Exhibit 99.1

Health Net, Inc. 21650 Oxnard Street Woodland Hills, CA 91367 818.676.6000 800.291.6911 www.healthnet.com

Contacts: David Olson

818.676.6978

david.w.olson@healthnet.com

Michael Engelhard

818.676.7620

michael.engelhard@healthnet.com

HEALTH NET REPORTS NET INCOME

OF $21 MILLION OR $.19 PER DILUTED SHARE

Company Settles Physician Class Action Lawsuits and

Records Related Charge of Approximately $66 Million

Improvements in Health Plan MCR and Administrative Ratio Highlight Results

LOS ANGELES, May 3, 2005 – Health Net, Inc. (NYSE: HNT) today announced 2005 first quarter net income per diluted share of $.19 compared with net income per diluted share of $.13 in the first quarter of 2004.

Included in the results for the first quarter of 2005 is the full effect of a $67,042,000 pretax charge, or $.36 per diluted share after tax, for severance benefits and litigation costs associated with the settlement of the physician class action lawsuits.

Health Net reported net income of $21,348,000 in the first quarter of 2005 compared to net income of $15,012,000 in the first quarter of 2004.

“We are pleased with our progress. Our earnings performance in the first quarter of 2005 showed substantial improvement over the prior year, consistent with our expectations,” said Jay Gellert, president and chief executive officer of Health Net. “We remain confident regarding the balance of 2005 and believe there are opportunities for future growth.

“We also are pleased that we have settled the physician class action lawsuits. We look forward to continuing improved relations with our physician partners,” Gellert added.

Positive developments for the first quarter of 2005 included:

• Commercial revenue per member per month (PMPM) increased by approximately 11 percent in the first quarter of 2005 compared to the first quarter of 2004, consistent with the company’s expectations, representing the fourth straight quarter of accelerating yields;

• Commercial health care costs PMPM rose 6.9 percent;

• Health Net’s Health Plan Medical Care Ratio (MCR) was 85.0 percent, a 260 basis point improvement compared with 87.6 percent reported in the first quarter of 2004;

• The Administrative Ratio declined by 50 basis points in the first quarter of 2005 to 9.5 percent compared with 10.0 percent in the first quarter 2004 as a result of the company’s ongoing efforts to monitor administrative expenses and adjusting to enrollment declines;

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• Cash flow from operations of $95,151,000 for the first quarter of 2005 compared to a use of cash of $154,575,000 in the first quarter of 2004; and

• Settlement of physician class action lawsuits.

Revenues

Health Net’s total revenues decreased slightly in the first quarter of 2005 to $2,911,745,000 from $2,924,752,000 in the first quarter of 2004. Health plan services revenues, including revenues from the company’s Commercial, Medicare and Medicaid health plans, also declined slightly to $2,397,689,000 in the first quarter of 2005 compared to $2,404,355,000 in the first quarter of 2004 as lower health plan enrollment almost completely offset improved yields.

The reduction in health plan services revenue was primarily a result of lower health plan enrollment in the first quarter of 2005 compared to the first quarter of 2004. Commercial enrollment, including both at-risk and Administrative Services Only (ASO) membership, was down 3.3 percent in the first quarter of 2005 compared with the fourth quarter of 2004. This lower enrollment almost completely offset higher commercial and Medicare premium yields across the company’s health plans.

In the first quarter of 2005, the overall health plan revenue PMPM, including commercial, Medicare and Medicaid enrollment, rose 9.3 percent compared to the same period in 2004. Commercial premium yields climbed 11.0 percent compared to the first quarter of 2004.

“The premium yields we achieved in the first quarter of 2005 were in line with our expectations and position us well for the remainder of 2005,” said Buddy Piszel, chief financial officer of Health Net. “This marks the fourth straight quarter of increasing yields, an indication that our pricing is having the desired effect.

