)	204.3		50.6		—			(13.0		)	241.9
Nine months ended September 30, 2012
Revenues from external sources	$	7,898.2	$	527.4	$	25.7		$	—		$	8,451.3
Intersegment revenues	8.3		—		—			(8.3		)	—
Segment pretax income (loss)	12.6		66.6		(34.4		)	(21.6		)	23.2

Premium Revenue by Line of Business

Our health plan services premium revenue by line of business is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
	(Dollars in millions)
Commercial premium revenue	$	1,279.8	$	1,420.4	$	3,903.8	$	4,310.0
Medicare premium revenue	685.4		682.9		2,080.3		2,089.4
Medicaid premium revenue	641.6		475.4		1,833.6		1,419.2
Total health plan services premiums	$	2,606.8	$	2,578.7	$	7,817.7	$	7,818.6

XML

Document and Entity Information Document	9 Months Ended
	Sep. 30, 2013	Nov. 04, 2013	Dec. 31, 2012
Entity Information [Line Items]
Entity Registrant Name	Health Net Inc
Entity Central Index Key	0000916085
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		79,508,757
Treasury Stock, Shares	70,696,000	70,698,207	67,426,000

XML

Investments (Tables)

9 Months Ended

Sep. 30, 2013

Investments [Abstract]

Fair Value of Investments Available-for-Sale

As of September 30, 2013 and December 31, 2012, the amortized cost, gross unrealized holding gains and losses, and fair value of our current investments available-for-sale and our investments available-for-sale-noncurrent, after giving effect to other-than-temporary impairments, were as follows:

	September 30, 2013
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Carrying Value
	(Dollars in millions)
Current:
Asset-backed securities	$	410.1	$	3.9	$	(6.6	)	$	407.4
U.S. government and agencies	26.5		—		—			26.5
Obligations of states and other political subdivisions	741.1		6.4		(28.3		)	719.2
Corporate debt securities	433.4		3.3		(9.8		)	426.9
	$	1,611.1	$	13.6	$	(44.7	)	$	1,580.0
Noncurrent:
Asset-backed securities	$	0.8	$	—	$	(0.1	)	$	0.7
Obligations of states and other political subdivisions	48.9		—		(6.0		)	42.9
Corporate debt securities	10.4		—		(1.4		)	9.0
	$	60.1	$	—	$	(7.5	)	$	52.6

	December 31, 2012
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Carrying Value
	(Dollars in millions)
Current:
Asset-backed securities	$	499.7	$	19.6	$	(0.2	)	$	519.1
U.S. government and agencies	25.9		—		—			25.9
Obligations of states and other political subdivisions	819.9		24.2		(2.0		)	842.1
Corporate debt securities	408.4		17.5		(0.5		)	425.4
	$	1,753.9	$	61.3	$	(2.7	)	$	1,812.5

Available-for-Sale Current Investments Classified by Contractual Maturity Date

As of September 30, 2013, the contractual maturities of our current investments available-for-sale and our investments available-for-sale-noncurrent were as follows:

	Amortized Cost		Estimated Fair Value
Current:	(Dollars in millions)
Due in one year or less	$	42.5	$	42.8
Due after one year through five years	281.6		284.1
Due after five years through ten years	442.8		434.9
Due after ten years	434.1		410.8
Asset-backed securities	410.1		407.4
Total current investments available-for-sale	$	1,611.1	$	1,580.0
	Amortized Cost		Estimated Fair Value
Noncurrent:	(Dollars in millions)
Due after one year through five years	$	1.0	$	0.8
Due after five years through ten years	9.5		8.3
Due after ten years	48.8		42.8
Asset-backed securities	0.8		0.7
Total noncurrent investments available-for-sale	$	60.1	$	52.6

Schedule of Unrealized Loss on Investments

The following table shows our current investments' fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	232.8	$	(6.2	)	$	9.1	$	(0.4	)	$	241.9	$	(6.6	)
Obligations of states and other political subdivisions	542.4		(28.3		)	0.2		—			542.6		(28.3		)
Corporate debt securities	253.3		(9.6		)	2.5		(0.2		)	255.8		(9.8		)
	$	1,028.5	$	(44.1	)	$	11.8	$	(0.6	)	$	1,040.3	$	(44.7	)

The following table shows our noncurrent investments' fair values and gross unrealized losses for individual securities that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	—	$	—		$	0.7	$	(0.1	)	$	0.7	$	(0.1	)
Obligations of states and other political subdivisions	42.9		(6.0		)	—		—			42.9		(6.0		)
Corporate debt securities	9.0		(1.4		)	—		—			9.0		(1.4		)
	$	51.9	$	(7.4	)	$	0.7	$	(0.1	)	$	52.6	$	(7.5	)

The following table shows our current investments’ fair values and gross unrealized losses for individual securities that have been in a continuous loss position through December 31, 2012:

	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in millions)
Asset-backed securities	$	54.9	$	(0.2	)	$	0.1	$	—	$	55.0	$	(0.2	)
U.S. government and agencies	10.1		—			—		—		10.1		—
Obligations of states and other political subdivisions	192.1		(2.0		)	0.2		—		192.3		(2.0		)
Corporate debt securities	45.9		(0.5		)	—		—		45.9		(0.5		)
	$	303.0	$	(2.7	)	$	0.3	$	—	$	303.3	$	(2.7	)

Number of Securities Included in Loss Position of Current Investments

The following table shows the number of our individual securities-current that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months	12 Months or More	Total
Asset-backed securities	101	7	108
Obligations of states and other political subdivisions	237	1	238
Corporate debt securities	213	3	216
	551	11	562

The following table shows the number of our individual securities-noncurrent that have been in a continuous loss position through September 30, 2013:

	Less than 12 Months	12 Months or More	Total
Asset-backed securities	—	1	1
Obligations of states and other political subdivisions	18	—	18
Corporate debt securities	9	—	9
	27	1	28