Humana 2004 Annual Report Download - page 5

The฀reason฀for฀our฀optimism฀is฀that฀we฀see฀the฀external฀market฀view฀of฀how฀to฀tackle฀the฀major฀problems฀
in฀health฀insurance฀increasingly฀lining฀up฀with฀our฀internal฀vision.฀First฀and฀foremost,฀rising฀health฀care฀costs฀
have฀taken฀center฀stage฀as฀one฀of฀the฀crucial฀issues฀for฀businesses฀and฀individuals฀in฀the฀United฀States.฀฀In฀
a฀recent฀survey฀of฀Business฀Roundtable฀CEOs,฀60฀percent฀ranked฀health฀care฀cost฀increases฀as฀the฀largest฀
single฀problem฀threatening฀U.S.฀economic฀growth.฀Although฀rising฀costs฀have฀eased฀off฀their฀highest฀levels,฀
employers฀are฀still฀shifting฀costs฀to฀their฀employees฀–฀a฀short-sighted฀and฀unsustainable฀quick฀fix.฀฀In฀any฀
case,฀the฀secular฀cost฀trend฀continues฀to฀run฀in฀double฀digits,฀driven฀by฀new฀drugs,฀technology,฀the฀growth฀in฀
elective฀surgery฀and฀an฀aging฀population฀–฀all฀factors฀that฀will฀stay฀in฀place฀for฀years฀to฀come.฀฀
Neither฀businesses฀nor฀consumers฀see฀the฀continuation฀of฀double-digit฀increases฀in฀their฀health฀care฀costs฀
as฀something฀tenable฀over฀the฀long฀term.฀฀This฀is฀particularly฀true฀at฀a฀time฀when฀inflation฀in฀the฀rest฀of฀our฀
economy฀is฀generally฀under฀control฀and฀the฀consumer฀price฀index฀averages฀in฀the฀range฀of฀2฀to฀3฀percent฀
annually.฀฀Only฀a฀total฀solution฀that฀controls฀costs฀for฀both฀employers฀and฀employees฀can฀provide฀a฀sustainable฀
way฀out฀of฀the฀dilemma.฀
Humana฀bases฀ its฀ business฀ model฀ on฀two฀ priorities฀ important฀ to฀ the฀market:฀ first,฀ the฀ need฀ to฀find฀ new฀
and฀innovative฀answers฀to฀the฀cost฀issue;฀and฀second,฀consumers’฀growing฀desire฀for฀a฀better฀health฀plan฀
experience฀–฀one฀that฀gives฀them฀the฀confidence฀they฀need฀to฀make฀the฀right฀choices฀for฀themselves฀and฀
their฀families฀through฀actionable฀information฀and฀guidance,฀which฀we฀supply.฀If฀nothing฀else,฀the฀national฀
election฀taught฀us฀that฀while฀they฀respond฀in฀different฀ways,฀both฀political฀parties฀recognize฀not฀only฀the฀
primacy฀of฀the฀health฀cost฀dilemma,฀but฀also฀the฀fact฀that฀the฀only฀way฀to฀achieve฀a฀long-term฀cost฀solution฀
is฀by฀unleashing฀the฀power฀of฀consumers฀through฀people฀who฀are฀equipped฀to฀seek฀quality,฀value฀and฀price.฀
In฀the฀hidebound฀world฀of฀health฀benefits,฀it’s฀the฀one฀thing฀that฀hasn’t฀been฀tried.฀And฀it’s฀the฀one฀thing฀
that฀is฀bound฀to฀succeed฀–฀as฀every฀other฀industry฀and฀sector฀of฀the฀economy฀has฀taught฀us.฀Once฀automatic฀
teller฀machines฀began฀dispensing฀cash฀more฀conveniently฀than฀bank฀tellers,฀or฀the฀Internet฀offered฀a฀faster,฀
more฀cost-effective฀way฀to฀book฀a฀flight฀than฀telephoning฀or฀visiting฀a฀travel฀agent,฀the฀consumer฀revolution฀
had฀arrived฀in฀banking฀and฀travel.฀With฀our฀track฀record฀of฀innovation฀that฀produces฀practical฀results,฀we’re฀
at฀the฀forefront฀of฀the฀consumer฀revolution฀in฀health฀insurance.
Another฀significant฀area฀where฀there฀is฀a฀convergence฀of฀views฀between฀Humana฀and฀the฀market฀is฀how฀
to฀provide฀insurance฀to฀the฀growing฀–฀and฀soon฀to฀be฀growing฀rapidly฀–฀population฀of฀senior฀citizens.฀The฀
passage฀of฀the฀Medicare฀Modernization฀Act฀in฀2003฀started฀the฀resurgence฀of฀Medicare฀as฀a฀strong฀business฀
opportunity฀for฀those฀companies฀that฀understand,฀based฀on฀varied฀and฀successful฀experience,฀how฀to฀work฀
with฀government฀and฀with฀senior฀citizens.฀This฀has฀re-established฀Medicare฀as฀a฀business฀line฀that฀is฀likely฀to฀
bring฀us฀accelerating฀growth.
In฀short,฀the฀business฀investments฀we฀have฀made฀over฀the฀past฀three฀years฀–฀staying฀the฀course฀in฀Medicare,฀
while฀pioneering฀consumerism฀in฀the฀commercial฀space฀--฀are฀now฀paying฀off.
฀฀
A฀different฀approach
We฀believe฀we’ve฀been฀able฀to฀reach฀this฀point฀because฀Humana฀is฀a฀different฀type฀of฀company.฀Our฀management฀
team฀views฀market฀dynamics฀differently฀and฀as฀a฀result,฀makes฀different฀calls฀on฀what฀businesses฀to฀be฀in฀and฀
what฀products฀to฀develop฀and฀launch.฀Part฀of฀this฀is฀related฀to฀our฀unique฀corporate฀history.฀For฀25฀years฀
Humana฀operated฀hospitals.฀This฀gives฀us฀a฀valuable฀first-hand฀perspective฀on฀how฀the฀market฀works฀from฀“the฀
other฀side฀of฀the฀table.”฀฀Further฀insights฀into฀the฀provider฀side฀of฀the฀equation,฀and฀how฀providers฀and฀payors฀
can฀work฀to฀mutual฀advantage,฀were฀gained฀during฀Humana’s฀operation฀of฀a฀large฀network฀of฀freestanding฀
physician฀clinics฀in฀the฀1980s฀and฀managing฀vertically฀integrated฀HMOs฀in฀the฀same฀period.฀It฀was฀against฀
this฀varied฀background฀that฀we฀became฀a฀major฀participant฀in฀Medicare฀with฀our฀acquisition฀of฀Miami-based฀
International฀Medical฀Centers฀in฀1987.฀By฀serving฀the฀Medicare฀HMO฀market฀longer฀and฀more฀successfully฀
than฀almost฀all฀of฀our฀competitors,฀we฀learned฀“early฀lessons”฀in฀health-care฀consumerism฀–฀Medicare฀may฀be฀
a฀largely฀government-financed฀program฀but฀it’s฀built฀on฀a฀retail฀sale฀to฀individual฀consumers.฀