Humana 2005 Annual Report Download - page 34

We are also subject to various governmental audits and investigations. These can include audits and
investigations by state attorneys general, CMS, the Office of the Inspector General of Health and Human
Services, the Office of Personnel Management, the Department of Justice, the Department of Labor, the Defense
Contract Audit Agency, and state Departments of Insurance and Departments of Health. Several state attorneys
general and Departments of Insurance are currently investigating the practices of insurance brokers, including
those of certain of the companies in the health care industry. All of these activities could result in the loss of
licensure or the right to participate in various programs, or the imposition of fines, penalties and other sanctions.
In addition, disclosure of any adverse investigation or audit results or sanctions could negatively affect our
industry or our reputation in various markets and make it more difficult for us to sell our products and services.
Other areas subject to substantial regulation include:
• licensing requirements;
• approval of policy language and benefits;
• mandated benefits and processes;
• approval of entry, withdrawal or re-entry into a state or market;
• premium rates; and
• periodic examinations by state and federal agencies.
In recent years, significant federal and state legislation affecting our business has been enacted. State and
federal governmental authorities are continually considering changes to laws and regulations applicable to us and
are currently considering regulations relating to:
• health insurance access and affordability;
• e-connectivity;
• disclosure of provider fee schedules and other data about payments to providers, sometimes called
transparency;
• disclosure of provider quality information; and
• formation of regional/national association health plans for small employers.
All of these proposals could apply to us and could result in new regulations that increase the cost of our
operations.
There can be no assurance that we will be able to continue to obtain or maintain required governmental
approvals or licenses or that legislative or regulatory change will not have a material adverse effect on our
business. Delays in obtaining or failure to obtain or maintain required approvals could adversely affect entry into
new markets, our revenues or the number of our members, increase our costs or adversely affect our ability to
bring new products to market as forecasted.
Our ability to manage administrative costs could hamper profitability.
The level of our administrative expenses impacts our profitability. While we attempt to manage effectively
such expenses, increases in staff-related expenses, investment in new products, including our opportunities in the
Medicare programs, greater emphasis on small group and individual health insurance products, acquisitions, and
implementation of regulatory requirements, among others, may occur from time to time.
There can be no assurance that we will be able to successfully contain our administrative expenses in line
with our membership that may result in a material adverse effect on our financial position, results of operations
and cash flows.
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