Humana 2007 Annual Report Download - page 34

All of these proposals could apply to us and could result in new regulations that increase the cost of our
operations.
There can be no assurance that we will be able to continue to obtain or maintain required governmental
approvals or licenses or that legislative or regulatory change will not have a material adverse effect on our
business. Delays in obtaining or failure to obtain or maintain required approvals could adversely affect entry into
new markets, our revenues or the number of our members, increase our costs or adversely affect our ability to
bring new products to market as forecasted.
We are also subject to potential changes in the political environment that can affect public policy and can
adversely affect the markets for our products.
While it is not possible to predict when and whether fundamental policy changes would occur, these could
include policy changes on the local, state, and federal level that could fundamentally change the dynamics of our
industry, such as a larger role of the government in the health care arena. Changes in public policy could
materially affect our profitability and cash flow, our ability to retain or grow our business, and our financial
position.
Any failure to manage administrative costs could hamper profitability.
The level of our administrative expenses impacts our profitability. While we proactively attempt to
effectively manage such expenses, increases in staff-related expenses, investment in new products, including our
opportunities in the Medicare programs, greater emphasis on small group and individual health insurance
products, acquisitions, and implementation of regulatory requirements, among others, may occur from time to
time.
There can be no assurance that we will be able to successfully contain our administrative expenses in line
with our membership and this may result in a material adverse effect on our financial position, results of
operations and cash flows.
Any failure by us to manage acquisitions, and other significant transactions successfully could harm our
financial results, business and prospects.
As part of our business strategy, we frequently engage in discussions with third parties regarding possible
investments, acquisitions, strategic alliances, joint ventures, and outsourcing transactions and often enter into
agreements relating to such transactions in order to further our business objectives. In order to pursue this
strategy successfully, we must identify suitable candidates for and successfully complete transactions, some of
which may be large and complex, and manage post-closing issues such as the integration of acquired companies
or employees. Integration and other risks can be more pronounced for larger and more complicated transactions,
or if multiple transactions are pursued simultaneously. In 2007, we acquired KMG America Corporation,
CompBenefits Corporation, and DefenseWeb Technologies, Inc. The failure to successfully integrate each and all
of these entities may adversely impact our revenues and results of operations. If we fail to identify and complete
successfully transactions that further our strategic objectives, we may be required to expend resources to develop
products and technology internally. We may also be at a competitive disadvantage or we may be adversely
affected by negative market perceptions, any of which may have a material adverse effect on our results of
operations, financial position or cash flows.
If we fail to develop and maintain satisfactory relationships with the providers of care to our members,
our business could be adversely affected.
We contract with physicians, hospitals and other providers to deliver health care to our members. Our
products encourage or require our customers to use these contracted providers. These providers may share
medical cost risk with us or have financial incentives to deliver quality medical services in a cost-effective
manner.
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