Humana 2004 Annual Report Download - page 13

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 2004 revenues of $13.1 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, 2004, we had approximately 7.0 million members in our medical insurance
programs, as well as approximately 1.7 million members in our specialty products programs. We have
approximately 495,000 contracts with physicians, hospitals, dentists, and other providers to provide health care to
our members. During 2004, 43% of our premiums and administrative services fees were derived from contracts
with the federal government, including 17% related to our TRICARE contracts and 15% related to one contract
in Florida with the Centers for Medicare and Medicaid Services, or CMS. Under the CMS contract in Florida we
provide health insurance coverage to approximately 231,700 members. Additionally, 37% of our premiums and
administrative services fees in 2004 were earned from contracts with employer groups and individuals covering
members located in Texas, Illinois, Florida, Kentucky and Ohio.
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.
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
Advantage, 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, 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 often 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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