Woodland Hills insurer Health Net Inc. said third-quarter net income plunged 71%, but its shares rose as the company resolved a dispute with California officials over reimbursement for government health programs.
Health Net disappointed investors in August when it slashed its full-year profit outlook and reported higher-than-expected medical costs. On Monday, Chief Executive Jay Gellert said the company was making progress on its turnaround plans. He cited a wide-ranging agreement with California healthcare officials as a major step forward.
Investors cheered the news, bidding up Health Net shares by $3.03, or 13%, to $25.71.
The deal with the California Department of Health Care Services ended company litigation over government reimbursement. As part of the agreement, Health Net said, the state will extend four existing Medi-Cal contracts by five years and provide additional payments if the company incurs larger-than-expected losses as new government programs get underway next year.
Medi-Cal is the state's Medicaid program for the needy, elderly and disabled.
In Los Angeles and San Diego counties, Health Net plans to participate in a closely watched program aimed at improving care and lowering costs for many chronically ill patients who are enrolled in both Medicare and Medicaid, known as dual-eligible patients. California is expected to launch that pilot program by the middle of next year.