Humana 2006 Annual Report Download - page 18

At December 31, 2006, we provided health insurance coverage under CMS contracts to approximately
1,002,600 MA-PD members for which we received premium revenues of approximately $8.5 billion, or 40.3% of
our total premiums and ASO fees for the year ended December 31, 2006. Under our Medicare Advantage
contracts with CMS in Florida, we provided health insurance coverage to approximately 324,600 members.
These contracts accounted for premium revenues of approximately $3.5 billion, which represented approximately
41.2% of our Medicare Advantage premium revenues, or 16.6% of our total premiums and ASO fees for the year
ended December 31, 2006.
Our HMO, PFFS, and PPO products covered under Medicare Advantage contracts with CMS are renewed
generally for a one-year term each December 31 unless CMS notifies Humana of its decision not to renew by
May 1 of the contract year, or Humana notifies CMS of its decision not to renew by the first Monday in June of
the contract year.
Medicare Stand-Alone Prescription Drug Products
On January 1, 2006, we began offering stand-alone prescription drug plans, or PDPs, under Medicare Part
D. Generally, Medicare-eligible individuals enroll in one of our three plan choices between November 15 and
December 31 for coverage that begins January 1. The enrollment period was extended to May 31 during 2006
because it was the first year of the program. Our stand-alone PDP offerings consist of plans offering basic
coverage with benefits mandated by Congress, as well as plans providing enhanced coverage with varying
degrees of out-of-pocket costs for premiums, deductibles and co-insurance. Our revenues from CMS and the
beneficiary are determined from our bids submitted annually to CMS. These revenues also reflect the health
status of the beneficiary and risk sharing provisions as more fully described beginning on page 55. Our stand-
alone PDP contracts with CMS are renewed generally for a one-year term each December 31 unless CMS
notifies Humana of its decision not to renew by May 1 of the contract year, or Humana notifies CMS of its
decision not to renew by the first Monday in June of the contract year.
Medicare Presence
We now have a national presence, offering our Medicare PFFS and stand-alone PDP products in all 50
states. The following table sets forth the number of markets in which we sold our Medicare Advantage and stand-
alone PDP products as of January 1, 2007, as compared with January 1, 2006 and 2005:
2007 2006 2005
PFFS (states) ............................................. 50 35 35
HMO (localities) .......................................... 12 12 12
Regional PPO (states) ...................................... 23 23 —
Local PPO (localities) ...................................... 26 33 30
Stand-alone PDP (states) .................................... 50 46 —
In addition, we market our HMO and PFFS products in Puerto Rico as well as our stand-alone PDP products
in the District of Columbia and Puerto Rico.
Medicaid Product
Medicaid is a federal program that is state-operated to facilitate the delivery of health care services primarily
to low-income residents. Each electing state develops, through a state specific regulatory agency, a Medicaid
managed care initiative that must be approved by CMS. CMS requires that Medicaid managed care plans meet
federal standards and cost no more than the amount that would have been spent on a comparable fee-for-service
basis. States currently either use a formal proposal process in which they review many bidders before selecting
one or award individual contracts to qualified bidders who apply for entry to the program. In either case, the
contractual relationship with a state generally is for a one-year period. Under these contracts, we receive a fixed
monthly payment from a government agency for which we are required to provide health insurance coverage to
6