Purpose

The purposes of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of Health Net, Inc. ("Health Net") shall be to oversee the practices and policies for Health Net's compensation and employee benefit plans, including its executive compensation plans and its incentive-compensation and equity-based plans; to oversee the preparation of the Compensation Discussion & Analysis ("CD&A") disclosure to be included in Health Net's annual proxy statement ("Proxy Statement") or annual report on Form 10-K ("Form 10-K") filed with the Securities and Exchange Commission ("SEC"); to produce a Committee report regarding the CD&A to be included in the Proxy Statement or Form 10-K and to perform such other functions as are set forth herein or required pursuant to the applicable rules and regulations of the New York Stock Exchange (the "NYSE") and the SEC.

Membership

The Committee shall consist of three or more members appointed by the Board after the Board's review of the recommendations of Health Net's Governance Committee (the "Governance Committee") with respect thereto. Each member of the Committee shall be qualified to serve on the Committee as an independent director* pursuant to the requirements of the NYSE and any additional requirements that the Board deems appropriate. Members of the Committee shall also qualify as "non-employee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and shall satisfy any other necessary standards of independence under the federal securities and tax laws.

Each member of the Committee shall be appointed to a term ending at the first meeting of the Committee following the next annual meeting of Health Net's stockholders, and following the end of his or her term, may be re-appointed as deemed appropriate by the Board, after the Board's review of the recommendations of the Governance Committee with respect thereto, so long as such member continues to meet the membership requirements. Any vacancy on the Committee shall be filled by majority vote of the Board. No member of the Committee shall be removed except by majority vote of the Board. On an annual basis, one member of the Committee shall be designated as the Chairman of the Committee by the Board after the Board's review of the recommendations of the Governance Committee with respect thereto. Any other applicable provisions relating to the term and qualifications of members of a committee of the Board under Health Net's bylaws shall also govern the Committee.

Meetings and Procedures

The Committee shall meet as often as it deems necessary to fulfill its responsibilities, but no less frequently than quarterly. The presence of a majority of the existing members of the Committee at each meeting shall constitute a quorum. A majority of members, but not less than two, present and voting shall approve issues requiring a vote. Telephonic attendance by any member at a meeting is specifically authorized, provided that appropriate equipment is used in order that each member of the Committee can hear one another. Additionally, as necessary, the Committee may request that members of Health Net management or others be present at Committee meetings. Minutes of each Committee meeting are to be prepared and approved by the Committee members and a copy thereof provided to the Board. Any other applicable provisions relating to meetings and procedures for committees of the Board under Health Net's bylaws shall also govern the Committee. The Committee shall report regularly to the Board on its activities, as appropriate.

The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members; and provided further that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.

Duties and Responsibilities

The Committee shall have the following duties and responsibilities with respect to Health Net's compensation and employee benefit plans, including incentive-compensation and equity-based plans, practices and policies:

(a) To review at least annually the goals and objectives of Health Net's compensation plans and other employee benefit plans, including incentive-compensation and equity-based plans, and amend, or recommend that the Board amend, these goals and objectives if the Committee deems it appropriate.

(b) To review at least annually Health Net's compensation plans and other employee benefit plans, including incentive-compensation and equity-based plans, in light of Health Net's goals and objectives with respect to such plans, and, if the Committee deems it appropriate, adopt, or recommend to the Board the adoption of new or the amendment of existing, plans.

(c) To review all equity-compensation plans to be submitted for stockholder approval under the NYSE listing standards, and to review and, in the Committee's sole discretion, approve, or recommend to the Board the approval of, all equity-compensation plans that are exempt from such stockholder approval requirement, in each case, in light of Health Net's goals and objectives with respect to such plans.

