Humana 2004 Annual Report Download - page 90

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
cost of purchasing insurance coverage from a number of third party insurance companies not included in the
table above, totaled $58.4 million in 2004, $52.5 million in 2003 and $33.6 million in 2002.
Amounts classified as current and non-current and their respective location in the consolidated balance
sheets were as follows at December 31, 2004 and 2003:
2004 2003
(in thousands)
Gross reserve included in:
Trade accounts payable and accrued expenses (current) ......... $ 37,619 $ 49,594
Other long-term liabilities (non-current) ...................... 193,875 192,922
Total gross reserve .................................. 231,494 242,516
Recoverables from insurance included in:
Other current assets (current) .............................. 8,441 25,248
Other assets (non-current) ................................. 43,982 69,760
Total recoverables from insurance ...................... 52,423 95,008
Total net reserve ................................ $179,071 $147,508
11. EMPLOYEE BENEFIT PLANS
Employee Savings Plan
We have defined contribution retirement and savings plans covering eligible employees. Our contribution to
these plans is based on various percentages of compensation, and in some instances, on the amount of our
employees’ contributions to the plans. The cost of these plans amounted to approximately $37.6 million in 2004,
$37.9 million in 2003, and $34.8 million in 2002, all of which was funded currently to the extent it currently was
deductible for federal income tax purposes. Based on the year end closing stock price of $29.69, approximately
24% of the retirement and savings plan’s assets were invested in our common stock representing less than 4% of
the shares outstanding as of December 31, 2004. The Company match is invested in the Humana common stock
fund. However, a participant may reinvest any funds, including the Company match, in any other plan investment
option at any time.
Severance Benefits
We provide severance and related employee benefits based upon our existing employee benefit plans and
policies. Severance benefits are generally determined based on years of service and salary. We accrue severance
benefits when payment is probable and reasonably estimable in accordance with Statement of Financial
Accounting Standards No. 112, Employers’ Accounting for Postemployment Benefits. The cost of this benefit
amounted to approximately $15.5 million in 2004, $11.2 million in 2003 and $40.2 million in 2002. Severance is
paid bi-weekly resulting in payments in periods subsequent to termination. Severance costs for 2002 included a
$32.1 million provision in connection with our decision to consolidate our customer service centers and our
enterprise-wide workforce reduction plan. The 2002 plan affected approximately 2,600 positions throughout the
entire organization, including customer service, claim administration, clinical operations, provider network
administration, as well as other corporate and field-based positions. We continually review estimates of future
payments for probable severance benefits and make necessary adjustments to our liability for severance benefits.
Stock Based Compensation
We have plans under which restricted stock awards and options to purchase our common stock have been
granted to officers, directors, key employees and consultants.
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