Humana 2007 Annual Report Download - page 29

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We are involved in various legal actions, which, if resolved unfavorably to us, could result in substantial
monetary damages.
We are a party to a variety of legal actions that affect our business, including employment and employment
discrimination-related suits, employee benefit claims, breach of contract actions, and tort claims.
In addition, because of the nature of the health care business, we are subject to a variety of legal actions
relating to our business operations, including the design, management and offering of products and services.
These include and could include in the future:
• claims relating to the methodologies for calculating premiums;
• claims relating to the denial of health care benefit payments;
• claims relating to the denial or rescission of insurance coverage;
• challenges to the use of some software products used in administering claims;
• claims relating to our administration of our Medicare Part D offerings;
• medical malpractice actions based on our medical necessity decisions or brought against us on the
theory that we are liable for our providers’ alleged malpractice;
• allegations of anti-competitive and unfair business activities;
• provider disputes over compensation and termination of provider contracts;
• disputes related to ASO business, including actions alleging claim administration errors;
• claims related to the failure to disclose some business practices;
• claims relating to customer audits and contract performance; and
• claims relating to dispensing of drugs associated with our in-house mail order pharmacy.
In some cases, substantial non-economic or punitive damages as well as treble damages under the federal
False Claims Act, Racketeer Influenced and Corrupt Organizations Act and other statutes may be sought. While
we currently have insurance coverage for some of these potential liabilities, other potential liabilities may not be
covered by insurance, insurers may dispute coverage or the amount of our insurance may not be enough to cover
the damages awarded. Additionally, the cost of business insurance coverage has increased significantly. As a
result, we have increased the amount of risk that we self-insure, particularly with respect to matters incidental to
our business. In addition, some types of damages, like punitive damages, may not be covered by insurance. In
some jurisdictions, coverage of punitive damages is prohibited. Insurance coverage for all or some forms of
liability may become unavailable or prohibitively expensive in the future.
See “Legal Proceedings” in Note 14 to the consolidated financial statements included in Item 8.—Financial
Statements and Supplementary Data. We cannot predict the outcome of these suits with certainty.
As a government contractor, we are exposed to additional risks that could adversely affect our business or
our willingness to participate in government health care programs.
A significant portion of our revenues relates to federal and state government health care coverage programs,
including the Medicare, Military, and Medicaid programs. Our Government segment accounted for
approximately 74% of our total premiums and ASO fees for the year ended December 31, 2007 and we expect
the Government segment to account for a greater percentage of our total premiums and ASO fees in 2008. These
programs involve various risks, including:
• at December 31, 2007, under our contracts with CMS we provided health insurance coverage to
approximately 507,700 Medicare members in Florida. These contracts accounted for approximately
19