Health Net could offload its business in Arizona and the Northeast after a disappointing 2008, said Jay Gellert, president and chief executive officer of the Woodland Hills, Calif.-based insurer.
Health Net is exploring an asset sale, stock sale or partnership for those markets before the end of the first quarter, Gellert said at the J.P. Morgan Healthcare Conference in San Francisco. Health Net wants to recoup $500 million in risk-based capital investment required to operate in those regions by the end of 2009, taking into consideration regulatory approvals. Combined revenue for those two regions is estimated at about $3.8 billion for 2009, he said. Our scale is not enough to support those markets, Gellert said.
Healthcare unit costs in Arizona and the Northeast are about 5% higher than the median of the competition, Gellert said. Health Net has about 700,000 members total in those regions. The company would like to focus on its health-plan offerings in California and Oregon, as well as its TriCare and Medicare contracts, Gellert said.
Health Nets board of directors shuffled executive duties last fall amid disappointing financial performance because of mispriced Medicare Advantage and Part D products and higher-than-expected medical costs. Gellerts focus is on strategy while James Woys, executive vice president and chief operating officer, is overseeing operational matters, according to the company. We had a rough 08, Gellert said. I think everyone is aware of that.