Health Net, Woodland Hills, Calif., said it would cut 500 jobs, or 6% of its workforce, after reporting an 80% drop in first-quarter profits amid higher-than-expected hospital claims. The health insurer's net income for the quarter ended March 31 fell to $15 million, or 13 cents per share, from $72.1 million, or 60 cents per share, for the year-ago quarter. Revenue rose 7.7% to $2.92 billion as total enrollment inched up 1% to 3.6 million members. President and Chief Executive Officer Jay Gellert said the earnings drop mainly resulted from the large number of hospital claims paid in March 2004 for services rendered in 2003 and earlier. "In light of these higher costs, we have already started raising commercial premiums for the balance of the year," Gellert said. Health Net plans to take a $15 million second-quarter charge for severance pay for the layoffs, most of which will take place in the Northeast. The company lowered its full-year earnings estimate, predicting slower enrollment growth and higher medical costs than previously anticipated for the remainder of the year. It now expects 2004 per-share earnings of $2.07 to $2.42, down from its February estimate of $2.92 to $3.07. Health Net operates health plans in seven states in the West and Northeast. -- by Laura B. Benko
Health Net to cut jobs after first-quarter surprise
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