4th Annual Investor Conference May 16, 2001 HEALTH PLANS DIVISION Cora Tellez President

2 Positioned for Profitable Growth  Solid Operating Performance in 2000 and Entering 2001  New Products Introduced in 2000 and More Planned for 2001  Medicare Strategy That Focuses on Profitable Performance

3 Positioned for Profitable Growth  Solid Operating Performance in 2000 and Entering 2001  New Products Introduced in 2000 and More Planned for 2001  Medicare Strategy That Focuses on Profitable Performance

4 Health Plan Membership Health Plan Membership By State

5 Health Plan Membership Health Plan Membership By Line of Business

6 Health Plan Revenue Health Plan Premium Revenue By Line of Business

Operating Performance Health Plans Division

8 Drivers of Membership Growth  Diversify the Product Portfolio  Diversify Market Segments  Pursue Niche Products  Provide Flexible Benefit Designs to Meet Consumers at the Price They Want to Pay  Expand Choice and Access  Price Ahead of Cost Trends

9 Membership Results By Line of Business Membership* Growth Between Q and Q * Excludes Florida, Washington and Colorado Medicare Supp is in Medicare

10 Membership Results By Product Commercial Membership* Growth Between Q and Q * Excludes Florida, Washington and Colorado Medicare Supp is in Medicare

11 Membership Results By Market Segment Commercial Membership* Growth Between Q and Q * Excludes Florida, Washington and Colorado Medicare Supp is in Medicare

12 Gradual and Planned Shift in Risk Health Net of California HMO Membership By Risk Type

13 Inpatient Utilization Under Control As Risk Shifts

14 Inpatient Utilization Under Control As Risk Shifts

15 Successfully Managing the Shift in Risk  Pricing Ahead of Medical Cost Trends  Claims Processing Under Control –Claims Volume Increased 25% from 1999 to 2000 and is Projected to Increase 27% in 2001 –Successfully Managing Inventory - “Work on Hand” Consistently Under Five Days –Increased Staff 25% Over Past 12 Months –Expanded Outsourced Adjudication Capabilities –Implemented Technology Enhancements - EDI, Auto Adjudication

16 Positioned for Profitable Growth  Solid Operating Performance in 2000 and Entering 2001  New Products Introduced in 2000 and More Planned for 2001  Medicare Strategy That Focuses on Profitable Performance

17 Market Position: A Platform For Growth HMO Market Position in Largest Markets

18 Consistently Profitable Medicaid Program  Strong Growth Between Q and Q –California: 100,000 Members (21% Growth) –Northeast: 12,000 Members (12% Growth)  Stable Performance –Consistent Profitability –Demographic Profile

19 Maintaining Affordability: California Copay Strategy  New Copays & Copay Increases Across All Services –$250-$350 Inpatient and Outpatient Surgery Copay –$75 Emergency Room Copay and Option to Increase Physician Visit Copay  Maintains Product Affordability Through Cost Sharing –Will Mitigate Premium Increases –Should Stem Shift to Self-Insurance

20 Maintaining Affordability: Northeast Copay Strategy  Introduced “Split Copay” Product - Differentiates Primary and Specialty Physician Copay –Will Mitigate Premium Increases –Well Received by the Market  Three-Tier Pharmacy Plans Offered on Every Renewal in 2000 –About 47% of Eligible Members Converted to 3-Tier in Q –Will Mitigate Premium Increases

21 Positioned for Profitable Growth  Solid Operating Performance in 2000 and Entering 2001  New Products Introduced in 2000 and More Planned for 2001  Medicare Strategy That Focuses on Profitable Performance

22 Medicare Product Line & Strategy  Medicare Profitability is Improving  Diligently Track Performance - Judicious in Evaluating Market Exits  Medicare Strategy: –High AAPCC Counties –Cost Effective Networks –Medicare Supplemental Plans

23 Medicare - West  24 Counties in the West –20 Counties in California –4 Counties in Arizona  Exited Five Counties: Fresno, Sonoma, Cochise, Gila and So. Pinal Impacting 11,000 Members  Benefit Reductions in 16 Out of 22 Counties –Copay Increases –Generics Only –Lower Pharmacy Caps  MCR Improvement Seen in Q1 2001

24 Medicare - Northeast  12 Counties in the Northeast  Exited Four Counties: Litchfield, Middlesex, Nassau and Suffolk Impacting 4,800 Members  Benefit Reductions in Connecticut –Generics Only  MCR Improvement Seen in Q1 2001

25 Health Net, Inc. Health Plans - Well Positioned For Growth  Solid Products  Strong Financial Base  Benefit Flexibility  Management Depth  Focus and Discipline Around Our “Vital Few”  Investment in Branding