Humana 2007 Annual Report Download - page 33

Laws in each of the states (including Puerto Rico) in which we operate our HMOs, PPOs and other health
insurance-related services regulate our operations, including the scope of benefits, rate formulas, delivery
systems, utilization review procedures, quality assurance, complaint systems, enrollment requirements, claim
payments, marketing, and advertising. The HMO, PPO, and other health insurance-related products we offer are
sold under licenses issued by the applicable insurance regulators. Our licensed subsidiaries are also subject to
regulation under state insurance holding company and Puerto Rico regulations.
We are also subject to various governmental audits and investigations. Under state laws, our HMOs and
health insurance companies are audited by state departments of insurance for financial and contractual
compliance. Our HMOs are audited for compliance with health services by state departments of health. Audits
and investigations are also conducted by state attorneys general, CMS, the Office of the Inspector General of
Health and Human Services, the Office of Personnel Management, the Department of Justice, the Department of
Labor, and the Defense Contract Audit Agency. Several departments of insurance are currently investigating the
practices of insurance brokers, particularly in the Medicare marketing area. All of these activities could result in
the loss of licensure or the right to participate in various programs, or the imposition of fines, penalties and other
civil and criminal sanctions. In addition, disclosure of any adverse investigation or audit results or sanctions
could negatively affect our industry or our reputation in various markets and make it more difficult for us to sell
our products and services.
Other areas subject to substantial regulation include:
• licensing requirements;
• approval of policy language and benefits;
• mandated benefits and processes;
• approval of entry, withdrawal or re-entry into a state or market;
• premium rates; and
• periodic examinations by state and federal agencies.
Two areas of legislation that can impact the company are experiencing an increase in activity. These are
Medicare funding under MMA and proposals to expand health insurance coverage. MMA funding and associated
program structure is an area of substantial legislative attention that may be influenced by federal budget
considerations and Medicare spending trends. The federal and state efforts to expand access to health coverage
may offer opportunities to serve individuals who are not currently in the health insurance market through public
program expansions, coverage connectors or premium assistance programs. Some access proposals also include
increased regulation of our commercial business, particularly small group and individual, through a combination
of benefit mandates, underwriting restrictions, rating limitations and assessments.
State and federal governmental authorities are continually considering changes to laws and regulations
applicable to us and are currently considering regulations relating to:
• health insurance access and affordability;
• regulation of broker licensing, particularly in the Medicare marketing area;
• e-connectivity;
• universal health coverage;
• disclosure of provider fee schedules and other data about payments to providers, sometimes called
transparency;
• disclosure of provider quality information; and
• formation of regional/national association health plans for small employers.
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