Humana 2005 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 2005 revenues of $14.4 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, 2005, we had approximately 7.1 million members in our medical insurance
programs, as well as approximately 1.9 million members in our specialty products programs. We have
approximately 559,000 contracts with physicians, hospitals, dentists, and other providers to provide health care to
our members. During 2005, 51% of our premiums and administrative services fees were derived from contracts
with the federal government, including 17% related to our TRICARE contracts and 20% related to our contracts
in Florida with the Centers for Medicare and Medicaid Services, or CMS. Under our CMS contracts in Florida,
we provide health insurance coverage to approximately 295,400 members as of December 31, 2005.
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].
This Annual Report on Form 10-K contains both historical and forward-looking information. See
Item 1A.—Risk Factors for a description of a number of factors that could adversely affect our results or
business.
Business Segments
We manage our business with two segments: Government and Commercial. The Government segment
consists of members enrolled in government-sponsored programs, and includes three lines of business: Medicare
Advantage, TRICARE, and Medicaid. 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. We identified our segments in accordance with the
aggregation provisions of Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About
Segments of an Enterprise and Related Information, or SFAS 131, 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 and 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. We believe our customer,
membership, revenue, and pretax income diversification across segments and products allows us to increase our
chances of success.
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