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“Our commitment to disciplined pricing resulted in lower commercial enrollment in the first quarter of 2005. We believe that, by year-end, our commercial enrollment will be slightly above the level seen at the end of the first quarter of 2005, excluding New Jersey,” Piszel added.

In the first quarter of 2005, Health Net’s Government contracts revenue declined 1.4 percent from the first quarter of 2004, falling by $7,238,000 to $496,710,000. “This decline resulted from the transition to the TRICARE North Region contract and the absence of any revenues from prior TRICARE contracts,” noted Piszel.

Health Plan Health Care Costs

The health plan MCR decreased to 85.0 percent in the first quarter of 2005 from 87.6 percent in the first quarter of 2004. This decrease in the health plan MCR reflects the impact of better health care cost performance and the absence of negative prior period reserve developments.

Overall PMPM health plan health care costs rose by 5.9 percent in the first quarter of 2005 compared to the first quarter of 2004. Commercial health care costs PMPM rose by 6.9 percent over the same period.

Non-GAAP Health Plan Health Care Costs

Health Net evaluates health care cost trends on a GAAP and non-GAAP basis. Given the charges recorded in the first quarter of 2004, Health Net believes it is important to examine health care costs on a non-GAAP basis to best determine underlying trends. “Subtracting the provider settlement and prior period reserve development from last year’s health care costs, you would see a total PMPM health care cost increase of 7.7 percent in the first quarter of 2005. Implicit in that increase is a commercial PMPM increase of 8.8 percent,” Piszel commented.

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A table outlining the impact of provider settlements, net prior period reserve development and other one-time items, to the first quarter of 2004 income statement is attached to this release.

Government Contracts Health Care Costs

The Government contracts cost ratio rose by 120 basis points to 96.6 percent for the first quarter of 2005 compared to the first quarter of 2004. “We are now responsible for paying claims for active duty personnel who get care in the private sector and this added $40 million in costs and revenues,” Piszel noted.

“We also saw higher claims related to Operation Iraqi Freedom. We are pursuing recovery from the Department of Defense on these higher costs, in line with the terms of the contract,” he added.

Administrative Expenses

In the first quarter of 2005, total general, administrative and depreciation expenses decreased by $14,685,000 to $226,783,000 compared to expenses of $241,468,000 in the first quarter of 2004. “The administrative ratio continues to reflect our desire to keep these costs low,” commented Piszel. “However, we do expect to see the absolute levels of spending increase in the second half of 2005 as expenses for Medicare-related and other commercial marketing activities increase.”

Health Net’s selling expenses decreased by $6,304,000 to $57,273,000 in the first quarter of 2005 compared with $63,577,000 in the same period in 2004, consistent with the decline in Small Group and Individual enrollment over the same periods. The selling costs ratio was 2.4 percent for the first quarter of 2005, compared with 2.6 percent in the same period last year.

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Balance Sheet Highlights

Cash and investments as of March 31, 2005 were $1,895,602,000 compared with $1,782,102,000 as of December 31, 2004.

The TRICARE receivable increased by $4,964,000 from the end of the fourth quarter of 2004 to $134,447,000 as of March 31, 2005, consistent with seasonal patterns.

Debt decreased by $8,779,000 from December 31, 2004 to $388,981,000 as of March 31, 2005, primarily due to the mark-to-market adjustment of the interest rate swap contracts, with a corresponding increase in other noncurrent liabilities that reflects the mark-to-market value of the swap. The company’s debt-to-total capital ratio was 22.9 percent as of March 31, 2005 compared to 23.8 percent as of December 31, 2004.

Reserves for claims and other settlements decreased by $14,006,000 to $1,155,291,000 at March 31, 2005 from $1,169,297,000 at December 31, 2004. The Incurred But Not Reported (IBNR) portion of the reserves rose 4 percent sequentially.

The company paid out approximately $38 million in the first quarter of 2005 for provider settlements associated with the charge taken in the fourth quarter of 2004, which was the primary cause of the total reduction in reserves. The company had remaining provider settlement reserves, associated with the charge taken in the fourth quarter of 2004, of approximately $100 million as of March 31, 2005 and approximately $138 million as of December 31, 2004.

