916085--2/27/2009--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. Our businesses are subject to significant government regulation, which increases our cost of doing business and could adversely affect our ability to grow our businesses. Our efforts to capitalize on Medicare business opportunities could prove to be unsuccessful. 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. Proposed federal and state legislation and regulations affecting the managed health care industry could adversely affect us. We may experience losses as a result of the regional concentration of our business. Federal and state audits, review and investigations of us and our subsidiaries could have a material adverse effect on our operations. Regulatory activities and litigation relating to the rescission of coverage, if resolved unfavorably, could adversely affect us. 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. 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. If the current unfavorable economic conditions continue or further deteriorate, it could adversely affect our revenues and results of operations. 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. 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. Adverse conditions in the credit markets may materially affect our ability to obtain credit. The current economic environment and volatility in the financial markets could have an adverse impact on the value of our investment portfolio and our goodwill which could, in turn, have a negative effect on our results of operations and stockholders equity. Downgrades in our debt ratings, should they occur, may adversely affect our business, financial condition and results of operations. We are a holding company and a substantial amount of our cash flow is generated by our subsidiaries. Our regulated subsidiaries are subject to restrictions on the payment of dividends and maintenance of minimum levels of capital. Our revolving credit facility and our financing facility contain restrictive covenants that could limit our ability to pursue our business strategies. The markets in which we do business are highly competitive. If we do not design and price our products competitively, our membership and profitability could decline. We have historically experienced significant turnover in senior management and recently reorganized our management structure. If we are unable to manage the succession of our key executives, it could adversely affect our business. If we fail to effectively maintain our management information systems, it could adversely affect our business. We are subject to risks associated with outsourcing services and functions to third parties. Acquisitions, divestitures and other significant transactions may adversely affect our business. We must comply with 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. 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. If we are required to publicly disclose information regarding our provider reimbursement rates and preferred drug list or other trade secret information for our programs, it could have a material adverse effect on our business. Large-scale public health epidemics and/or terrorist activity could cause us to incur unexpected health care and other costs and could materially and adversely affect our business, financial condition and results of operations. 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.

Full 10-K form ▸

916085--2/27/2009--HEALTH_NET_INC