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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Legal Proceedings
Securities Litigation
In late 1997, three purported class action complaints were filed in the United States District Court for the
Southern District of Florida by former stockholders of Physician Corporation of America, or PCA, against PCA
and certain of its former directors and officers. We acquired PCA by a merger that became effective on
September 8, 1997. The three actions were consolidated into a single action entitled In re Physician Corporation
of America Securities Litigation. The consolidated complaint alleged that PCA and the individual defendants
knowingly or recklessly made false and misleading statements in press releases and public filings with respect to
the financial and regulatory difficulties of PCA’s workers’ compensation business. The Court certified a class on
May 20, 2003. On August 25, 2003, the parties entered into an agreement to settle the case for the amount of
$10.2 million. On November 26, 2003, the settlement received final approval by the Court. A provision for the
settlement was previously made in our financial statements during the fourth quarter of 2002. The Company had
pursued insurance coverage for this matter from two insurers and has settled the matter with one of the insurers
who will pursue coverage against the other insurer.
Managed Care Industry Purported Class Action Litigation
We have been involved in several purported class action lawsuits that are part of a wave of generally similar
actions that target the health care payer industry and particularly target managed care companies. These include a
lawsuit against us and nine of our competitors that purports to be brought on behalf of physicians who have
treated our members. As a result of action by the Judicial Panel on Multidistrict Litigation (“JPML”), the case
was consolidated in the United States District Court for the Southern District of Florida, and has been styled In re
Managed Care Litigation.
The plaintiffs assert that we and other defendants improperly paid providers’ claims and “downcoded” their
claims by paying lesser amounts than they submitted. The complaint alleges, among other things, multiple
violations under the Racketeer Influenced and Corrupt Organizations Act, or RICO, as well as various breaches
of contract and violations of regulations governing the timeliness of claim payments. We moved to dismiss the
complaint on September 8, 2000, and the other defendants filed similar motions thereafter. On March 2, 2001,
the Court dismissed certain of the plaintiffs’ claims pursuant to the defendants’ several motions to dismiss.
However, the Court allowed the plaintiffs to attempt to correct the deficiencies in their complaint with an
amended pleading with respect to all of the allegations except a claim under the federal Medicare regulations,
which was dismissed with prejudice. The Court also left undisturbed the plaintiffs’ claims for breach of contract.
On March 26, 2001, the plaintiffs filed their amended complaint, which, among other things, added four state or
county medical associations as additional plaintiffs. Two of those, the Denton County Medical Society and the
Texas Medical Association, purport to bring their actions against us, as well as against several other defendant
companies. The Medical Association of Georgia and the California Medical Association purport to bring their
actions against various other defendant companies. The associations seek injunctive relief only. The defendants
filed a motion to dismiss the amended complaint on April 30, 2001.
On September 26, 2002, the Court granted the plaintiffs’ request to file a second amended complaint, adding
additional plaintiffs, including the Florida Medical Association, which purports to bring its action against all
defendants. On October 21, 2002, the defendants moved to dismiss the second amended complaint. On
December 8, 2003, the Court denied the motion.
Also on September 26, 2002, the Court certified a global class consisting of all medical doctors who
provided services to any person insured by any defendant from August 4, 1990, to September 26, 2002. The class
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