Interest expense was $2,171,000 higher in the first quarter of 2005 compared to the first quarter of 2004 due to a step up in the interest rate on the company’s senior notes resulting from the rating agency downgrade of the company’s senior unsecured debt rating in the third quarter of 2004 and higher market interest rates in the first quarter 2005 compared to rates in the first quarter of 2004.

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Days claims payable (DCP) increased to 51.4 days for the first quarter of 2005 compared to 44.7 days for the fourth quarter of 2004 and 45.2 days in the first quarter of 2004, a reflection of provider-related reserves recorded in the fourth quarter of 2004. Excluding provider settlement reserves related to the charge taken in the fourth quarter of 2004 and excluding capitation expenses, DCP increased by 0.4 days for the first quarter of 2005 to 61.4 days compared to 61.0 days for the fourth quarter of 2004.

Cash Flow

Cash flow provided by operations in the first quarter of 2005 amounted to $95,151,000 compared to cash flow used in operations of $154,575,000 in the first quarter of 2004.

Medicare

Health Net continues to be a major Medicare participant with more than 169,000 members in its Medicare Advantage plans. The company has filed applications with the Center for Medicare and Medicaid Services to participate in additional Medicare programs like the Part D drug benefit, the stand-alone Part D drug benefit, and both regional and local PPO plans.

“We have a team focused on finding the best potential Medicare opportunities for Health Net in the areas we serve,” Piszel added.

Outlook

Health Net believes its earnings per diluted share for the full year 2005 will be $1.94 to $2.14, including the effect of the physician class action settlement charge. Excluding the charge, the full year earnings per diluted share range would be between $2.30 and $2.50. The company believes that its earnings per diluted share in the second quarter of 2005 will be between $.50 and $.55.

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“We are reiterating our full year guidance despite having to absorb additional G&A expenditures for Medicare modernization, implementation of the business practice changes required by the physician class action settlement agreement and a higher than expected diluted share count,” Piszel commented.

“For the full year, we continue to believe that commercial enrollment will be up modestly overall from the end of the first quarter of this year, excluding New Jersey, with membership gains in key markets in the second half of the year,” he added.

The company’s effective tax rate in the first quarter of 2005 was 34.0 percent as the company realized a tax-related benefit related to the final settlement of a small subsidiary that was sold in February 2005. The company expects its effective tax rate to rise to 38.9 percent for the full year of 2005.

Conference Call

As previously announced, Health Net will discuss the company’s first quarter 2005 results during a conference call with investors on Tuesday, May 3, 2005, at approximately 11:00 a.m. EST. To listen to the call, please dial 719.457.2728, code 5350704. A live webcast and replay of the conference call also will be available at www.healthnet.com. The conference call webcast is open to all interested parties. A replay of the conference call will be available following the call on Tuesday, May 3, 2005 through May 7, 2005, by dialing 719.457.0820, code 5350704. Anyone listening to the company’s conference call will be presumed to have read Health Net’s Annual Report on Form 10-K for the year ended December 31, 2004, and other reports filed by the company from time to time with the Securities and Exchange Commission.

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About Health Net

Health Net, Inc. is among the nation’s largest publicly traded managed health care companies. Its mission is to help people be healthy, secure and comfortable. The company’s HMO, POS, insured PPO and government contracts subsidiaries provide health benefits to approximately 6.5 million individuals in 27 states and the District of Columbia through group, individual, Medicare, Medicaid and TRICARE programs. Health Net’s subsidiaries also offer managed health care products related to behavioral health and prescription drugs, and offer managed health care product coordination for multi-region employers and administrative services for medical groups and self-funded benefits programs.

For more information on Health Net, Inc., please visit the company’s Web site at www.healthnet.com.

