Humana 2002 Annual Report Download - page 58

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with us. In addition, payment or other disputes between a primary care provider and specialists with whom the
primary care provider contracts can result in a disruption in the provision of services to our members or a
reduction in the services available to our members. The financial instability or failure of a primary care provider
to pay other providers for services rendered could lead those other providers to demand payment from us, even
though we have made our regular fixed payments to the primary provider. There can be no assurance that
providers with whom we contract will properly manage the costs of services, maintain financial solvency or
avoid disputes with other providers. Any of these events could have an adverse effect on the provision of services
to our members and our operations.
Our ability to obtain funds from our subsidiaries is restricted.
Because we operate as a holding company, we are dependent upon dividends and administrative expense
reimbursements from our subsidiaries to fund the obligations of Humana Inc., the parent company. These
subsidiaries generally are regulated by state departments of insurance. In most states, we are required to seek
prior approval by these state regulatory authorities before we transfer money or pay dividends from these
subsidiaries that exceed specified amounts, or, in some states, any amount. We are also required by law to
maintain specific proscribed minimum amounts of capital in these subsidiaries. One TRICARE subsidiary under
the Regions 3 and 4 contract with the Department of Defense is required to maintain assets at least equivalent to
its current liabilities. In addition, we normally notify the state departments of insurance prior to making payments
that do not require approval.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item appears in Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Item 7 herein, under the caption “Market Risk-Sensitive Financial Instruments and
Positions.”
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