UnitedHealthcare to Acquire Health Net's Northeast Licenses and Rights to Renew Membership
Minneapolis, Minn., and Los Angeles, Calif. (July 20, 2009) –
UnitedHealthcare, a UnitedHealth Group (NYSE: UNH) company, and Health
Net, Inc. (NYSE: HNT) today announced that UnitedHealthcare has agreed
to acquire Health Net of the Northeast’s licensed subsidiaries and will
work with Health Net to renew the customers currently enrolled in those
plans with UnitedHealthcare as those customers reach their annual
renewal dates. The transaction, subject to regulatory approvals and
other closing conditions, is expected to close within 12 months.
“We look forward to continuing to advance the health and well-being of
Health Net’s Northeast members through affordable, quality health care
options,” said Jeff Alter, UnitedHealthcare Chief Executive Officer,
Northeast Region. “We have a long, successful history of serving
people in the Northeast and are committed to responding to local market
needs while also providing people with access to the innovative health
care products, programs and technology applications of a company with
national scale.”
“A primary goal of our strategic review was to realize the value in our Northeast health plans.
This transaction will achieve this goal,” said Jay Gellert, Health
Net’s President and Chief Executive Officer. “We now can focus our
resources on our health plans in the West. At the same time, we are
committed to meeting our Northeast members’ needs as we continue to
operate in the Northeast during the post-closing transition period.”
The transition period is the period following the close of the
transaction and prior to the completion of the transition of the
membership to UnitedHealthcare.
Additionally, as part of its strategic review, Health Net announced
that it is retaining its Arizona health plan. “We determined that
there are greater synergistic opportunities among our three Western
health plans than we originally thought,” said Mr. Gellert. “Also, Arizona’s performance is improving significantly. The commercial market has become much more rational, our provider
network is stable, and Medicare is achieving anticipated improvements.”
Benefits to Health Net’s Customers
Health Net’s Northeast customers, upon underwriting and renewal with
UnitedHealthcare, will have access to a strong local network of more
than 79,000 health care professionals, 200 hospitals and 7,000
pharmacies in Connecticut, New York and New Jersey. UnitedHealthcare
has a national network of more than 590,000 health care professionals,
4,900 hospitals and 61,000 pharmacies. Health Net’s Northeast
customers will be able to choose from a full range of affordable and
innovative UnitedHealthcare products and services, including:
- Proactive care management and wellness tools, such as
health coaching programs, which utilize the proprietary eSyncSM
technology for access from multiple electronic platforms (e.g., phone,
email, text messaging);
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A full suite of disease management programs that range from helping members stay healthy to living with illness;
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Programs that use data to help physicians achieve optimal outcomes for their patients;
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Health care technology and applications that simplify and enhance
patient and physician engagement with the health system; and
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Service solutions tailored to the unique needs of all customer segments
with local, rapid resolution teams, continuous monitoring of member,
physician and customer feedback, and a focus on quality.
“We assessed several alternatives for our Northeast health plans. We
concluded that a transaction with UnitedHealthcare is in the best
interest of our members. UnitedHealthcare has national scale, strong
local relationships, and a very broad range of products,” Mr. Gellert
added.
After closing, UnitedHealthcare and Health Net will work together so
that members and health care professionals have full continuity of
their coverage and payments during the time that the Health Net benefit
policies remain in force under the existing Health Net contracts.
Dr. Sanford Cohen, UnitedHealthcare Chief Medical Officer, Northeast
Region, said, “This will be a smooth transition for physicians,
hospitals and other health care professionals since the majority of
Health Net’s health care professionals in the Northeast already
participate in UnitedHealthcare’s network. We work with these
physicians and hospitals on a regular basis and will continue to
support them in helping our members live healthy lives.”
“We will continue to focus on serving our customers in Connecticut, New
York and New Jersey during the transition period,” said Paul Lambdin,
President of Health Net of the Northeast. “We are committed to
ensuring that our members experience a smooth transition to
UnitedHealthcare’s products and services.”