Cautionary Statements

Certain matters discussed in this release contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that involve a number of risks and uncertainties. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements. These statements are based on management’s analysis, judgment, belief and expectation only as of the date hereof, and are subject to uncertainty and changes in circumstances. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend” and other similar expressions are intended to identify forward-looking statements. Actual results could differ materially due to, among other things, rising health care costs, negative prior period claims reserve developments, trends in medical care ratios, issues relating to provider contracts, operational issues, health care

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reform and general business conditions. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included within the company’s most recent Annual Report on Form 10-K filed with the SEC and the risks discussed in the company’s other periodic filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this release.

# # #

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Health Net, Inc.

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share and ratio data)

	First Quarter Ended March 31, 2004			Second Quarter Ended June 30, 2004			Third Quarter Ended September 30, 2004			Fourth Quarter Ended December 31, 2004			First Quarter Ended March 31, 2005
REVENUES:
Health plan services premiums	$	2,404,355		$	2,398,943		$	2,393,160		$	2,363,786		$	2,397,689
Government contracts		503,948			504,317			525,783			487,823			496,710
Net investment income		15,201			13,818			14,750			14,378			15,763
Other income		1,248			1,737			1,540			1,606			1,583
Total revenues		2,924,752			2,918,815			2,935,233			2,867,593			2,911,745
EXPENSES:
Health plan services		2,107,087			2,062,277			2,022,870			2,221,404	(f)		2,036,873
Government contracts		480,905			478,927			501,628			466,138			479,974
General and administrative		231,485			214,244			207,187			235,564	(f)		215,227
Selling		63,577			59,993			60,410			56,137			57,273
Depreciation		9,983			10,424			10,487			10,532			11,556
Amortization		606			606			789			861			861
Interest		8,438			7,304			8,044			9,347			10,609
		2,902,081			2,833,775			2,811,415			2,999,983			2,812,373
Litigation settlement, asset impairments and restructuring charges		—			17,402	(b)		5,172	(b)		10,319	(e)		67,042	(g)
(Gain) loss on sale of businesses		(1,875	)(a)		—			400	(c)		305	(d)		—
Total expenses		2,900,206			2,851,177			2,816,987			3,010,607			2,879,415
Income (loss) from continuing operations before income taxes		24,546			67,638			118,246			(143,014	)		32,330
Income tax provision (benefit)		9,534			26,272			46,391			(57,385	)		10,982	(h)
Net income (loss)	$	15,012		$	41,366		$	71,855		$	(85,629	)		21,348
Basic earnings (loss) per share	$	0.13		$	0.37		$	0.64		$	(0.77	)	$	0.19
Diluted earnings (loss) per share	$	0.13		$	0.36		$	0.64		$	(0.77	)	$	0.19
Weighted average shares outstanding:
Basic		112,600			112,574			111,440			110,844			111,544
Diluted		114,342			113,460			112,397			110,844			113,235
Health plan services MCR		87.6	%		86.0	%		84.5	%		94.0	%		85.0	%
Government contracts cost ratio		95.4	%		95.0	%		95.4	%		95.6	%		96.6	%
Administrative ratio ((G&A+Dep) / (HP serv rev + Other income))		10.0	%		9.4	%		9.1	%		10.4	%		9.5	%
Selling costs ratio (Selling costs / HP serv rev)		2.6	%		2.5	%		2.5	%		2.4	%		2.4	%
Days claims payable		45.2			46.6			46.2			44.7			51.4
Effective tax rate		38.84	%		38.84	%		39.23	%		40.13	%		33.97	%
Health plan services premiums PMPM	$	212.21		$	215.98		$	219.09		$	222.30		$	231.84
Health plan services costs PMPM	$	185.97		$	185.67		$	185.19		$	208.91		$	196.96

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Health Net, Inc.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except ratio data)

