Imagine how profitable Health Net would be if it got rid of all its businesses. O.K., that’s a joke. But the company has lost its lucrative Tricare business and now — at long last and after much ado — has struck a deal to sell its Northeast operations to UnitedHealth.
The sale price appears to be a good one for Health Net. It includes $60 million in up-front cash, plus another potential $120 million in incentive payouts tied to commercial member retention, plus access to $450 million in previously restricted assets — a total potential value of $630 million.
Health Net serves 578,000 members in Connecticut, New York and New Jersey: 437,000 commercial risk, 35,000 self-funded, 55,000 Medicare Advantage and 51,000 Medicaid members. The company expects 2009 revenues from these operations of about $2.7 billion.
I still think Health Net will sell off the rest of the company at some point, which includes its operations in California and Arizona. So the good news — i.e., the successful sale of the northeast business at a decent price — is overshadowed by the prospect that this is just another step in the dismantling of an organization that has been floundering for most of the decade.
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