Information from Settlement Notice

A. Why Did I Get This Notice Package?
 
You or someone in your family may be a Class Member who would be eligible to participate in the proposed Settlement. You may receive more than one Notice due to duplicate mailing records, but in an abundance of caution, this Notice is being sent to all address records obtained.

The Court directed this Notice to be sent to you, because you have a right to know about a proposed Settlement of three class action lawsuits, and about all of your options, before the Court decides whether to approve the Settlement. If the Court approves it and after objections and appeals are resolved, the Claims Administrator appointed by the Court will make the payments that the Settlement allows.

This package explains the lawsuits, the Settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them.

The Court in charge of the cases is the United States District Court for the District of New Jersey, and the names of the cases are: McCoy v. Health Net, Inc., et al. (03-cv-1801) (“McCoy”), Wachtel v. Health Net, Inc., et al. (01-cv-4183) (“Wachtel”). and Scharfman v. Health Net, Inc., et al. (05-cv-0301) (“Scharfman”). The judge in these cases is United States District Court Judge Faith S. Hochberg. whose chambers are in Newark, New Jersey.

B. What Is This Lawsuit About?

These actions challenge the way that Health Net pays claims when members of Health Net’s health insurance plans use medical providers who are not part of their network (“Out-of-Network Providers” or “ONET Providers”). These actions claim that Health Net provided inadequate usual, customary and reasonable (“UCR”) reimbursement to its members for Covered Services and/or Supplies provided by Out-of-Network Providers by using the Ingenix databases and/or other protocols or methods. These actions also challenge the quantity and quality of the information Health Net provided about how it will pay for covered Out-of-Network Services, how Health Net explained its benefit denials and how it decided appeals from subscribers who disagreed with Health Net’s decisions. The Amended Complaints in Wachtel and McCoy allege that this conduct violated the Employee Retirement Income Security Act of 1974 (“ERISA”) and state law. The Second Amended Complaint in Scharfman alleges that this conduct violated ERISA and the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Health Net denies the factual allegations and legal claims asserted in these Complaints, and denies any wrongdoing or liability.

By Order dated September 25, 2006 (the “September 25, 2006 Order”), the Court certified Wachtel and McCoy to proceed as class actions on behalf of the Wachtel and McCoy classes described in Part II of this Notice. The Plaintiffs who have been appointed as Representative Plaintiffs to represent the classes are Zev Wachtel and Renee McCoy. On April 24, 2008, the Court also preliminarily certified a settlement class in the Scharfman action, appointed Stewart Scharfman, Zev Wachtel and Renee McCoy as the Representative Plaintiffs to represent the Scharfman class, and designated Class Counsel. These classes are also described in Part II of this Notice.

C. What Are the Class Claims, Issues, and Defenses in the Wachtel and McCoy Actions?

The following represents the claims, issues and defenses that the Court ordered shall be treated on a class basis for the Wachtel and McCoy actions in the September 25, 2006 Order pursuant to Rule 23(c)(1)(B) of the Federal Rules of Civil Procedure, and which is set forth in this Notice pursuant to Rule 23(c)(2)(B):

1. Whether Health Net’s use of Ingenix data or any other data to calculate usual, customary, or reasonable charges in determining ONET reimbursement violated ERISA or any applicable law;

2. Whether Health Net’s use of protocols that reduced ONET reimbursements violated ERISA or any applicable law;

3. Whether ERISA requires each class member to prove exhaustion or futility;

4. Whether Health Net’s alleged fiduciary violations, if proved, justify appointment of a monitor under ERISA § 502(a)(3) or other injunctive relief;

5. Whether class members who assigned claims (or assignee providers) may recover damages;

6. Whether the claim for failure to provide accurate Summary Plan Descriptions (“SPDs”) and other information upon request entitles class members to any relief;

7. Whether interest should be assessed on any monetary recovery under ERISA;

8. Whether Health Net’s claims review procedures complied with ERISA;

9. What is the standard of review applicable to review Health Net’s benefit determinations;

10. What is the identity and scope of the ERISA plans;

11. Whether the contractual terms of the relevant plans permit Health Net’s reimbursement practices for ONET claims;

12. Whether Health Net’s VCR ONET reductions were fiduciary or settlor functions;

13. Whether the New Jersey Department of Banking and Insurance restitution precludes recovery by class members;

14. Whether there is standing to assert claims for prospective relief;

15. Whether Health Net’s failure to properly disclose the specific reason for claim denials in its Explanation of Benefits (“EOBs”) and/or that beneficiaries could request supporting evidence upon request, violated ERISA;

16. Whether the Court’s interpretation of the ERISA plans must be guided by the state regulators’ interpretation of such plans;

17. What the applicable statutes of limitations periods are for the claims of class members;

18. Whether Health Net’s failure to pay interest, (a) when claims were not timely paid, and (b) when the VCR was increased on appeal, violated ERISA; and

19. Whether Health Net has violated the New Jersey Regulation for all ERISA small employer plans.

D. What Are the Class Claims, Issues, and Defenses in the Scharfman Action?

The following represents the claims, issues and defenses that the Court ordered shall be treated on a class basis for the Scharfman Classes pursuant to Rule 23(e) of the Federal Rules of Civil Procedure. and which is set forth in this Notice pursuant to Rule 23(e)(l):

1. Whether Health Net’s use of Ingenix data or any other data to calculate UCR charges in determining ONET reimbursement violated ERISA or RICO, from September 1, 2004 until July 31,2007;

2. Whether Health Net’s use of protocols that reduced ONET reimbursements violated ERISA or RICO from September 1,2004 until July 31, 2007;

3. Whether ERISA requires each class member to prove exhaustion or futility;

4. Whether Health Net’s alleged fiduciary violations, if proved, justify appointment of a monitor under ERISA § 502(a)(3) or other injunctive relief;

5. Whether class members who assigned claims (or assignee providers) may recover damages;

6. Whether the claim for failure to provide accurate SPDs and other information upon request entitles class members to relief;

7. Whether interest should be assessed on any monetary recovery under ERISA;

8. Whether Health Net’s claims review procedures complied with ERISA;

9. What the standard of review applicable to review Health Net’s benefit determinations is;

10. What the identity and scope of the ERISA plans from September I, 2004 until July 31, 2007 are;

11. Whether the contractual terms of the relevant plans permit Health Net’s reimbursement practices for ONET claims:

12. Whether Health Net’s VCR ONET reductions were fiduciary or settlor functions;

13. Whether the New Jersey DOBI restitution precludes recovery by class members;

14. Whether there is standing to assert claims for prospective relief;

15. Whether Health Net’s failure to properly disclose the specific reason for claim denials in its EOBs and/or that beneficiaries could request supporting evidence upon request, violated ERISA;

16. Whether the Court’s interpretation of the ERISA plans must be guided by the state regulators’ interpretation of such plans;

17. What the applicable statute of limitations periods are for the claims of class members; and

18. Whether Health Net’s failure to pay interest. (a) when claims were not timely paid and (b) when the UCR was increased on appeal, violated ERISA.

E. Why Is This a Class Action?

In a class action, one or more people called Class Representatives (in this case Renee McCoy, Zev Wachtel, Linda Wachtel and Stewart Scharfman), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class.

F. Why Is There a Settlement?

The Court did not decide in favor of either side. Instead, both sides agreed to settle all claims that were or could have been asserted against Health Net in the actions, in exchange for monetary consideration and business practice initiatives. That way, they avoid the uncertainties and cost of a trial and possible appeal, and the affected Class Members will receive compensation.