	March 31, 2004			June 30, 2004			September 30, 2004			December 31, 2004			March 31, 2005
ASSETS
Current Assets
Cash and cash equivalents	$	684,782		$	467,565		$	622,903		$	722,102		$	765,842
Investments - available for sale		1,042,021			1,153,222			1,082,969			1,060,000			1,129,760
Premiums receivable, net		186,178			151,619			118,201			118,521			124,041
Amounts receivable under government contracts		121,037			128,960			136,335			129,483			134,447
Incurred but not reported (IBNR) health care costs receivable under TRICARE North contract		—			—			114,618			173,951			216,740
Other receivables		94,469			93,920			102,494			92,435			82,401
Deferred taxes		40,827			40,652			41,162			98,659			106,150
Other assets		92,404			103,907			99,578			97,163			112,044
Total current assets		2,261,718			2,139,845			2,318,260			2,492,314			2,671,425
Property and equipment, net		186,700			186,570			185,291			184,643			183,176
Goodwill, net		723,595			723,595			723,595			723,595			723,595
Other intangible assets, net		19,313			21,505			22,716			21,855			20,993
Deferred taxes		41,409			41,868			18,327			23,737			24,917
Other noncurrent assets		214,894			282,258			249,912			207,050			163,732
Total Assets	$	3,447,629		$	3,395,641		$	3,518,101		$	3,653,194		$	3,787,838
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Reserves for claims and other settlements	$	1,069,247		$	1,042,831		$	990,240		$	1,169,297		$	1,155,291
Health care and other costs payable under government contracts		233,331			216,816			201,494			119,219			128,570
IBNR health care costs payable under TRICARE North contract		—			—			114,618			173,951			216,740
Unearned premiums		95,614			85,894			78,832			139,766			115,859
Accounts payable and other liabilities		272,000			254,453			296,782			258,923			348,068
Total current liabilities		1,670,192			1,599,994			1,681,966			1,861,156			1,964,528
Senior notes payable		406,603			384,220			401,750			397,760			388,981
Other noncurrent liabilities		78,958			95,243			81,657			121,398			126,471
Total Liabilities		2,155,753			2,079,457			2,165,373			2,380,314			2,479,980
Stockholders’ Equity
Common stock and additional paid-in capital		794,602			798,432			805,426			811,426			834,412
Restricted common stock		6,027			5,855			6,483			7,188			7,859
Unearned compensation		(3,624	)		(3,121	)		(3,999	)		(4,110	)		(4,095	)
Treasury common stock, at cost		(577,484	)		(580,634	)		(632,926	)		(632,926	)		(632,926	)
Retained earnings		1,066,788			1,108,154			1,180,009			1,094,380			1,115,728
Accumulated other comprehensive income (loss)		5,567			(12,502	)		(2,265	)		(3,078	)		(13,120	)
Total Stockholders’ Equity		1,291,876			1,316,184			1,352,728			1,272,880			1,307,858
Total Liabilities and Stockholders’ Equity	$	3,447,629		$	3,395,641		$	3,518,101		$	3,653,194		$	3,787,838
Debt-to-Total Capital Ratio		23.9	%		22.6	%		22.9	%		23.8	%		22.9	%

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Health Net, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

