Health Net lost $8.9 million in the third quarter, compared with a $66.8 million profit in the year-ago period, as the insurer incurred millions of dollars in expenses tied to a new outsourcing contract.
Health Net inked a definitive seven-year deal last week with Cognizant Healthcare Services after signing a letter of intent in August. Cognizant will manage essentially all of Health Net's core administrative functions, including information technology and claims management. Health Net expects the contract will cut its expenses by up to $200 million by 2017.
However, the deal hurt Health Net's bottom line in the short term. The Woodland Hills, Calif.-based insurer said it absorbed $106 million in one-time costs related to the deal in the third quarter.
Health Net's core businesses performed well and were in line with analysts' expectations. Revenue rose almost 37% year over year to $3.79 billion.
