Humana 2006 Annual Report Download - page 5

2Annual Report 2006 3
• We met our aggressive membership goals
for Medicare Advantage and used our
unique and successful Medicare marketing,
distribution and value-proposition model to
position ourselves for continued Medicare
Advantage growth into the future.
• Earnings in our Commercial segment
continued to increase, with membership
growth occurring in segments of strategic
focus: Administrative Services Only (ASO),
individual, small group and consumer plans.
• We solidifi ed and enhanced our position
as a leading consumer company in health
benefi ts, at the forefront of the movement
toward greater cost and quality transparency.
• We successfully administered another option
period of our TRICARE contract, and are now
in our 11th year as a trusted Department of
Defense business partner.
• We were named “easiest to do business
with” in a national physician survey
conducted by athenahealth, validating our
commitment to becoming the industry’s
number-one provider partner, and ranked
fi rst in Florida and second in Texas in a J.D.
Power survey of customer satisfaction
among PDP members.
For 2006, earnings per common share were
$2.90, representing an increase of 62 percent
over the $1.79 per common share we earned
last year.
Leadership in Health Benefi ts
Beyond pacesetting growth, an important way to
measure industry leadership is to look at brand
positioning in relation to peers. As determined
by CoreBrand, the nation’s foremost authority
on the quantifi cation of brand equity, Humana’s
brand scores the highest in favorability of any in
our industry. Our news media “share-of-voice”
in consumerism, Medicare and transparency
is fi rst among our peer companies. And our
emphasis on putting the consumer at the center
of the health-benefi ts equation, which we
pioneered in 2000, is now being followed by
many competitors.
Medicare: Unprecedented
Expansion
During 2006, Humana launched a signifi cantly
expanded offering of Medicare insurance plans
in response to the 2003 Medicare Modernization
Act. In preparing for this breakthrough
opportunity, we were convinced that we
could offer PDP options that people with
Medicare would wholeheartedly embrace.
At the same time, we believed we could
signifi cantly expand our multiple Medicare
Advantage offerings and, over time, present
our new PDP members with Medicare
Advantage value propositions that would
represent compelling, affordable long-term
benefi ts solutions.
The positive response to our strategy was
unprecedented. Our PDP offerings enrolled
3.5 million members, the second-highest total
among all carriers. We were especially gratifi ed
by the 2.9 million of this total who chose us
voluntarily (as opposed to being auto-assigned) –
also the second-highest industry result.
Our Medicare Advantage plans grew from
approximately 560,000 at December 31, 2005 to
1 million a year later. Total Medicare membership
at December 31, 2006, was 4.5 million, a more
than eight-fold increase in 12 months.
Behind these results is a unique, integrated
Medicare model that was in tune with seniors’
needs and desires. It featured the following
principal elements.
First, while Medicare is a government
program, it is in our view a retail
consumer business. Our research suggested
that just as with our “Smart” family of consumer-
focused Commercial products, a spectrum of
product offerings featuring varying benefi ts and
different price points would appeal to people
with Medicare. We developed SmartSummary Rx,
the industry’s fi rst cumulative, personalized cost
and benefi ts statement that shows our Medicare
members what prescriptions they fi lled, how
much they paid for them and how to save money
in the future. We learned that seniors wanted to
be approached and educated one-on-one, so we
developed our successful national “Let’s Talk” RV
educational campaign prior to the selling period.
It eventually reached more than 300 cities. We
also wanted to establish ourselves as the thought
leader in Medicare, and therefore executed
an early, aggressive national media strategy,
positioning Humana as the “go-to” company on
questions of plan design, senior preferences and
public policy.