	First Quarter Ended March 31, 2004			Second Quarter Ended June 30, 2004			Third Quarter Ended September 30, 2004			Fourth Quarter Ended December 31, 2004			First Quarter Ended March 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	15,012		$	41,366		$	71,855		$	(85,629	)	$	21,348
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Amortization and depreciation		10,589			11,030			11,276			11,393			12,417
(Gain) loss on sale of businesses		(1,875	)		—			400			305			—
Asset impairments		—			—			—			5,916			—
Other changes		(898	)		1,518			546			2,803			3,189
Changes in assets and liabilities, net of the effects of dispositions:
Premiums receivable and unearned premiums		(130,211	)		24,839			26,356			60,614			(29,427	)
Other receivables, deferred taxes and other assets		4,718			515			5,140			(96,872	)		(6,685	)
Amounts receivable/payable under government contracts		(52,787	)		(24,438	)		(22,697	)		(75,423	)		4,387
Reserves for claims and other settlements		42,962			(26,416	)		(52,591	)		179,057			(14,006	)
Accounts payable and other liabilities		(42,085	)		(15,900	)		44,267			433			103,928
Net cash (used in) provided by operating activities		(154,575	)		12,514			84,552			2,597			95,151
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of investments		125,015			65,320			79,438			12,751			23,090
Maturities of investments		112,345			84,102			30,632			47,171			13,777
Purchases of investments		(186,289	)		(284,446	)		(22,774	)		(4,846	)		(125,650	)
Purchases of property and equipment		(5,853	)		(10,045	)		(9,178	)		(12,870	)		(10,392	)
Cash received (paid) from the sale of businesses		11,026			—			(400	)		486			1,949
Sales and purchases of restricted investments and other		(49,279	)		(84,552	)		39,307			48,697			29,246
Net cash provided by (used in) investing activities		6,965			(229,621	)		117,025			91,389			(67,980	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and employee stock purchases		4,785			3,040			6,053			5,213			16,569
Repurchases of common stock		(33,264	)		(3,150	)		(52,292	)		—			—
Net cash (used in) provided by financing activities		(28,479	)		(110	)		(46,239	)		5,213			16,569
Net (decrease) increase in cash and cash equivalents		(176,089	)		(217,217	)		155,338			99,199			43,740
Cash and cash equivalents, beginning of period		860,871			684,782			467,565			622,903			722,102
Cash and cash equivalents, end of period	$	684,782		$	467,565		$	622,903		$	722,102		$	765,842

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Health Net, Inc.

Notes to Condensed Consolidated Statements of Operations

Notes:

(a) Pretax $1.9 million gain on the sales of our Subacute subsidiaries.

(b) Pretax severance and related benefit costs related to our workforce reduction announced in May 2004.

(c) Pretax $0.4 million additional loss on the sale of our Florida health plan resulting from the stock purchase and reinsurance settlement agreements dated September 30, 2004.

(d) Pretax $0.3 million additional loss on the sale of Denticare and Vision.

(e) Pretax $10.3 million asset impairments and restructuring charges due to the following:

$5.9 million asset impairment charge taken on certain investments and fixed assets

$2.7 million for severance and related benefit costs related to our workforce reduction announced in May 2004

$1.7 million for lease termination costs

(f) Includes pretax $158 million provider dispute charge and related legal costs of $11 million.

(g) Pretax $67.0 million litigation settlement and restructuring charges due to the following:

$65.6 million litigation settlement

$1.4 million for severance and related benefit costs related to our workforce reduction announced in May 2004.

(h) Includes $2.2 million of income tax benefit related to the sale of a small subsidiary.

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HEALTH NET, INC.

Medical Covered Lives at March 31, 2005

(in Thousands)

	Commercial -Large Group*			Commercial -Small Group & Individual			Commercial Risk Subtotal			ASO			Commercial Subtotal
	03/05	12/04	03/04	03/05	12/04	03/04	03/05	12/04	03/04	03/05	12/04	03/04	03/05	12/04	03/04
Arizona	66	74	70	54	55	52	120	129	122	—	—	—	120	129	122
California	1,113	1,101	1,194	433	459	524	1,546	1,560	1,718	7	3	3	1,552	1,564	1,721
Connecticut	182	192	202	38	41	44	220	233	246	48	51	52	268	284	298
New Jersey	71	98	133	98	111	147	169	210	279	18	18	18	188	228	297
New York	124	144	157	106	108	114	230	252	271	21	7	7	251	259	277
Oregon	103	105	91	34	33	31	137	138	121	1	1	—	138	139	121
Total	1,659	1,714	1,846	763	808	912	2,422	2,523	2,758	95	81	79	2,516	2,603	2,837
Year over Year		(10)%			(16)%			(12)%			20%			(11)%
Sequential		(3)%			(6)%			(4)%			18%			(3)%
	Medicare Risk			Medicaid			Health Plan Total
	03/05	12/04	03/04	03/05	12/04	03/04	03/05	12/04	03/04
Arizona	32	35	36	—	—	—	152	164	158
California	93	95	98	696	696	691	2,341	2,355	2,510
Connecticut	27	27	27	93	94	98	388	405	423
New Jersey	—	—	—	42	42	44	229	270	341
New York	6	6	5	—	—	—	256	265	283
Oregon	12	9	3	—	—	—	150	148	124
Total	169	171	169	831	831	833	3,517	3,605	3,840
Year over Year		(0)%			(0)%			(8)%
Sequential		(1)%			(0)%			(2)%
	03/05	12/04	03/04
TRICARE
Previous TRICARE Contracts **	—	—	1,477
North Contract ***	2,941	2,929	—
Total TRICARE	2,941	2,929	1,477

