Humana 2003 Annual Report Download - page 24

Federal
On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, or DIMA. DIMA makes many significant changes to the Medicare fee-for-service
and Medicare+Choice programs, as well as other changes to the commercial health insurance marketplace. Most
significantly, DIMA creates a prescription drug benefit for Medicare beneficiaries, establishes a new Medicare
Advantage program to replace the Medicare+Choice program, and enacts health savings accounts, or HSAs, for
non-Medicare eligible individuals and groups.
In 2004 and 2005, older Americans will be eligible to purchase a discount card. Low-income seniors also
will receive an annual subsidy of $600 to further defray drug costs. Distribution of the discount cards is expected
in March or April 2004. Beginning in 2006, Medicare beneficiaries will be able to sign up for a stand-alone drug
plan or join a private health plan that offers drug coverage. DIMA adds a new payment methodology for private
MedicareAdvantage plans in 2004. This methodology provides another basis of payment equal to 100% of
Medicare fee-for-service costs and changes the 2% minimum update to include the greater of 2% or the
MedicareAdvantage growth rate.
The legislation establishes a new Medicare private health plan program, called MedicareAdvantage, to offer
regional PPO options beginning in 2006 and a continuance of HMO, Point-of-Service, PPO (those established
prior to December 31, 2005), and Private-Fee-for-Service options in defined, local service areas.
The legislation also includes a provision establishing HSA’s, tax-advantaged savings accounts that can be
used to pay for medical expenses incurred by individuals, their spouse, and their dependents.
The Health Insurance Portability and Accountability Act of 1996, or HIPAA, includes administrative
provisions directed at simplifying electronic data interchange through standardizing transactions, establishing
uniform health care provider, payer, and employer identifiers and seeking protections for confidentiality and
security of patient data. Under the new HIPAA standard transactions and code sets rules, we have made
significant systems enhancements and invested in new technological solutions. The compliance and enforcement
date for standard transactions and code sets rules was October 16, 2003. We have continued to be in compliance
with this regulation. However, as many providers indicated that they could not yet comply, CMS stated that
covered entities making a good faith effort to comply with HIPAA transactions and code-set standards would be
allowed to implement contingency plans to maintain their operations and cash flows. On October 15, 2003, we
announced implementation of a contingency plan to accept non-compliant electronic transactions from our
providers. We will continue to accept and process transactions sent in pre-HIPAA electronic formats from
providers who are showing a good-faith effort until all providers and clearinghouses are capable of transmitting
fully compliant standards transactions as defined in the HIPAA implementation guidelines or until CMS begins
enforcement of the HIPAA Electronic Data Interchange regulations. We believe that the implementation of our
contingency plans has minimized any disruptions in our business operations during this transition. However, if
entities with which we do business do not ultimately comply with the HIPAA transactions and code set
standards, it could result in disruptions of certain of our business operations.
In addition, Congress is evaluating proposals to include establishing additional protections for personal
health information, tax credits for the uninsured, proposals to reduce the number of medical errors by health care
providers and systems of care, and various state and federal purchasing plans to allow individuals and small
employers to purchase health insurance. Many of these proposals may require additional administrative costs to
ensure compliance and we are currently assessing their cost and impact on premiums for the future.
State
We continue to encounter regulation on health care claims payment practices at the state level. This
legislation and possible future regulation and oversight could expose us to additional liability and penalties.
Supplemental legislation includes, among other provisions, claims submission content and electronic submission.
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