Humana 2006 Annual Report Download - page 19

enrolled members. Due to the increased emphasis on state health care reform and budgetary constraints, more
states are utilizing a managed care product in their Medicaid programs.
Our Medicaid business, which accounted for approximately 2.5% of our total premiums and ASO fees for
the year ended December 31, 2006, consisted of contracts in Puerto Rico and Florida, with the Puerto Rico
contract representing 75.2% of total Medicaid premiums and ASO fees.
TRICARE
TRICARE provides health insurance coverage to the dependents of active duty military personnel and to
retired military personnel and their dependents. Currently, three health benefit options are available to TRICARE
beneficiaries. In addition to a traditional indemnity option, participants may enroll in an HMO-like plan with a
point-of-service option or take advantage of reduced copayments by using a network of preferred providers,
similar to a PPO.
We have participated in the TRICARE program since 1996 under contracts with the United States
Department of Defense. Our current TRICARE South Region contract, which we were awarded in 2003, covers
approximately 2.9 million eligible beneficiaries as of December 31, 2006 in Florida, Georgia, South Carolina,
Mississippi, Alabama, Tennessee, Louisiana, Arkansas, Texas and Oklahoma. The South Region is one of the
three regions in the United States as defined by the Department of Defense. Of these eligible beneficiaries,
1.2 million were TRICARE ASO members representing active duty beneficiaries, seniors over the age of 65 and
beneficiaries in Puerto Rico for which the Department of Defense retains all of the risk of financing the cost of
their health benefit. The TRICARE South Region contract is for a five-year period subject to annual renewals at
the federal government’s option, with the fourth option period scheduled to begin April 1, 2007. We have
subcontracted with third parties to provide selected administration and specialty services under the contract.
The TRICARE South Region contract contains provisions that require us to negotiate a target health care
cost amount annually with the federal government. Any variance from the target health care cost is shared with
the federal government. As such, events and circumstances not contemplated in the negotiated target health care
cost amount could have a material adverse effect on our business. These changes may include, for example, an
increase or reduction in the number of persons enrolled or eligible to enroll due to the federal government’s
decision to increase or decrease U.S. military deployments. In the event government reimbursements were to
decline from projected amounts, our failure to reduce the health care costs associated with these programs could
have a material adverse effect on our business.
For the year ended December 31, 2006, TRICARE premium revenues were approximately $2.5 billion, or
12.1% of our total premiums and ASO fees, and TRICARE ASO fees totaled $48.0 million, or 0.2% of our total
premiums and ASO fees.
Our Products Marketed to Commercial Segment Employers and Members
Consumer-Choice Products
Over the last several years, we have developed and offered various commercial products designed to
provide options and choices to employers that are annually facing substantial premium increases driven by
double-digit medical cost inflation. These consumer-choice products, which can be offered on either a fully
insured or ASO basis, provided coverage to approximately 437,900 members at December 31, 2006, representing
approximately 13.3% of our total commercial medical membership as detailed below.
Consumer-Choice
Membership
Other Commercial
Membership
Commercial
Medical
Membership
Fully insured ..................... 231,900 1,522,300 1,754,200
ASO ............................ 206,000 1,323,600 1,529,600
Total Commercial medical ...... 437,900 2,845,900 3,283,800
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