Humana 2003 Annual Report Download - page 28

but based their allegations on assertions that physicians in the Greater Cincinnati region are paid less than
physicians in other major cities in Ohio and Kentucky.
On October 23, 2003, we entered into a settlement agreement with the plaintiffs that specified an increase in
future reimbursement we pay to a class consisting of physicians in a 12-county area in Southern Ohio and
Northern Kentucky over the next three years. We agreed to increase the reimbursement, in the aggregate, subject
to certain contingencies, that will increase the amounts paid for physician services over the amounts paid in 2003
as follows: $20 million in 2004, an additional $15 million in 2005 and an additional $10 million in 2006. The
agreement also provides for a committee to monitor our contracting practices for the period 2007 through 2010,
with reporting to us if any anticompetitive behavior is believed to have occurred. The agreement was approved
by the courts on December 30, 2003.
Government Audits and Other Litigation and Proceedings
In July 2000, the Office of the Florida Attorney General initiated an investigation, apparently relating to
some of the same matters that are involved in the managed care industry purported class action litigation
described above. On September 21, 2001, the Texas Attorney General initiated a similar investigation. No actions
have been filed against us by either state. These investigations are ongoing, and we have cooperated with the
regulators in both states.
On May 31, 2000, we entered into a five-year Corporate Integrity Agreement, or CIA, with the Office of
Inspector General, or OIG, of the Department of Health and Human Services. Under the CIA, we are obligated
to, among other things, provide training, conduct periodic audits and make periodic reports to the OIG.
In addition, our business practices are subject to review by various state insurance and health care regulatory
authorities and federal regulatory authorities. There has been increased scrutiny by these regulators of the
managed health care companies’ business practices, including claims payment practices and utilization
management practices. We have been and continue to be subject to such reviews. Some of these have resulted in
fines and could require changes in some of our practices and could also result in additional fines or other
sanctions.
We also are involved in other lawsuits that arise in the ordinary course of our business operations, including
claims of medical malpractice, bad faith, nonacceptance or termination of providers, failure to disclose network
discounts, and various other provider arrangements, as well as challenges to subrogation practices. We also are
subject to claims relating to performance of contractual obligations to providers, members, and others, including
failure to properly pay claims and challenges to the use of certain software products in processing claims.
Pending state and federal legislative activity may increase our exposure for any of these types of claims.
In addition, several courts, including several federal appellate courts, recently have issued decisions which
have the effect of eroding the scope of ERISA preemption for employer-sponsored health plans, thereby
exposing us to greater liability for medical negligence claims. This includes decisions which hold that plans may
be liable for medical negligence claims in some situations based solely on medical necessity decisions made in
the course of adjudicating claims. In addition, some courts have issued rulings which make it easier to hold plans
liable for medical negligence on the part of network providers on the theory that providers are agents of the plans
and that the plans are therefore vicariously liable for the injuries to members by providers.
Personal injury claims and claims for extracontractual damages arising from medical benefit denials are
covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the
extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which
insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms
of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.
On January 1, 2002 and again on January 1, 2003, we reduced the amount of coverage purchased from third party
insurance carriers and increased the amount of risk we retain due to substantially higher insurance rates.
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