CHICAGO--(BUSINESS WIRE)-- Fitch Ratings current ratings for Health Net Inc. (NYSE: HNT; Health Net) are unchanged following this week's announcement that the company is selling its northeast operations to UnitedHealth Group, Inc.

While Health Net's northeast business comprised approximately 8.9% of its total membership as of March 31, 2009, the business was not a primary source of growth or earnings for the company. In addition, the move had been widely expected for many months. Health Net's management has previously indicated that it was also seeking strategic alternatives for its Arizona business to include a possible sale, but has announced that the business now presents additional opportunity for the company and will remain part of Health Net for the foreseeable future.

Monday's announcement follows a notice last week from the Department of Defense (DOD) indicating that Health Net's contract as the Managed Care Support Contractor for the TRICARE North Region was not being renewed. TRICARE is a DOD program that provides health insurance to active members of the U.S. military and their families in partnership with private insurers. Upon the announcement, Fitch downgraded Health Net's Issuer Default Rating (IDR) to 'BB-', its senior debt rating to 'B+', and the Insurer Financial Strength (IFS) ratings of its insurance subsidiaries to 'BBB-'.

A primary uncertainty related to the sale of the northeast business involves Health Net's use of proceeds. Factoring in the loss of the TRICARE contract and assuming the sale is approved, the company will be contracting significantly in the next 12-18 months. Fitch believes that negative rating pressure could ease should Health Net use some combination of its future earnings, cash and proceeds from the sale to reduce its financial leverage and strengthen the capitalization of its operating subsidiaries.


Fitch recognizes the potential for a material shift in the profile of the health insurance and managed care sector driven by reform efforts currently underway in Congress. Fitch is closely following these developments and their impact on the sector.

Health Net, Inc. is among the largest publicly traded managed care operations in the U.S., reporting March 31, 2009 enrollment of approximately 6.1 million individuals, including enrollment associated with its TRICARE business. The company provides a variety of indemnity, PPO, POS, and HMO plans in the group, individual, Medicare risk, Medicaid, and TRICARE markets. The company also reported membership of approximately 449,000 in the company's Medicare Part D plans at March 31, 2009.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.



Fitch Ratings, Chicago

Manish J. Patel, +1-312-368-3188

Bradley S. Ellis, CFA, +1-312-368-2089

Brian Bertsch, +1-212-908-0549 (Media Relations, New York)

brian.bertsch@fitchratings.com

Source: Fitch Ratings