(d) To evaluate annually the performance of the Chief Executive Officer in light of the goals and objectives of Health Net's executive compensation plans, and, either as a Committee or together with the other independent directors (as directed by the Board), to determine, and recommend for approval by the independent directors of the Board, the Chief Executive Officer's compensation level based on this evaluation, which recommendation is subject to ratification, modification or rejection by the independent directors of the Board. In determining the Chief Executive Officer's compensation, including the long-term incentive component of his or her compensation, the Committee shall consider all relevant factors, including but not limited to, salary survey/market data for the job; individual and Health Net's overall performance compared to our business plan; relative performance to our peer group; industry factors during the performance period; and the CEO's compensation progression over time compared to his or her development, expected future contributions to our success and retention concerns.

(e) To evaluate annually the performance of the most highly compensated officer of Health Net (other than the Chief Executive Officer) in light of the goals and objectives of Health Net's executive compensation plans and to recommend to the Board such officer's compensation level, which recommendation shall be subject to ratification, modification or rejection by the Board. In determining any such officer's compensation, including any long-term incentive compensation, the Committee shall consider all relevant factors in determining the appropriate level of such compensation, including but not limited to, salary survey/market data for the job; individual and Health Net's overall performance compared to our business plan; relative performance to our peer group; industry factors during the performance period; and the executive's compensation progression over time compared to his or her development, expected future contributions to our success and retention concerns.

(f) To evaluate annually the performance of the senior officers of Health Net, including all officers (as defined under Rule 16a-1 of the Exchange Act) of Health Net and officers of its subsidiaries who occupy jobs that the Committee, solely for the purpose of evaluating compensation, determines to have the highest impact on the Company (the "Senior Officers") and to approve each such Senior Officer's compensation level. In determining any such officer's compensation, including any long-term incentive compensation, the Committee shall consider all relevant factors in determining the appropriate level of such compensation, including, but not limited to, salary survey/market data for the job; individual and Health Net's overall performance compared to our business plan; relative performance to our peer group; industry factors during the performance period; and the executive's compensation progression over time compared to his or her development, expected future contributions to our success and retention concerns.

(g) To review and approve, on a general and policy level basis only, the compensation and benefits of officers, managers and employees other than those covered in subsections (d), (e) and (f) above, based on management's presentation of all relevant factors of proposed actions in totality, and advise the Board of actions taken.

(h) To review and approve any severance or termination arrangements to be made with any Senior Officer of Health Net.

(i) To review periodically perquisites or other personal benefits to Health Net's Senior Officers and recommend any changes to the Board.

(j) To produce a Committee report that contains a statement as to whether the Committee has reviewed and discussed the CD&A with management and whether it has recommended to the Board that the CD&A be included in Health Net's Proxy Statement or Form 10-K.

(k) To perform such duties and responsibilities as may be assigned to the Board or the Committee under the terms of any compensation or other employee benefit plan, including any incentive-compensation or equity-based plans.

Evaluation of the Committee and its Charter

The Committee shall, on an annual basis, evaluate its performance and its duties and responsibilities set forth in this Charter. In conducting this review, the Committee shall evaluate whether this Charter appropriately addresses the matters that are or should be within its scope and shall recommend to the Board such changes as it deems necessary or appropriate.

The Committee shall address all matters that the Committee considers relevant to its performance, including at least the following: the adequacy, appropriateness and quality of the information and recommendations presented by the Committee to the Board, the manner in which they were discussed or debated, whether the number and length of meetings of the Committee were adequate for the Committee to complete its work in a thorough and thoughtful manner and the appropriateness of this Charter.

The Committee shall deliver to the Board a report, which may be oral, setting forth the results of its evaluations, including any recommended amendments to this Charter and any recommended changes to Health Net's or the Board's policies or procedures.

Investigations and Studies; Outside Advisors

The Committee may conduct or authorize investigations into or studies of matters within the Committee's scope of responsibilities, and may retain, at Health Net's expense, such independent counsel or other consultants or advisors as it deems necessary. The Committee shall have the sole authority to retain or terminate any compensation consultant to assist the Committee in carrying out its responsibilities, including sole authority to approve the consultant's fees and other retention terms as such fees and terms relate to the consultant's work for the Committee, such fees to be borne by Health Net.

* In this Charter, the term "independent director" shall mean any member of the Board that would be qualified to serve on the Committee pursuant to the requirements of the NYSE.