Humana 2008 Annual Report Download - page 15

Our Products Marketed to Government Segment Members and Beneficiaries
Medicare
We have participated in the Medicare program for private health plans for over 20 years. Since recent
significant changes were made to the Medicare program for health plans like those offered by us, we have
expanded from a regional to a national presence, now offering at least one type of Medicare plan in all 50 states.
The resulting growing membership base provides us with greater leverage to expand our network of PPO and
HMO providers. We employ strategies including health assessments and programs such as Personal Nurse®,
which is a case management and disease management program, and a fitness program for seniors to guide
Medicare beneficiaries in making cost-effective decisions with respect to their health care, including cost savings
that occur from making positive behavior changes that result in living healthier.
Medicare is a federal program that provides persons age 65 and over and some disabled persons under the
age of 65 certain hospital and medical insurance benefits. Hospitalization benefits are provided under Part A,
without the payment of any premium, for up to 90 days per incident of illness plus a lifetime reserve aggregating
60 days. Eligible beneficiaries are required to pay an annually adjusted premium to the federal government to be
eligible for physician care and other services under Part B. Beneficiaries eligible for Part A and Part B coverage
under traditional Medicare are still required to pay out-of-pocket deductibles and coinsurance. Prescription drug
benefits are provided under Part D. CMS, an agency of the United States Department of Health and Human
Services, administers the Medicare program.
Medicare Advantage Products
We contract with CMS under the Medicare Advantage program to provide a comprehensive array of health
insurance benefits, including wellness programs, to Medicare eligible persons under HMO, PPO, and PFFS plans
in exchange for contractual payments received from CMS, usually a fixed payment per member per month. We
refer to beneficiaries enrolled in these plans collectively as Medicare Advantage, or MA-PD, members. With
each of these products, the beneficiary receives benefits in excess of traditional Medicare, typically including
reduced cost sharing, enhanced prescription drug benefits, care coordination, data analysis techniques to help
identify member needs, complex case management, tools to guide members in their health care decisions, disease
management programs, wellness and prevention programs, and in some instances a reduced monthly Part B
premium. Since 2006, Medicare beneficiaries have had more health plan options, including a prescription drug
benefit option and greater access to a PPO offering with the roll-out of Regional PPO plans. Prior to 2006, PPO
plans were offered on a local basis only. Most Medicare Advantage plans offer the prescription drug benefit
under Part D as part of the basic plan, subject to cost sharing and other limitations. Accordingly, all of the
provisions of the Medicare Part D program described in connection with our stand-alone prescription drug plans
in the following section also are applicable to our Medicare Advantage plans. Medicare Advantage plans may
charge beneficiaries monthly premiums and other copayments for Medicare-covered services or for certain extra
benefits.
Our Medicare HMO and PPO plans, which cover Medicare-eligible individuals residing in certain counties,
may eliminate or reduce coinsurance or the level of deductibles on many other medical services while seeking
care from participating in-network providers or in emergency situations. Except in emergency situations, HMO
plans provide no out-of-network benefits. PPO plans carry an out-of network benefit that is subject to higher
member cost-sharing. In most cases, these beneficiaries are required to pay a monthly premium to the HMO or
PPO plan in addition to the monthly Part B premium they are required to pay the Medicare program.
Our Medicare PFFS plans have no preferred network. Individuals in these plans pay us a monthly premium
to receive typical Medicare Advantage benefits along with the freedom to choose any health care provider that
accepts individuals at reimbursement rates equivalent to traditional Medicare payment rates.
CMS uses monthly rates per person for each county to determine the fixed monthly payments per member to
pay to health benefit plans. These rates are adjusted under CMS’s risk-adjustment model which uses health status
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