Humana 2002 Annual Report Download - page 9

PART I
ITEM 1. BUSINESS
General
Headquartered in Louisville, Kentucky, Humana Inc. referred to throughout this document as “we,” “us,”
“our,” the “Company” or “Humana,” is one of the nation’s largest publicly traded health benefits companies,
based on our 2002 revenues of $11.3 billion. We offer coordinated health insurance coverage and related services
through a variety of traditional and Internet-based plans for employer groups, government-sponsored programs,
and individuals. As of December 31, 2002, we had approximately 6.6 million members in our medical insurance
programs, as well as approximately 1.6 million members in our specialty products programs. We have
approximately 425,000 contracts with physicians, hospitals, dentists and other providers to provide health care to
our members. In 2002, approximately 70% of our premiums and administrative services fees resulted from
members located in Florida, Illinois, Texas, Kentucky, and Ohio. We derived approximately 44% of our
premiums and administrative services fees from contracts with the federal government in 2002. Under two
federal government contracts with the Department of Defense, we provide health insurance coverage to the
TRICARE members, accounting for approximately 19% of our total premiums and administrative services fees
in 2002. Under one federal government contract with the Centers for Medicare and Medicaid Services, or CMS,
we provide health insurance coverage to approximately 228,400 Medicare+Choice members in Florida,
accounting for approximately 16% of our total premiums and administrative services fees in 2002.
We were organized as a Delaware corporation in 1964. Our principal executive offices are located at
500 West Main Street, Louisville, Kentucky 40202, and the telephone number at that address is [phone].
We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and
Exchange Commission, or SEC, under the Securities Exchange Act of 1934, or the Exchange Act.
We have made available free of charge on or through our Internet website (http://www.humana.com) our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Proxy Statements, and since November 15,
2002 we expanded the data available on our website to include all reports, and, if applicable, amendments to
those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC.
This Annual Report on Form 10-K contains both historical and forward-looking information. See the
“Cautionary Statements” section in Item 7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations for a description of a number of factors that could adversely affect our results.
Business Segments
We manage our business with two segments: Commercial and Government. The Commercial segment
consists of members enrolled in products marketed to employer groups and individuals, and includes three lines
of business: fully insured medical, administrative services only, or ASO, and specialty. The Government segment
consists of members enrolled in government-sponsored programs, and includes three lines of business:
Medicare+Choice, Medicaid, and TRICARE. We identified our segments in accordance with the aggregation
provisions of Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information which is consistent with information used by our Chief Executive Officer in
managing our business. The segment information aggregates products with similar economic characteristics.
These characteristics include the nature of customer groups and pricing, benefits, and underwriting requirements.
The results of each segment are measured by income before income taxes. We allocate all selling, general
and administrative expenses, investment and other income, interest expense, and goodwill, but no other assets or
liabilities, to our segments. Members served by our two segments generally utilize the same medical provider
networks, enabling us to obtain more favorable contract terms with providers. Our segments also share overhead
costs and assets. As a result, the profitability of each segment is interdependent.
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