916085--2/13/2006--HEALTH_NET

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Our profitability will depend, in part, on our ability to accurately predict and control health care costs. We face competitive pressure to contain premium prices. Our inability to estimate and maintain appropriate levels of reserves for claims may adversely affect our business, financial condition or results of operations. We may experience losses as a result of the regional concentration of our business. Our businesses are highly regulated. Our efforts to capitalize on Medicare business opportunities could prove to be unsuccessful. Federal and state audits, review and investigations of us and our subsidiaries could have a material adverse effect on our operations. Proposed federal and state legislation and regulations affecting the managed health care industry could adversely affect us. A significant reduction in revenues from the government programs in which we participate could have an adverse effect on our business, financial condition or results of operations. If we are unable to maintain good relations with the physicians, hospitals and other providers that we contract with, our profitability could be adversely affected. We face risks related to litigation, which, if resolved unfavorably, could result in substantial penalties and/or monetary damages, including punitive damages. In addition, we incur material expenses in the defense of litigation and our results of operations or financial condition could be adversely affected if we fail to accurately project litigation expenses. Our forecasts and other forward-looking statements are based on a variety of assumptions that are subject to significant uncertainties. Our performance may not be consistent with these forecasts and forward-looking statements. The markets in which we do business are highly competitive and our inability to effectively compete could have an adverse effect on our business, financial condition or results of operations. Our efforts to capitalize on business opportunities provided by consumer-directed healthcare, such as our HSA program, could prove to be unsuccessful. We have a material amount of indebtedness and may incur additional indebtedness, or need to refinance existing indebtedness, in the future, which may adversely affect our operations. We are a holding company and a substantial amount of our cash flow is generated by our subsidiaries. Our senior credit facility contains restrictive covenants that may limit our ability to pursue our business strategies. Any failure to effectively maintain our management information systems could adversely affect our business. We must comply with emerging restrictions on patient privacy and information security, including taking steps to ensure compliance by our business associates with HIPAA Negative publicity regarding the managed health care industry could adversely affect our ability to market and sell our products and services. If we are unable to manage our general and administrative expenses, our business, financial condition or results of operations could be harmed. Changes in the value of our investment assets could have a negative effect on our results of operations and stockholders equity. We depend, in part, on independent brokers and sales agents to market our products and services, and recent regulatory investigations have focused on certain brokerage practices, including broker compensation arrangements and bid quoting practices. The market price of our common stock is volatile. Natural disasters, including earthquakes, fires and floods, could severely damage or interrupt our systems and operations and result in an adverse effect on our business, financial condition or results of operations. Terrorist and other malicious activity could cause us to incur unexpected health care and other costs. A pandemic, such as a worldwide outbreak of a new influenza virus, could materially and adversely affect our ability to control health care costs.

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916085--2/13/2006--HEALTH_NET_INC