* Commercial Large Group includes Medicare Supplement

** Includes only Tricare eligible for which we have health care risk

*** Includes Tricare eligible for which we have health care risk, and those for which we provide Administrative Services Only (ASO), primarily active duty

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Health Net, Inc.

Reconciliation of Reserve For Claims And Other Settlements

(In thousands)

	Health Plan Services
	Q1 2005			Year 2004		Year 2003
Reserve for claims (a), beginning of period	$	794,614		$	777,059	$	787,317
Divested health plans (b)		—			—		(5,119	)
Incurred claims related to:
Current Year		1,329,557			5,048,289		4,487,698
Prior Years (d)		(29,555	)		8,769		(33,812	)
Total Incurred (c)		1,300,002			5,057,058		4,453,886
Paid claims related to:
Current Year		757,454			4,286,929		3,738,599
Prior Years		510,213			752,574		720,426
Total Paid (c)		1,267,667			5,039,503		4,459,025
Reserve for claims (a), end of period		826,949			794,614		777,059
Add:
Claims Payable		239,461			288,331		167,361
Other (e)		88,881			86,352		80,130
Reserves for claims and other settlements, end of period	$	1,155,291		$	1,169,297	$	1,024,550

(a) Consists of incurred but not reported claims and received but unprocessed claims and reserves for loss adjustment expenses.

(b) Adjustment for 2003 consists primarily of reductions in reserves for claims resulting from the sales of our dental and vision plans.

(c) Includes medical claims only. Capitation, pharmacy and other payments including provider settlements are not included.

(d) The change in “incurred related to prior years” claims was offset by an increase in the “incurred related to current year” claims amount.

(e) Includes accrued capitation, shared risk settlements, provider incentives and other reserve items.

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Health Net, Inc. ^(a)

Consolidated Statements of Operations

(Amounts in thousands, except for earnings per share)

	First Quarter Ended March 31, 2004 (Actual)			Impact of Selected Costs Recorded in the First Quarter Ended March 31, 2004
REVENUES
Health plan services premiums	$	2,404,355
Government contracts		503,948
Investment income		15,201
Other income		1,248
Total revenues		2,924,752		—
EXPENSES
Health plan services		2,107,087		(43,479	)
Government contracts		480,905
General and administrative		231,485		(2,713	)
Selling		63,577
Depreciation		9,983
Amortization		606
Interest		8,438
Asset impairment and restructuring charges		—		—
Net (gain) loss on sale of businesses and properties		(1,875	)	1,875
Total expenses		2,900,206		(44,317	)
Income before income taxes and cumulative effect of a change in accounting principle		24,546		44,317
Income tax provision		9,534
Net income		15,012
Basic earnings (loss) per share	$	0.13
Diluted earnings (loss) per share	$	0.13
Weighted average shares outstanding
Basic		112,600
Diluted Shares		114,342

(a) This table presents the company’s consolidated statement of operations for the first quarter of 2004 (column 1), and the impact of provider settlement expenses, net prior period reserve developments, and other one-time items to the consolidated statement of operations for the first quarter of 2004 (column 2).

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