Health Net nears 1994 growth goal - in one quarter.

The big Woodland Hills-based health plan Health Net has posted huge membership gains in the first quarter -- gains so large that annual targets for growth already have been nearly exceeded, even while the million-member milestone was passed.

Health Net, which recently inked a deal to merge with Pueblo, Colo.-based health maintenance organization QualMed, had 1.04 million members signed on as of March 31, up about 110,000 from year-end, said Tim Littlefield, Health Net vice president of sales, last week.

"Our goal for the whole year was 130,000," said Littlefield. "I guess we'll have to adjust that goal."

Littlefield, an eight-year veteran of Health Net, attributed the enrollment surge to "the health care and economic environment."

"Consumers are looking for ways to save money, and we offer them a way," he said.

More and more employers are offering employees a menu of health plans -- and for some plans, such as Health Net, the employer might pick up much of the tab for health care, while in other plans the employee might be asked to pay more.

In recent "open enrollment" periods (when employees choose their plan for the year) at major employers, Health Net scored well, said Littlefield. "As more and more Californians become aware of HMOs, and familiar with them, they are choosing HMOs during open enrollment," he said.

Health Net's recent marriage to QualMed has not yet resulted in changes that would have favorably affected membership, said Littlefield. "Most of this increase is due to enrollment period changes, which happened late last year, before the merger," he said.

But when the million-member mark was passed in March, Health Net did not break open the champagne, joked Littlefield. "As a health care organization, we had orange juice and bran muffins," he said.

Other health plans are also reporting enrollment gains, if not as large as Health Net's. Cypress-based PacifiCare Health Systems has added 30,000 members in the first two months of the year, bringing its total to 862,000.

A spokesman for PacifiCare echoed Littlefield's comment in explaining the increase.

"HMOs offer a price-competitive product. Employers are under pressure to hold down costs, and HMOs offer lower costs (in comparison to traditional fee-for-service health insurance)," said spokesman Ben Singer of PacifiCare.

HMOs -- and their cousin, preferred provider organizations -- are health plans in which medical fees are fixed or negotiated.

Broadly speaking, HMOs and PPOs contract with doctors and hospitals to provide care for enrollees. Enrollees, generally speaking, agree to patronize only doctors in the HMO and PPO.

HMOs and PPOs are distinguished from traditional fee-for-service health insurance plans, in which enrollees choose their own doctors, and fees are the doctors' "usual and customary" rates.

Too, in HMOs doctors must undergo "utilization review" in which they are scrutinized for the amount of services they provide.

In this way, doctors who, say, perform far more operations than peers with like patients can be screened out of the plan, if necessary.

About one-third of all Californians are now enrolled in HMOs. The PPOs are also experiencing large enrollment gains, although statewide figures are not available. Traditional fee-for-service has been all but shunted aside in California's employer markets.

Health Net is an example of this growth. When Chairman Roger Greaves split the then non-profit Health Net off from Blue Cross in 1982 (in a litigated split), the HMO had 100,000 members. By 1992 the HMO reported more than $1 billion in revenues, and Greaves was considering plans to convert the 750,000-member HMO into a for-profit entity.

In February 1992, the state Department of Corporations approved the conversion of Health Net to a for-profit status, although the state reduced the amount of stock Health Net executives could own as a result of the conversion.

Health Net last year agreed to team up with QualMed, a publicly traded HMO giant.