Humana 2004 Annual Report Download - page 27

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Medical malpractice reform is receiving significant attention. Pending medical malpractice reform proposals
differ substantially relative to the entities covered by the reforms. Since the substance of the reforms remains
under discussion and the scope of covered entities has not been resolved in most states, management is unable to
predict future activity under these laws.
We are unable to predict how existing federal or state laws and regulations may be changed or interpreted,
what additional laws or regulations affecting our businesses may be enacted or proposed, when and which of the
proposed laws will be adopted or what effect any such new laws and regulations will have on our financial
position, results of operations or cash flows.
Other
Captive Insurance Company
We bear general business risks associated with operating our Company such as professional and general
liability, employee workers’ compensation, and officer and director errors and omissions risks. Professional and
general liability risks may include, for example, medical malpractice claims and disputes with members
regarding benefit coverage. We retain these risks through our wholly-owned, consolidated insurance subsidiary.
We reduce exposure to our own general business risks by insuring levels of coverage for losses in excess of our
retained limits with a number of third-party insurance companies. We remain liable in the event these insurance
companies are unable to pay their portion of the losses. In an effort to minimize credit risk, we insure our risks
with a number of insurance companies having a long history of strong financial ratings. Since January 1, 2002,
we have 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. We provide a detail of the significant assets and
liabilities as well as a rollforward of reserve activity related to our captive insurance subsidiary in Note 10 to the
consolidated financial statements.
Centralized Management Services
We provide centralized management services to each health plan and both of our business segments from
our headquarters and service centers. These services include management information systems, product
development and administration, finance, personnel, development, accounting, law, public relations, marketing,
insurance, purchasing, risk management, internal audit, actuarial, underwriting, claims processing, and customer
service.
Employees
As of December 31, 2004, we had approximately 13,700 employees, including approximately 20 employees
covered by collective bargaining agreements. We have not experienced any work stoppages and believe we have
good relations with our employees.
ITEM 2. PROPERTIES
We own our principal executive office, which is located in the Humana Building, 500 West Main Street,
Louisville, Kentucky 40202. In addition, as of December 31, 2004, we own buildings in Louisville, Kentucky,
and Green Bay, Wisconsin, and lease facilities in Cincinnati, Ohio and Puerto Rico, all of which are used for
customer service, enrollment, and claims processing. Our Louisville and Green Bay facilities also house other
corporate functions.
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