Humana 2003 Annual Report Download - page 59

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• medical cost inflation; and
• new government mandated benefits or other regulatory changes.
Failure to adequately price our products or estimate sufficient medical claim reserves may result in a
material adverse effect on our financial position, results of operations and cash flows.
If we do not design and price our products properly and competitively, our membership and profitability
could decline.
We are in a highly competitive industry. Many of our competitors are more established in the health care
industry and have a larger market share and greater financial resources than we do in some markets. In addition,
other companies may enter our markets in the future, including emerging competitors in the MedicareAdvantage
program, in e-commerce insurance or benefit programs and in consumer-directed health plans. Contracts for the
sale of commercial products are generally bid upon or renewed annually. While health plans compete on the
basis of many factors, including service and the quality and depth of provider networks, we expect that price will
continue to be a significant basis of competition. In addition to the challenge of controlling health care costs, we
face competitive pressure to contain premium prices.
Premium increases, introduction of new product designs, and our relationship with our providers in various
markets, among other issues, could affect our membership levels. Other actions that could affect membership
levels include the possible exit of or entrance to MedicareAdvantage or Commercial markets. If we do not
compete effectively in our markets, if we set rates too high or too low in highly competitive markets to keep or
increase our market share, if membership does not increase as we expect, or if it declines, or if we lose accounts
with favorable medical cost experience while retaining or increasing membership in accounts with unfavorable
medical cost experience, our business and results of operations could be materially adversely affected.
If we fail to effectively implement our operational and strategic initiatives, our business could be
materially adversely affected.
Our future performance depends in large part upon our management team’s ability to execute our strategy to
position the company for the future. This strategy includes the growth of our Commercial segment business,
introduction of new products and benefit designs, including our Smart products, the successful implementation of
our e-business initiatives and the selection and adoption of new technologies. We believe that the adoption of
new technologies will contribute toward a reduction in administrative costs as we more closely align our
workforce with our membership. This alignment is achieved through reductions in workforce or by employing
additional people in certain strategic operating areas such as sales and underwriting. Additionally, we have
consolidated our service centers and their related systems as part of our operational initiatives. There can be no
assurance that we will be able to successfully implement our operational and strategic initiatives that are intended
to position the company for future growth. Failure to implement this strategy may result in a material adverse
effect on our financial position, results of operations and cash flows.
If we fail to properly maintain the integrity of our data, or to strategically implement new information
systems, or to protect our proprietary rights to our systems, our business could be materially adversely
affected.
Our business depends significantly on effective information systems and the integrity and timeliness of the
data we use to run our business. Our business strategy involves providing members and providers with easy to
use products that leverage our information to meet their needs. Our ability to adequately price our products and
services, provide effective and efficient service to our customers, and to timely and accurately report our
financial results depends significantly on the integrity of the data in our information systems. As a result of our
past and on-going acquisition activities, we have acquired additional systems. We have been taking steps to
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