4th Annual Investor Conference

May 16, 2001

GOVERNMENT AND SPECIALTY SERVICES DIVISION

Jeffrey J. Bairstow

President

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4 Point Review

Solid performance in 2000

Positioned for consistent results in 2001-2003

Opportunity to reduce costs in base business through technology applications

Opportunity to increase growth and profitability through new products

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HNFS - Health Net Federal Services: Administers the TRICARE Health Care Program to approximately 1.5 million military dependents in 11

states under the Civilian Health and Medical Program of the Uniformed

Services (CHAMPUS)

MHN - Managed Health Network: Provides behavioral health care services to more than 10 million

lives nationwide (Risk, ASO, and EAP)

Overview of Division

Core Assets

4

Overview of Division (Continued)

EOS - Employer & Occupational Services: Provides a broad range of administrative services primarily to

the workers’ compensation industry

HBI - Health Benchmarks, Inc: A health information services

company that provides services to managed care organizations,

pharmaceutical & biotechnology companies, & self-insured

employers.

DentiCare/AVP: Provides dental and vision care management services

to more than 800,000 lives.

Other Segments

5

2001 Highlights

Achieved global settlement with Department of Defense to reduce receivables to $64 million on 3/31/01

Expanded MHN membership to over 10 million members

Successfully integrated IPS operations into Health Plan Operations

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Roster of PanelJeff Bairstow President, Government & Specialty

Services DivisionJim Woys President, HN Federal ServicesJonathan Scheff, M.D. SVP & Chief Medical Officer,

HN Federal ServicesBen Yates VP & Chief Financial Officer,

HN Federal ServicesDave Buhler Chief Administrative Officer, MHNJim Jones SVP, Sales & Marketing, MHNMike Berlin VP Business Development, New Ventures

Group

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HNFS - Health Net Federal Services

Presenter: Jim WoysPresident, HNFS

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11

10

96

1

34

5 2

Central

TRICARE Regions

Region 11Annual Revenue: $160MEligibles: 244,000Ext. term 3/002/02

Region 6Annual Revenue: $560MEligibles: 611,000Ext. term 11/0010/02

Regions CA/HI/AKAnnual Revenue: $530MEligibles: 608,000Ext. term 4/013/03

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TRICARE Contract Extension Summary

Financial terms of current extensions– Increased profit rates– Increased administrative prices– Re-basing health costs and trends– More favorable risk sharing provisions– Elimination of capitation arrangements

Contractual terms of extensions improve predictability of earnings and receivable levels

Additional two-year extensions likely

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$0

$50

$100

$150

$200

$250

$300

$350

$321

$273

19971997

$ in

mill

ions

Management focused on maintaining low level of Government investment &

maintaining operating cash flow

TRICARE Government Receivable

Expectations for 2001….Accounts receivable levels to be <$125 million

19981998 19991999 20002000 20012001

$334

$64$64

<$125<$125

$290

3/31/013/31/01

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-$150

-$100

-$50

$0

$50

$100

$150

$89

$10

19971997

$ in

mill

ions

Net investment = Government receivable less Government payable less

claims payable

TRICARE Net InvestmentExpectations for 2001….

19981998 19991999 20002000 20012001

$127

$111 $89(Estimated)

$57

3/31/013/31/01

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Enrollment3%

Other30%

Field Operations

12%

Claims & Customer

Service32%

Medical Management

23%

Solutions

Medical Management System

On-Line Billing and Enrollment

Provider ConnectivityQuestiumEnterprise Portal

(HN Connect) Digital Claims Engine

Opportunity to Reduce Cost Through Innovation

Opportunities

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New Business Opportunities

Sales & licensing of new products to other TRICARE Regions/payers/customers

– On-line enrollment– Questium– Medical management system

Veterans Administration opportunity– Repricing arrangements– At-Risk or ASO arrangements similar to DoD– Care delivery operations

DoD Program Changes– TRICARE for Life

14

HNFS Opportunity: VA Healthcare Spend Will Increasingly be Outsourced

1999: $19.1 billion 2003: $24.0 billion 2007: $32.7 billion

$18,500 m97%

$630 m3%

$1,500 m6%

$22,500 m94%

$4,000 m12%

$28,700 m88%

Direct Care vs.. Purchased Care

Direct CarePurchased Care

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MHN - Managed Health Network

Presenter: Dave BuhlerChief Administrative Officer

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WA

CA

TX

OK AR

LA

AK

ORMT

NVUT

IDSD

WY

NM

CO

AZ

IA

IL

WI

MO

MN

KS

NE

ND

SC

FL

GAALMS

TNKY

OHIN

MINY

NC

PA

ME

WV VA

HI

MHN - A National Company

National NetworkRevenue $250MLives 10,000,000

East 3,000,000Central 2,000,000West 5,000,000

Providers 33,000Facilities 1,300Offices 43

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Limited Risk

(EAP/ASO)

69%

FullRisk31%

Non-Affiliate

60%

Affiliate40%

MHN Covered Lives

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Positioned for Consistent Results 2001-2003

Expanded to over 10 million members in 2001- #5 behavioral health organization in market share

Continued strength in EAP product line - #2 market share

Web automation through Questium

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Solutions Through Self Service

Questium Life Provider connectivity Enterprise portal

(HN Connect)Intake28%

Other16%

Field Operations

13%

Claims8% Medical

Management9%

Care Management

24%

Enrollment2%

Opportunities

Opportunity to Reduce Cost Through Innovation

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MHN - Managed Health NetworkHuman Capital Solutions

Presenter: Jim JonesSVP, Sales and Marketing

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$5BN Mature Market Opportunity

The Next Behavioral Health Opportunity

Direct Costs•Health care

•Administration

Indirect Costs• Aberrant behaviors

• Reduced productivity & performance

• Drives reduced competitive advantage

Future Industry Focus:Current Industry Focus:$81BN of direct costs $500BN of indirect costs

$25-50BN New Market Opportunity

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MHN is Well-Positioned to Attack This New Market

Leverage national employer distribution channel

Penetrate six million member commercial client base

Use strategic partnerships to accelerate market penetration and expand reach into new markets

Current clients, both large and mid-size, very receptive to idea

Clients see it as an extension of our leading EAP market position

Health Net a pilot client Recently signed first

external client

Market Validation: Market Entry:

25 years as a leader in helping people change behavior

MHN products and services that can be repositioned to impact indirect costs

Core competency in integrating and managing an array of professional service partners

A scaleable delivery platform--Questium

Why MHN?

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QUESTIUM Personal and Professional Life Services

Self-generated referrals and authorizations

On-line access to authorization and utilization history

Wide range of interactive self-care behavioral programs

Broad spectrum of personal and organizational tools/services

Competitive Points of Differentiation

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Government & Specialty Services Summary

Executed on stated plan in 2000

2001-2003 positioned for consistent results

Upside from revenue and cost reduction initiatives