Humana 2005 Annual Report Download - page 38

In connection with the settlement and other related litigation costs, we recorded pretax administrative
expense of $71.9 million ($44.8 million after taxes, or $0.27 per diluted common share) in the third quarter of
2005.
Other Litigation and Proceedings
In July 2000, the Office of the Florida Attorney General initiated an investigation, apparently relating to
some of the same matters that are involved in the managed care industry purported class action litigation
described above. On September 21, 2001, the Texas Attorney General initiated a similar investigation. No actions
have been filed against us by either state.
In addition, our business practices are subject to review by various state insurance and health care regulatory
authorities and federal regulatory authorities. There has been increased scrutiny by these regulators of the
business practices of managed care companies, including allegations of anticompetitive and unfair business
activities, claims payment practices, commission payment practices, and utilization management practices. Some
of these reviews have resulted in fines imposed on us and required changes in some of our practices. We continue
to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or
additional changes in some of our practices.
We also are involved in other lawsuits that arise in the ordinary course of our business operations, including
claims of medical malpractice, bad faith, nonacceptance or termination of providers, improper rate setting, failure
to disclose network discounts and various other provider arrangements, as well as challenges to subrogation
practices. We also are subject to claims relating to performance of contractual obligations to providers, members,
and others, including failure to properly pay claims and challenges to the use of certain software products in
processing claims. Pending state and federal legislative activity may increase our exposure for any of these types
of claims.
In addition, some courts have issued rulings which make it easier to hold plans liable for medical negligence
on the part of network providers on the theory that providers are agents of the plans and that the plans are
therefore vicariously liable for the injuries to members by providers.
Personal injury claims and claims for extracontractual damages arising from medical benefit denials are
covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the
extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which
insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all forms of
liability has become increasingly costly and coverage for certain forms of liability may become unavailable or
prohibitively expensive in the future.
The outcome of current suits or likelihood or outcome of future suits or governmental investigations cannot
be accurately predicted with certainty. In addition, the potential for increased liability for medical negligence
arising from claims adjudication, along with the increased litigation that has accompanied the negative publicity
and public perception of our industry, adds to this uncertainty. Therefore, such legal actions and government
audits and investigations could have a material adverse effect on our financial position, results of operations, and
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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