Transaction Details
UnitedHealthcare will acquire Health Net’s Northeast insurance and HMO
entities in Connecticut, New York and New Jersey, which have
approximately $450 million in tangible net equity. UnitedHealthcare
will also acquire membership renewal rights for the Health Net Life
health care business in the Northeast. The transaction is expected to
be modestly accretive to both Health Net and UnitedHealth Group’s net
earnings per share. Key features of the transaction are:
- UnitedHealthcare will pay Health Net transaction
consideration of $60 million at close for the Medicare business, the
Medicaid business and the renewal rights for the commercial
membership. UnitedHealthcare will pay Health Net additional
consideration on a per member basis as Health Net’s Northeast
commercial customers transition to UnitedHealthcare. This additional
consideration could be as much as $120 million if all commercial
members move to UnitedHealthcare licenses.
-
After closing, UnitedHealthcare will transfer approximately $290
million to Health Net, representing a portion of the $450 million in
tangible net equity acquired in the legal entities. The remaining
portion of the tangible net equity will be distributed to Health Net as
the business transitions over the next two years, and is currently
estimated to be approximately $160 million. Health Net will continue to
serve commercial, Medicare and Medicaid members following the close of
the transaction and prior to their renewal with UnitedHealthcare.
Health Net currently expects to record several amounts in connection
with the transaction, including tax benefits, severance costs, freed-up
capital, other transaction-related costs and operating costs during the
transition period. These items may result in an estimated net negative
impact to Health Net of approximately $20 million.
Health Net is currently evaluating other potential noncash charges
related to the transaction including potential goodwill impairment.
Health Net serves 578,000 members in Connecticut, New York and New
Jersey: 437,000 commercial risk members, 35,000 self-funded commercial
members, 55,000 Medicare Advantage members and 51,000 Medicaid
members. Expected 2009 Health Net revenues for these operations are
approximately $2.7 billion.
Conference Call
Health Net will host a conference call to discuss this transaction on
Monday, July 20, 2009, beginning at approximately 6.30 p.m. Eastern
time. The conference call should be accessed at least 15 minutes prior
to its start with the following numbers:
-
866.393.1637 (Domestic) 800.642.1687 (Replay—Domestic)
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706.643.5711 (International) 706.645.9291 (Replay—International)
An access code is required for the both live conference call and the
replay. The access code is 21134171. A replay of the conference call
will be available through 12.00 a.m. Eastern time on July 27, 2009. A
live webcast and replay of the conference call will also be available
at www.healthnet.com under “Investor Relations.” The conference call
webcast is open to all interested parties. 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, 2008,
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, and
other reports filed by company from time to time with the Securities
and Exchange Commission.
About Health Net, Inc.
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 health plans and government contracts
subsidiaries provide health benefits to approximately 6.6 million
individuals across the country through group, individual, Medicare,
Medicaid and TRICARE and Veterans Affairs programs. Health Net’s
behavioral health subsidiary, MHN, provides mental health benefits to
approximately 6.7 million individuals in all 50 states. The company’s
subsidiaries also offer managed health care products related to
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
regarding Health Net, please visit the company’s Web site at
www.healthnet.com.
About UnitedHealthcare
UnitedHealthcare (
www.unitedhealthcare.com)
provides a full spectrum of consumer-oriented health benefit plans and
services to individuals, public sector employers and businesses of all
sizes, including more than half of the Fortune 100 companies. The
company organizes access to quality, affordable health care services on
behalf of more than 25 million individual consumers, contracting
directly with approximately 590,000 physicians and care professionals
and more than 4,900 hospitals to offer them broad, convenient access to
services nationwide. UnitedHealthcare is one of the businesses of
UnitedHealth Group (NYSE: UNH), a diversified Fortune 50 health and
well-being company.
UnitedHealthcare and Health Net, Inc. Forward-Looking Statements
This press release may contain statements, estimates, projections,
guidance or outlook that constitute “forward-looking” statements as
defined under U.S. federal securities laws. Generally the words
“believe,” “expect,” “intend,” “estimate,” “anticipate,” “plan,”
“project,” “will” and similar expressions, identify forward-looking
statements, which generally are not historical in nature. These
statements may contain information about financial prospects, economic
conditions, trends and uncertainties and involve risks and
uncertainties. UnitedHealthcare and Health Net, Inc. caution that
actual results could differ materially from those that their respective
managements expect, depending on the outcome of certain factors,
including satisfaction of applicable regulatory approvals and closing
conditions and the volume and timing of business that ultimately
transitions to UnitedHealthcare.
