Health Net Posts Loss on Settlement Costs

Times Staff Writer

Health Net Inc., one of California’s biggest health insurance companies, posted a larger-than-expected fourth-quarter loss as it swallowed the cost of settling claims disputes with hospitals.

The Woodland Hills-based insurer reported a net loss of $85.6 million, or 77 cents a share, contrasted with net income of $89.3 million, or 77 cents, a year earlier.

Revenue rose 3.2% to $2.9 billion, largely on the strength of higher premiums.


The results included a one-time pretax charge of $252 million, $169 million of which was set aside for the hospital settlements.

Starting in 2001, the company was involved in disputes with healthcare providers in California and the Northeast over claims for emergency room treatment and other services. In 2004, with legal expenses rising and relations with hospitals frayed, the insurer decided to summarily settle the claims.

“We are using this quarter to put a number of challenging issues behind us,” said Chief Executive Jay Gellert.

Excluding the one-time charge, the company earned 59 cents a share. On that basis, Wall Street analysts were expecting earnings of 69 cents.

Health Net’s first-quarter forecast also fell short of expectations, with the company forecasting earnings of 50 to 55 cents, below analysts’ estimates of 57 cents.

Even so, Health Net’s stock rose 56 cents to $28.58 on the New York Stock Exchange.

One analyst attributed the gain to hopes that Health Net was putting its difficulties behind it.

For the full year, net income dropped to $42.6 million from $234 million in 2003. The company said 2005 earnings would be $2.30 to $2.50 a share.