Humana 2007 Annual Report Download - page 101

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We also are subject to claims relating to performance of contractual obligations to providers, members, and
others, including failure to properly pay claims, challenges to our implementation of the new Medicare
prescription drug program and other litigation.
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 or certain forms
of liability has become increasingly costly and 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. Although it is not reasonably possible to estimate whether a loss will
occur as a result of these legal matters, or if a loss should occur, the amount of such loss, we do not believe that
any legal matters to which we are a party are likely to have a material adverse effect on our financial position,
results of operations, and cash flows. However, there can be no assurance that any pending legal matters or any
legal matters that may arise in the future would not have a material adverse effect on our financial position,
results of operations, and cash flows.
15. SEGMENT INFORMATION
We manage our business with two segments: Government and Commercial. The Government segment
consists of beneficiaries of government benefit programs, and includes three lines of business: Medicare,
Military, and Medicaid. The Commercial segment consists of members enrolled in our medical and specialty
products marketed to employer groups and individuals. We identified our segments in accordance with the
aggregation provisions of SFAS 131,which aggregates products with similar economic characteristics. These
characteristics include the nature of customer groups as well as pricing, benefits, and underwriting requirements.
These segment groupings are consistent with information used by our Chief Executive Officer.
The accounting policies of each segment are the same and are described in Note 2. The results of each
segment are measured by income before income taxes. We allocate all selling, general and administrative
expenses, investment and other revenue, interest expense, and goodwill, but no other assets or liabilities, to our
segments. Members served by our two segments often utilize the same medical provider networks, enabling us to
obtain more favorable contract terms with providers. Our segments also share indirect overhead costs and assets.
As a result, the profitability of each segment is interdependent.
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