Los Angeles Business Journal

Costs Hurt Health Net’s Quarter

By Deborah Crowe Wednesday, January 30, 2013

Health Net Inc.’s profit plummeted in the fourth-quarter as the managed-care provider was hurt by litigation costs and other expenses.

The Woodland Hills managed health care company, which primarily provides commercial, Medicare and Medicaid-related coverage in California, Arizona and Oregon, on Wednesday reported net income of $5.1 million (6 cents a share), 91 percent (65 cents) lower than in the same period a year earlier.

Revenue rose more than 4 percent to $2.83 billion. Analysts surveyed by Thomson Reuters on average had expected profit of 38 cents a share on revenue of $2.78 billion.

Health Net said the quarter was affected by an increase in medical costs from members of certain large, employer-sponsored group accounts that ended Dec. 31. The company also took a $2.2 million loss related to the end of its Medicare prescription drug coverage business. It had $7.1 million in litigation expenses, $5.2 million in severance costs and $5 million related to the early end of a medical management contract.

“While the first half of 2012 presented us with challenges, our performance in the second half of 2012 demonstrated stability as we continued to prepare for 2013 and 2014,” Chief Executive Jay Gellert said in a statement.

Shares closed down 37 cents, or less than 1 percent, to $26.35 on the New York Stock Exchange.