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Thursday, Mar 28, 2024

Health Net Selling Northeast Operations

UnitedHealthcare will acquire Health Net’s licensed subsidiaries in the Northeast less than a week after the insurer lost a lucrative military contract with the U.S. Department of Defense’s TRICARE program. Last week, two of the three current TRICARE contractors- Health Net Federal Services and Humana Military Healthcare Services- lost to rival firms in their bids for contracts worth a combined total of $55.5 billion over five years. Health Net, based in Woodland Hills, had held this contract since 1997, and provided coverage for 3 million active-duty military personnel, including National Guard and Reserve members, retirees and dependents in 20 East Coast and Midwest states and Washington, D.C. Through this contract Health Net was expected to generate about 20 percent of its projected annual revenues of more than $15 billion. Health Net has a right under federal rules to protest the contract’s loss but the company said it will determine whether or not to challenge the decision after a Defense Department debriefing is held in the coming weeks. The impending contract loss had roused speculation of a possible acquisition of Health Net’s Northeast health insurance operations, which could significantly reduce the company’s national presence. UnitedHealthcare announced July 20 it 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. Health Net currently serves 578,000 members in Connecticut, New York and New Jersey. Expected 2009 Health Net revenues for these operations are approximately $2.7 billion. “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, in a statement. The purchase transaction is expected to close within 12 months. -Andrea Alegria

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