Health Net Posts 79% Decrease in Q1 Profit, Sets Plan To Lay Off 500 Employees
Officials for Los Angeles-based Health Net on Tuesday reported that the health plan's first-quarter earnings decreased by 79% to $15 million, or 13 cents per share, from $72.1 million, or 60 cents per share, a year earlier, the Los Angeles Times reports. Health Net officials attributed the decrease to about $64 million in unexpected hospital claims paid in March 2004 for services rendered in 2003 and before (White, Los Angeles Times, 5/5). Health Net officials reported that first-quarter premium increases averaged about 8% to 9%, while medical costs increased 11.8%, the Hartford Courant reports. Officials said that the company now intends to increase premiums 13% to 15% for its commercial health plans (Levick, Hartford Courant, 5/5). For the quarter, revenue increased 7.7% to $2.92 billion from $2.72 billion a year earlier (Dow Jones/Orange County Register, 5/5). First-quarter revenue from Tricare, which provides health insurance to members of the military and their dependents, increased 11% to $503.9 million. Enrollment increased to 3.8 million in the first quarter, a slight increase compared with the first and last quarters of 2003 (Los Angeles Times, 5/5).
Health Net officials also announced plans to eliminate 500 jobs, or about 6% of the company's workforce. Most of the layoffs will take place in the Northeast, the Los Angeles Daily News reports (Pondel, Los Angeles Daily News, 5/4). Health Net CEO Jay Gellert said that the job cuts would occur "in the next few weeks," Dow Jones/Register reports. In the second quarter, the company will take a $15 million pre-tax charge for costs associated with the job cuts. Health Net officials said that the company expects second-quarter earnings of between 37 cents per share and 47 cents per share (Dow Jones/Orange County Register, 5/5). Health Net officials also reduced the company's previous 2004 full-year guidance to between $2.15 and $2.50 per share, excluding severance charges. Health Net's previous 2004 full-year guidance was between $2.92 and $3.07 per share (Hartford Courant, 5/5). "Clearly we are disappointed with what we are reporting today. We have already begun to raise prices. We will start to see some effect in the second quarter," Gellert said (Los Angeles Times, 5/5).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.